Income Taxes

12 Months Ended

Sep. 30, 2023

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,
	2021		2022		2023
Income (loss) before income taxes:
U.S.	$	(11,417)	$	38,864	$	37,538
Foreign		1,634		18,750		14,364
Total	$	(9,783)	$	57,614	$	51,902
Provision for (benefit from) income taxes:
Current:
U.S. Federal	$	741	$	2,031	$	7,366
Foreign		349		3,302		2,741
State		228		639		490
Total		1,318		5,972		10,597
Deferred:
U.S. Federal		(2,986)		5,931		(1,509)
Foreign		470		120		459
State		(317)		(300)		25
Valuation allowance		415		804		355
Total		(2,418)		6,555		(670)
Total provision for (benefit from) income taxes	$	(1,100)	$	12,527	$	9,927

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

	Year Ended September 30,
	2021			2022			2023
Statutory federal tax rate		21.00	%		21.00	%		21.00	%
Tax provision for income taxes at the statutory rate	$	(2,054)		$	12,099		$	10,899
Foreign tax rate differentials		(59)			(307)			102
Provision for state taxes, net of federal taxes		(84)			974			822
U.S. tax on distributed and undistributed earnings of foreign subsidiaries		198			984			54
Foreign derived intangible income deduction		—			(966)			(693)
Tax credits		(691)			(702)			(724)
Federal and state tax rate change impact on deferred tax asset		790			(206)			81
Change in valuation allowance		415			804			355
Stock compensation		138			191			46
Other, net		247			(344)			(1,015)
Provision for (benefit from) income taxes at effective tax rate	$	(1,100)		$	12,527		$	9,927
Effective tax rate		11.2	%		21.7	%		19.1	%

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.  

During fiscal 2023, the Company’s effective tax rate was lower than the federal statutory rate primarily due to a change in estimate on U.S. taxes owed on foreign income.  

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

	September 30,
	2022		2023
Deferred tax assets:
Pension and postretirement benefits	$	16,802	$	12,045
TIMET Agreement		2,396		1,801
Inventories		3,225		4,341
Accrued compensation and benefits		2,096		1,451
Accrued expenses and other		2,600		2,526
Tax attributes		5,625		5,596
Other assets		250		1,077
Valuation allowance		(4,695)		(5,052)
Total deferred tax assets	$	28,299	$	23,785
Deferred tax liabilities:
Property, plant and equipment, net	$	(24,081)	$	(22,056)
Intangible and other		(1,414)		(1,511)
Other liabilities		(227)		(296)
Total deferred tax liabilities	$	(25,722)	$	(23,863)
Net deferred tax assets (liabilities)	$	2,577	$	(78)

As of September 30, 2023 the Company had state tax net operating loss carryforwards of $7,254, tax credits of $5,832 and foreign net operating loss carryforwards of $1,984.  Certain state tax attributes and other tax credit attributes begin to expire in 2026 and 2024, respectively.  The Company has recorded a valuation allowance against the foreign net operating loss carryforwards of $445 and federal and state tax credits of $4,607 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 $83,063 at September 30, 2023. 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. For the Company’s foreign subsidiary in the U.K., Haynes International Ltd, as of September 30, 2023, the Company considers this subsidiary’s earnings to be reinvested indefinitely except to the extent there is previously taxed earnings and profit (PTEP), in which case, the Company might decide to repatriate cash via a dividend to the U.S.  If such funds were to be repatriated, there could be minor currency gains/losses 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, 2023, the Company was open to examination in the U.S. for the 2019 through 2023 tax years and in various foreign jurisdictions from 2018 through 2023. The Company is also open to examination in various states in the U.S., none of which were individually material.

As of September 30, 2022 and 2023, the Company had no uncertain tax positions.