Income Taxes

12 Months Ended

Sep. 30, 2022

Income Taxes

Income Taxes

Note 7.  Income Taxes

The components of income (loss) before provision for income taxes and the provision for income taxes are as follows:

	Year Ended September 30,
	2020		2021		2022
Income (loss) before income taxes:
U.S.	$	(9,831)	$	(11,417)	$	38,864
Foreign		2,333		1,634		18,750
Total	$	(7,498)	$	(9,783)	$	57,614
Provision for (benefit from) income taxes:
Current:
U.S. Federal	$	(371)	$	741	$	2,031
Foreign		541		349		3,302
State		29		228		639
Total		199		1,318		5,972
Deferred:
U.S. Federal		(2,266)		(2,986)		5,931
Foreign		56		470		120
State		(810)		(317)		(300)
Valuation allowance		1,801		415		804
Total		(1,219)		(2,418)		6,555
Total provision for (benefit from) income taxes	$	(1,020)	$	(1,100)	$	12,527

The provision for income taxes applicable to results of operations differed from the U.S. federal statutory rate as follows:

	Year Ended September 30,
	2020			2021			2022
Statutory federal tax rate		21.00	%		21.00	%		21.00	%
Tax provision for income taxes at the statutory rate	$	(1,575)		$	(2,054)		$	12,099
Foreign tax rate differentials		107			(59)			(307)
Provision for state taxes, net of federal taxes		(145)			(84)			974
U.S. tax on distributed and undistributed earnings of foreign subsidiaries		(289)			198			984
Foreign derived intangible income deduction		—			—			(966)
Tax credits		(1,058)			(691)			(702)
Federal and state tax rate change impact on deferred tax asset		(60)			790			(206)
Change in valuation allowance		1,801			415			804
Stock compensation		24			138			191
Other, net		175			247			(344)
Provision for (benefit from) income taxes at effective tax rate	$	(1,020)		$	(1,100)		$	12,527
Effective tax rate		13.6	%		11.2	%		21.7	%

During fiscal 2020, the Company’s effective tax rate was lower than the federal statutory rate primarily due to an increased valuation allowance on tax credits that are not expected to be able to be utilized before they expire.  

During fiscal 2021, the Company’s effective tax rate was lower than the federal statutory rate primarily due to an increase in the UK tax rate and decreases in the state tax rates and apportionment, both of which resulted in a decrease in net deferred tax assets.

During fiscal 2022, the Company’s effective tax rate was higher than the federal statutory rate primarily due to a provision for state taxes, net of federal taxes and an increased valuation allowance on tax credits that are not expected to be able to be utilized before they expire.  

Deferred tax assets (liabilities) are comprised of the following:

	September 30,
	2021		2022
Deferred tax assets:
Pension and postretirement benefits	$	22,318	$	16,802
TIMET Agreement		2,976		2,396
Inventories		1,498		3,225
Accrued compensation and benefits		2,034		2,096
Accrued expenses and other		3,376		2,600
Tax attributes		11,638		5,625
Other assets		299		250
Valuation allowance		(3,891)		(4,695)
Total deferred tax assets	$	40,248	$	28,299
Deferred tax liabilities:
Property, plant and equipment, net	$	(25,669)	$	(24,081)
Intangible and other		(1,296)		(1,414)
Other liabilities		(345)		(227)
Total deferred tax liabilities	$	(27,310)	$	(25,722)
Net deferred tax assets (liabilities)	$	12,938	$	2,577

As of September 30, 2022, the Company had state tax net operating loss carryforwards of $14,557, tax credits of $5,193 and foreign net operating loss carryforwards of $2,392.  Certain state tax attributes and other tax credit attributes begin to expire in 2026 and 2024, respectively, and the foreign tax attributes begin to expire in 2025.  The Company has recorded a valuation allowance against the foreign net operating loss carryforwards of $598 and federal and state tax credits of $4,097 because management does not believe that it is more likely than not that the amounts will be realized.

Undistributed earnings of certain of the Company’s foreign subsidiaries amounted to approximately $66,094 at September 30, 2022. The Company considers most of those earnings reinvested indefinitely and, accordingly, aside from the one-time transition tax associated with the Tax Cuts and Jobs Act, no additional provision for U.S. income taxes has been provided. We note that with our foreign subsidiary in the United Kingdom, Haynes International Ltd, as of September 30, 2022, we consider this subsidiary to be indefinitely reinvested except to the extent there is previously tax earnings and profit (PTEP), in that case, we might decide to repatriate cash via a dividend to the U.S.  If such funds were to be repatriated, there could be minor currency gain/loss that would be subject to tax and any distribution could also be subject to applicable non-U.S. income and withholding taxes.

As of September 30, 2022, the Company is open to examination in the U.S. for the 2017 through 2021 tax years and in various foreign jurisdictions from 2017 through 2022. The Company is also open to examination in various states in the U.S., none of which were individually material.

As of September 30, 2021 and 2022, the Company had no uncertain tax positions.