Note 8:  Income Taxes

The U.S. and foreign components of earnings before income taxes and the provision for income taxes consisted of the following:

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The reconciliation between the U.S. federal statutory income tax rate and the Company’s effective tax rate was as follows:

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As of March 31, 2026 and 2025, income tax liabilities included within other current liabilities on the Company’s consolidated balance sheets totaled $37.0 million and $16.4 million, respectively.

Cash paid for income taxes, net of refunds, consisted of the following:

In July 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes the permanent extension of certain provisions of the Tax Cuts and Jobs Act, including 100% bonus depreciation and domestic research cost expensing. It also includes modifications to the international tax framework. The legislation has multiple effective dates, with certain provisions impacting the Company through fiscal 2027. The Company began recognizing the impacts of the OBBBA for the provisions currently enacted during the second quarter of fiscal 2026, including the provision regarding domestic research costs. During fiscal 2026, impacts associated with provisions of the OBBBA on state deferred taxes and the utilization of foreign tax credits increased the income tax provision by $5.8 million. The Company is continuing to assess provisions that are expected to impact future periods.

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 judgment 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. 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.

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As of March 31, 2026, 2025, and 2024, the Company’s deferred tax asset valuation allowances totaled $68.1 million, $67.6 million, and $63.0 million, respectively. The net $0.5 million increase during fiscal 2026 was primarily attributable to an increase in net operating losses in Germany and foreign currency impacts. These increases were partially offset by a decrease in deferred tax assets in the U.S. related to certain federal and state tax credits, which were utilized prior to expiration, and a decrease in net operating losses in Hungary due to expiration. The $4.6 million net increase during fiscal 2025 was primarily attributable to an increase in net operating losses in Germany.

The tax effects of temporary differences that gave rise to deferred tax assets and liabilities were as follows:

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Unrecognized tax benefits were as follows:

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The Company’s liability for unrecognized tax benefits as of March 31, 2026 was $10.1 million and, if recognized, $8.2 million would have an effective tax rate impact.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. During fiscal 2026, 2025 and 2024, interest and penalties accrued on the consolidated balance sheets and included within income tax expense in the consolidated statements of operations were not significant.

The Company files income tax returns in multiple jurisdictions and is subject to examination by taxing authorities throughout the world. At March 31, 2026, the Company was under income tax examination in several jurisdictions. The Company’s major tax jurisdictions include the United States, Italy, and Canada. For the United States, fiscal 2023 through fiscal 2025 remain subject to examination. For Italy, fiscal 2021 through fiscal 2025 remain subject to examination. For Canada, fiscal 2024 and fiscal 2025 remain subject to examination.

At March 31, 2026, the Company had federal and state tax credits of $42.8 million that, if not utilized against U.S. taxes, will expire between fiscal 2027 and 2050. The Company also had state and local tax loss carryforwards totaling $73.9 million. If not utilized against state apportioned taxable income, certain state and local carryforwards will expire between fiscal 2029 and 2043, while some will not expire due to an unlimited carryforward period. In addition, the Company had tax loss and foreign attribute carryforwards totaling $296.8 million in various tax jurisdictions throughout the world. Certain of the carryforwards in foreign jurisdictions are offset by valuation allowances. If not utilized against taxable income, $65.3 million of these carryforwards will expire between fiscal 2027 and 2041, and $231.5 million, mainly related to Germany and Italy, will not expire due to an unlimited carryforward period.

The Company’s practice and intention is to reinvest, with certain insignificant exceptions, the earnings of its non-U.S. subsidiaries outside of the U.S., and therefore, the Company has not recorded foreign withholding taxes or deferred income taxes for these earnings. The Company has estimated the net amount of unrecognized foreign withholding tax and deferred tax liabilities would total approximately $16.0 million if the accumulated foreign earnings were distributed; however, the actual tax cost would be dependent on circumstances existing when remittance occurs.