|
15. Income Taxes
Income taxes included in the consolidated income statement consisted of the following:
|
|
|
Year Ended
March 31, 2012
|
|
For the Period From
May 1, 2010
Through
March 31, 2011
|
|
For the Period
from April 1,
2010 Through
April 30, 2010
|
|
Year Ended
March 31, 2010
|
|
|
Current provision:
|
|
|
|
|
|
|
|
|
|
|
Federal provision (benefit)
|
|
$
|
(1,072
|
)
|
$
|
4,878
|
|
$
|
(2,016
|
)
|
$
|
4,481
|
|
|
Foreign provision (benefit)
|
|
12,551
|
|
9,394
|
|
(177
|
)
|
5,168
|
|
|
State provision (benefit)
|
|
356
|
|
281
|
|
(119
|
)
|
277
|
|
|
Deferred provision:
|
|
|
|
|
|
|
|
|
|
|
Federal deferred provision (benefit)
|
|
(1,424
|
)
|
(4,975
|
)
|
(14,730
|
)
|
3,413
|
|
|
Foreign deferred provision (benefit)
|
|
(2,788
|
)
|
(3,288
|
)
|
(354
|
)
|
617
|
|
|
State deferred provision (benefit)
|
|
(155
|
)
|
(130
|
)
|
(38
|
)
|
10
|
|
|
Total provision for income taxes (benefit)
|
|
$
|
7,468
|
|
$
|
6,160
|
|
$
|
(17,434
|
)
|
$
|
13,966
|
|
Deferred income tax assets and liabilities were as follows:
|
|
|
March 31,
|
|
|
|
|
2012
|
|
2011
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Accrued liabilities and reserves
|
|
$
|
2,411
|
|
$
|
1,878
|
|
|
Unrealized gain on hedge
|
|
68
|
|
|
|
|
Inventories
|
|
383
|
|
466
|
|
|
International, net
|
|
912
|
|
524
|
|
|
Total current deferred tax assets
|
|
3,774
|
|
2,868
|
|
|
|
|
|
|
|
|
|
Non-current
|
|
|
|
|
|
|
Capitalized transaction costs
|
|
809
|
|
879
|
|
|
Stock option compensation
|
|
1,434
|
|
466
|
|
|
Other
|
|
72
|
|
|
|
|
Total non-current deferred tax assets
|
|
2,315
|
|
1,345
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Prepaid expenses
|
|
(110
|
)
|
(89
|
)
|
|
Total current deferred tax liabilities
|
|
(110
|
)
|
(89
|
)
|
|
Non-current
|
|
|
|
|
|
|
Intangible assets
|
|
(42,498
|
)
|
(47,002
|
)
|
|
Property, plant and equipment
|
|
(2,246
|
)
|
(1,981
|
)
|
|
Undistributed foreign earnings
|
|
(3,570
|
)
|
(2,171
|
)
|
|
Total non-current tax liabilities
|
|
(48,314
|
)
|
(51,154
|
)
|
|
|
|
|
|
|
|
|
Net current deferred tax asset
|
|
$
|
3,664
|
|
$
|
2,779
|
|
|
Net non-current deferred tax liability
|
|
$
|
(45,999
|
)
|
$
|
(49,809
|
)
|
The U.S. and non-U.S. components of income (loss) from continuing operations before income taxes were as follows:
|
|
|
Successor
|
|
Predecessor
|
|
|
|
|
Year Ended
March 31, 2012
|
|
For the Period From
May 1, 2010
Through
March 31, 2011
|
|
For the Period
from April 1,
2010 Through
April 30, 2010
|
|
Year Ended
March 31, 2010
|
|
|
U.S.
|
|
$
|
(14,480
|
)
|
$
|
(13,894
|
)
|
$
|
(16,652
|
)
|
$
|
14,398
|
|
|
Non-U.S.
|
|
33,978
|
|
5,114
|
|
(1,049
|
)
|
18,508
|
|
|
Income (loss) from continuing operations
|
|
$
|
19,498
|
|
$
|
(8,780
|
)
|
$
|
(17,701
|
)
|
$
|
32,906
|
|
The difference between the provision for income taxes and the amount that would result from applying the U.S. statutory tax rate to income before provision for income taxes is as follows:
|
|
|
Successor
|
|
Predecessor
|
|
|
|
|
Year Ended
March 31, 2012
|
|
For the Period From
May 1, 2010
Through
March 31, 2011
|
|
For the Period
from April 1,
2010 Through
April 30, 2010
|
|
Year Ended
March 31, 2010
|
|
|
Notional U.S. federal income tax expense (benefit) at the statutory rate
|
|
$
|
6,825
|
|
$
|
(3,073
|
)
|
$
|
(6,196
|
)
|
$
|
11,517
|
|
|
Adjustments to reconcile to the income tax provision (benefit):
|
|
|
|
|
|
|
|
|
|
|
U.S. state income tax provision (benefit), net
|
|
77
|
|
61
|
|
—
|
|
86
|
|
|
Undistributed foreign earnings
|
|
1,728
|
|
1,978
|
|
—
|
|
—
|
|
|
Effects on Canadian debt facility
|
|
—
|
|
—
|
|
(8,713
|
)
|
2,463
|
|
|
Rate difference—international subsidiaries
|
|
(1,974
|
)
|
5,190
|
|
(3,587
|
)
|
(410
|
)
|
|
Nondeductible expensed
|
|
774
|
|
1,541
|
|
1,041
|
|
38
|
|
|
Charges related to uncertain tax positions
|
|
211
|
|
582
|
|
—
|
|
251
|
|
|
Other
|
|
(173
|
)
|
(119
|
)
|
21
|
|
21
|
|
|
Provision (benefit) for income taxes
|
|
$
|
7,468
|
|
$
|
6,160
|
|
$
|
(17,434
|
)
|
$
|
13,966
|
|
The Company views undistributed earnings of its foreign subsidiaries as eligible for repatriation to the extent that the earnings have exceeded their local working capital requirements and therefore has the ability to distribute earnings to the U.S. parent. The Company considers its original investment and the working capital portion of retained earnings of each subsidiary to be permanently reinvested. The deferred tax liability recorded on the U.S. financial statements is subject to fluctuations in the U.S. dollar/foreign currency exchange rate each year.
In connection with the Audax Transaction in 2007, the Predecessor obtained financing in Canada, which was repaid through the CHS Transactions. In completing the Audax Transaction, the stock of Thermon Canada, a subsidiary of Thermon Manufacturing Company (“TMC”), was distributed to Thermon Holding Corp. (“THC”). This caused TMC to realize a gain on the difference between its tax basis in Thermon Canada and the fair market value of Thermon Canada’s stock under IRC Section 311(b); however, the gain was deferred under the consolidated return rules and created a “deferred intercompany gain.” This deferred gain is a tax attribute which is not reflected on the financial statements of the Company since it is avoidable.
As of March 31, 2012, the tax years 2006 through 2011 remain open to examination by the major taxing jurisdictions to which we are subject.
An additional liability was booked during the year ended March 31, 2012 relating to uncertain positions regarding the foreign tax credits. In addition, $141 of interest and penalties were accrued on previously establishment reserves. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
|
|
Successor
|
|
Successor
|
|
|
|
|
Year Ended
March 31, 2012
|
|
For the Period From
May 1, 2010
Through
March 31, 2011
|
|
|
Beginning balance
|
|
$
|
1,298
|
|
$
|
716
|
|
|
Additions based on tax positions related to the current year
|
|
70
|
|
521
|
|
|
Interest and penalties on prior reserves
|
|
141
|
|
61
|
|
|
Reductions for tax positions of prior years
|
|
—
|
|
—
|
|
|
Settlements
|
|
—
|
|
—
|
|
|
Reserve for uncertain income taxes
|
|
$
|
1,509
|
|
$
|
1,298
|
|
|