Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.23.3
INCOME TAXES
 12 Months Ended
Sep. 30, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES:
The income tax provision (benefit) consisted of the following:
  2023 2022 2021
Current:
Federal $ 13,967  $ 13,481  $ (3,741)
State 4,381  4,676  3,579 
Foreign 5,052  10,414  2,379 
  23,400  28,571  2,217 
Deferred:
Federal (14,466) (24,239) 5,829 
State (1,887) (3,895) 169 
Foreign (5,273) (4,828) (1,840)
(21,626) (32,962) 4,158 
Total $ 1,774  $ (4,391) $ 6,375 
The reconciliation of the federal statutory tax rate to the consolidated effective tax rate was as follows:
  2023 2022 2021
Federal statutory tax rate 21.0  % 21.0  % 21.0  %
Effect of state income taxes, net of federal deduction 3.8  % 0.2  % 37.5  %
Foreign statutory taxes compared to federal statutory rate (0.7) % 1.6  % (18.6) %
Share-based compensation 3.6  % (1.1) % 24.5  %
Termination of SERP —  % —  % 28.6  %
Tax credits (7.0) % 1.2  % (26.6) %
Sale of SERP-related investments —  % —  % 23.8  %
Goodwill write-down —  % (11.2) % —  %
Tax rate differential on net operating loss carryback —  % —  % (21.4) %
Nontaxable income (7.5) % 0.8  % (9.9) %
Utilization of foreign losses with valuation allowance (5.6) % —  % —  %
Other *
(3.3) % (8.3) % 10.1  %
Effective tax rate 4.3  % 4.2  % 69.0  %
* In Fiscal 2022, "Other" primarily consists of foreign net operating losses that had a full valuation allowance.

The Company's consolidated income taxes for the year ended September 30, 2023 were an expense of $1,774, compared to a benefit of $4,391 for fiscal 2022, and an expense of $6,375 for fiscal 2021. The difference between the Company's consolidated income taxes for fiscal 2023 compared to fiscal 2022 partially resulted from fiscal 2023 having consolidated income before income taxes compared to fiscal 2022 having a consolidated loss before income taxes. The fiscal 2023 tax rate was negatively impacted by share-based compensation. Additionally, the fiscal 2023 tax rate benefited from research and development and foreign tax credits and the utilization of foreign tax net operating losses with a valuation allowance. The fiscal 2022 consolidated loss reflected a goodwill write-down recorded in the fourth quarter of fiscal 2022 that was primarily non-deductible. The fiscal 2022 effective tax rate also benefited from research and development and foreign tax credits. The fiscal 2022 effective tax rate was negatively impacted by foreign net operating losses requiring a full valuation allowance.

The difference between the Company's consolidated income taxes for fiscal 2022 compared to fiscal 2021 partially resulted from fiscal 2022 having a consolidated loss before income taxes compared to fiscal 2021 having consolidated income before income taxes. The fiscal 2022 consolidated loss reflected a goodwill write-down recorded in the fourth quarter of fiscal 2022 that was primarily non-deductible. The Company’s fiscal 2021 effective tax rate benefited from research and development and foreign tax credits as well as the reduction of uncertain tax positions due to the expiration of the statute of limitations in certain jurisdictions, the completion of a state tax audit, and the tax benefit of the NOL carryback. The fiscal 2021 effective tax rate was negatively affected by the termination of the Company’s SERP, which resulted in certain expenses that are nondeductible for tax purposes.

The Company's foreign subsidiaries had income before income taxes for the year ended September 30, 2023 of approximately $43,090, loss before income taxes for the year ended September 30, 2022 of approximately $47,653 and income before income taxes for the year ended September 30, 2021 of approximately $6,685. Deferred income taxes have not been provided on undistributed earnings of foreign subsidiaries since they have either been previously taxed, or are now exempt from tax, under the U.S. Tax Cuts and Jobs Act, or such earnings are considered to be reinvested indefinitely in foreign operations. At September 30, 2023, undistributed earnings of foreign subsidiaries for which deferred income taxes have not been provided approximated $368,306. 
The components of deferred tax assets and liabilities at September 30, 2023 and 2022 are as follows:
  2023 2022
Deferred tax assets:
Pension and postretirement benefits $ 5,544  $ 9,051 
Accruals and reserves not currently deductible 11,158  10,909 
Income tax credit carryforward 4,970  5,796 
Operating and capital loss carryforwards 59,956  54,875 
Stock options 8,007  7,103 
Research and development capitalization 11,028  — 
Other 3,016  50 
Total deferred tax assets 103,679  87,784 
Valuation allowances (22,506) (27,552)
Net deferred tax assets 81,173  60,232 
Deferred tax liabilities:    
Depreciation (23,547) (27,317)
Unrealized gains and losses (2,969) (2,793)
Goodwill and intangible assets (97,415) (98,715)
Revenue recognized over time (21,226) (10,847)
Other (5,002) (9,539)
Total deferred tax liabilities (150,159) (149,211)
Net deferred tax liability $ (68,986) $ (88,979)

At September 30, 2023, the Company had foreign net operating loss carryforwards of $292,206. The majority of the Company's foreign net operating losses have no expiration period. Certain of these carryforwards are subject to limitations on use due to tax rules affecting acquired tax attributes, loss sharing between group members, and business continuation. Therefore, the Company has established tax-effected valuation allowances against these tax benefits in the amount of $22,506 at September 30, 2023. The Company has recorded deferred tax assets of $2,756 for state net operating loss carryforwards, which will be available to offset future income tax liabilities.

Changes in the total amount of gross unrecognized tax benefits (excluding penalties and interest) are as follows:
  2023 2022 2021
Balance, beginning of year $ 4,123  $ 2,807  $ 10,483 
Increases for tax positions of prior years 100  1,393  — 
Decreases for tax positions of prior years —  (200) (288)
Increases based on tax positions related to the current year 769  551  628 
Decreases due to lapse of statute of limitation (1,213) (428) (8,016)
Balance, end of year $ 3,779  $ 4,123  $ 2,807 

The Company had unrecognized tax benefits of $3,779 at September 30, 2023, which would impact the annual effective tax rate.  It is reasonably possible that the amount of unrecognized tax benefits could decrease by approximately $2,648 in the next 12 months primarily due to the completion of audits and the expiration of the statute of limitation related to specific tax positions.

The Company classifies interest and penalties on tax uncertainties as a component of the provision for income taxes.  Total penalties and interest accrued were $730 and $876 at September 30, 2023 and 2022, respectively.  These accruals may potentially be applicable in the event of an unfavorable outcome of uncertain tax positions.
The Company is currently under examination in several tax jurisdictions and remains subject to examination until the statute of limitation expires for those tax jurisdictions. 

As of September 30, 2023, the tax years that remain subject to examination by major jurisdiction generally are:
United States - Federal 2020 and forward
United States - State 2019 and forward
Canada 2019 and forward
Germany 2019 and forward
United Kingdom 2022 and forward
Australia 2018 and forward
Singapore 2019 and forward