Income Taxes

3 Months Ended

Jun. 30, 2023

Income Taxes [Abstract]

Income Taxes

Note 8: Income Taxes

The Company’s effective tax rate for the three months ended June 30, 2023 and 2022 was 24.5 percent and 25.5 percent, respectively.  The effective tax rate for the first quarter of fiscal 2024 is lower than the first quarter of the prior year, primarily due to changes in the mix and amount of foreign and U.S. earnings.

The Company records valuation allowances against its net deferred tax assets to the extent it determines it is more likely than not that such assets will not be realized in the future.  Each quarter, the Company evaluates the probability that its deferred tax assets will be realized and determines whether valuation allowances or adjustments thereto are needed.  This determination involves judgement and the use of significant estimates and assumptions, including expectations of future taxable income and tax planning strategies.  In addition, the Company considers the duration of statutory carryforward periods and historical financial results.

At June 30, 2023, valuation allowances against deferred tax assets in the U.S. and in certain foreign jurisdictions totaled $35.5 million and $27.6 million, respectively.  The Company will maintain the valuation allowances in each applicable tax jurisdiction until it determines it is more likely than not the deferred tax assets will be realized, thereby eliminating the need for a valuation allowance.  Future events or circumstances, such as lower taxable income or unfavorable changes in the financial outlook of the Company’s operations in the U.S. and certain foreign jurisdictions, could necessitate the establishment of further valuation allowances.

Accounting policies for interim reporting require the Company to adjust its effective tax rate each quarter to be consistent with its estimated annual effective tax rate.  Under this methodology, the Company applies its estimated annual income tax rate to its year-to-date ordinary earnings to derive its income tax provision each quarter.  The Company records the tax impacts of certain significant, unusual or infrequently occurring items in the period in which they occur.  The Company excluded the impact of its operations in certain foreign locations from the overall effective tax rate methodology and recorded them discretely based upon year-to-date results because the Company anticipates net operating losses for the full fiscal year in these jurisdictions.  The Company estimates a $2.1 million net decrease in unrecognized tax benefits during the remainder of fiscal 2024 mainly due to lapses in statutes of limitations.