Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 12 Months Ended
Mar. 31, 2013
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes

Income taxes included in the consolidated income statement consisted of the following:
 
 
 
Year Ended March 31, 2013
 
Year Ended March 31, 2012
 
For the Period from May, 1 2010 to March 31, 2011
 
For the Period from April 1, 2010 to April 30, 2010
 
 
 
(Successor)
 
(Successor)
 
(Successor)
 
(Predecessor)
Current provision:
 
 
 
 
 
 
 
 
 
Federal provision (benefit)
 
$
3,835

 
$
(1,072
)
 
$
4,878

 
$
(2,016
)
 
Foreign provision (benefit)
 
12,352

 
12,551

 
9,394

 
(177
)
 
State provision (benefit)
 
422

 
356

 
281

 
(119
)
Deferred provision:
 
 
 
 
 
 
 
 
 
Federal deferred provision (benefit)
 
(376
)
 
(1,424
)
 
(4,975
)
 
(14,730
)
 
Foreign deferred provision (benefit)
 
(1,646
)
 
(2,788
)
 
(3,288
)
 
(354
)
 
State deferred provision (benefit)
 
(11
)
 
(155
)
 
(130
)
 
(38
)
Total provision for income taxes (benefit)
 
$
14,576

 
$
7,468

 
$
6,160

 
$
(17,434
)


Deferred income tax assets and liabilities were as follows:
 
 
 
March 31,
 
 
 
2013
 
2012
Deferred tax assets:
 
 
 
 
Current
 
 
 
 
 
Accrued liabilities and reserves
 
$
946

 
$
2,411

 
Unrealized gain on hedge
 
11

 
68

 
Inventories
 
433

 
383

 
International, net
 
945

 
912

 
Total current deferred tax assets
 
2,335

 
3,774

 
 
 
 
 
 
 
Non-current
 
 
 
 
 
Foreign tax credit carry forward
 
1,159

 
—

 
Capitalized transaction costs
 
740

 
809

 
Stock option compensation
 
963

 
1,434

 
Other
 
18

 
72

 
Total non-current deferred tax assets
 
2,880

 
2,315

 
 
 
 
 
 
Deferred tax liabilities:
 
 
 
 
Current
 
 
 
 
Prepaid expenses
 
(124
)
 
(110
)
Total current deferred tax liabilities
 
(124
)
 
(110
)
Non-current
 
 
 
 
Intangible assets
 
(38,783
)
 
(42,498
)
Property, plant and equipment
 
(3,011
)
 
(2,246
)
Undistributed foreign earnings
 
(3,685
)
 
(3,570
)
Total non-current tax liabilities
 
(45,479
)
 
(48,314
)
 
 
 
 
 
 
Net current deferred tax asset
 
$
2,211

 
$
3,664

Net non-current deferred tax liability
 
$
(42,599
)
 
$
(45,999
)


As of March 31, 2013, the Company had foreign tax credit carryforwards of approximately $1,159. These carryforwards expire in fiscal 2023. Recognition of these credit carryforwards is subject to an annual limit, which may cause them to expire before they are used.

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, 2013
 
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
 
 
 
(Successor)
 
(Successor)
 
(Successor)
 
(Predecessor)
U.S.
 
 
$
4,951

 
$
(14,480
)
 
$
(13,894
)
 
$
(16,652
)
Non-U.S.
 
 
36,599

 
33,978

 
5,114

 
(1,049
)
Income (loss) from continuing operations
 
$
41,550

 
$
19,498

 
$
(8,780
)
 
$
(17,701
)


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, 2013
 
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
 
 
 
 
(Successor)
 
(Successor)
 
(Successor)
 
(Predecessor)
Notional U.S. federal income tax expense (benefit) at statutory rate
 
$
14,543

 
$
6,825

 
$
(3,073
)
 
$
(6,196
)
Adjustments to reconcile to the income tax provision (benefit):
 
 
 
 
 
 
 
 
U.S. state income tax provision (benefit), net
 
263

 
77

 
61

 
—

 
Undistributed foreign earnings
 
44

 
1,728

 
1,978

 
—

 
Effects on Canadian debt facility
 
—

 
—

 
—

 
(8,713
)
 
Rate difference-international subsidiaries
 
(270
)
 
(1,974
)
 
5,190

 
(3,587
)
 
Nondeductible expenses
 
115

 
774

 
1,541

 
1,041

 
Charges related to uncertain tax positions
 
143

 
211

 
582

 
—

 
Other
 
(262
)
 
(173
)
 
(119
)
 
21

Provision (benefit) for income taxes
 
$
14,576

 
$
7,468

 
$
6,160

 
$
(17,434
)


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 the foreign subsidiary 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 foreign 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. The translation effect to our deferred tax liability was a$52 decrease and a $287 increase as of March 31, 2013 and 2012, respectively.

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 Section 311(b) of the Internal Revenue Code; however, the gain was deferred under the consolidated return rules and created a “deferred intercompany gain”. This deferred gain is a tax attribute that is not reflected on the financial statements of the Company since it is avoidable.

As of March 31, 2013, the tax years 2006 through 2011 remain open to examination by the major taxing jurisdictions to which we are subject. The Company’s U.S. federal income tax returns are under exam for the Predecessor’s tax period ending April 30, 2010 and the tax years ended March 31, 2010, 2009 and 2008. The Company’s Canadian federal income tax returns are under exam for the Predecessor’s tax years ended March 31, 2008, 2009 and 2010. See Note 12, “Commitments and Contingencies”.

No additional liability was booked during fiscal 2013 relating to uncertain positions however; $142 of interest and penalties were accrued on previously established reserves. Such penalties and interest are recorded as a component of the Company's income tax expense. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
 
 
 
Year Ended March 31, 2013
 
Year Ended March 31, 2012
Beginning balance
 
$
1,509

 
$
1,298

Additions based on tax positions related to the current year
 
—

 
70

Interest and penalties on prior reserves
 
142

 
141

Reserve for uncertain income taxes
 
$
1,651

 
$
1,509