RBC Bearings INC Income Taxes Disclosure

15. Income Taxes

 

Income before income taxes for the Company’s domestic and foreign operations is as follows:

 

		Fiscal Year Ended
		March 28, 2026				March 29, 2025				March 30, 2024
Domestic		$	353.7			$	292.5			$	240.8
Foreign			15.6				19.4				21.0
Total income before income taxes		$	369.3			$	311.9			$	261.8

 

The provision for income taxes consists of the following:

 

		Fiscal Year Ended
		March 28, 2026				March 29, 2025				March 30, 2024
Current tax expense:
Federal		$	54.1			$	78.5			$	53.1
State			11.7				9.5				5.9
Foreign			5.0				4.5				5.2
			70.8				92.5				64.2
Deferred tax expense:
Federal			12.2				(21.0	)			(9.3	)
State			(0.7	)			(4.6	)			(4.3	)
Foreign			(0.6	)			(1.2	)			1.3
			10.9				(26.8	)			(12.3	)
Total income taxes		$	81.7			$	65.7			$	51.9

An analysis of the difference between the provision for income taxes and the amount computed by applying the U.S. statutory income tax rate to pre-tax income follows:

 

		Fiscal Year Ended (1)
		March 28, 2026
		Amount				Percent
Income taxes using U.S. federal statutory rate		$	77.5				21.0	%
State and local income taxes, net of federal benefit (2)			8.4				2.3
Foreign tax effects			1.1				0.3
Effect of tax law changes in period			0.0				0.0
Effect of cross-border tax laws
Foreign derived intangible income (FDII)			(4.4	)			(1.2	)
Other			(1.0	)			(0.3	)
Tax credits			(1.7	)			(0.5	)
Changes in valuation allowance			0.0				0.0
Nontaxable or nondeductible items
Stock-based compensation			(7.3	)			(2.0	)
162m limitation on executive compensation			8.5				2.3
Changes in unrecognized tax benefits			0.6				0.2
		$	81.7				22.1	%

 

(1)	The effective tax rate has been disaggregated in accordance with ASU 2023-09, which was adopted prospectively in fiscal 2026.

 

(2)	For fiscal 2026, the majority (greater than 50%) in the State and local income taxes category consisted of state taxes in California, Indiana, Florida, Texas and Georgia.

 

		Fiscal Year Ended (1)
		March 29, 2025				March 30, 2024
Income taxes using U.S. federal statutory rate		$	65.5			$	55.0
State income taxes, net of federal benefit			4.2				0.8
Stock-based compensation			0.2				(0.9	)
Foreign rate differential			0.3				2.0
Research and development credits			(2.4	)			(2.5	)
Company-owned life insurance			(0.2	)			(0.8	)
Foreign derived intangible income (FDII)			(3.7	)			(3.3	)
U.S. unrecognized tax positions			1.2				1.5
Valuation allowance			(1.1	)			(1.7	)
Other - net			1.7				1.8
		$	65.7			$	51.9

 

(1)	As presented prior to adoption of ASU 2023-09, which was adopted prospectively in fiscal 2026.

Net deferred tax assets (liabilities) are comprised of the following:

 

		March 28, 2026				March 29, 2025
Deferred tax assets:
Pension and postretirement benefits		$	0.8			$	1.3
Employee compensation accruals			13.1				10.8
Inventory reserves			25.3				19.9
Operating lease liabilities			12.8				10.5
Finance lease liabilities			1.1				0.9
Stock compensation			4.0				4.1
Tax loss and credit carryforwards			12.2				12.3
State tax			2.0				2.0
Other accrued liabilities			10.7				9.6
Capitalized research and development costs			1.8				21.5
Other			3.8				0.9
Total gross deferred tax assets			87.6				93.8
Valuation allowance			(6.7	)			(5.7	)
Total deferred tax assets		$	80.9			$	88.1
Deferred tax liabilities:
Property, plant and equipment		$	(35.6	)		$	(31.1	)
Operating lease assets			(12.5	)			(10.3	)
Other			(4.7	)			(4.2	)
Intangible assets			(294.2	)			(299.3	)
Total deferred tax liabilities		$	(347.0	)		$	(344.9	)
Total net deferred liabilities		$	(266.1	)		$	(256.8	)

 

The Company evaluates deferred tax assets to ensure that the estimated future taxable income will be sufficient in character (i.e. capital versus ordinary income treatment), amount and timing to result in their recovery. After considering the positive and negative evidence, a valuation allowance has been recorded on foreign tax credits and on certain state and foreign credits and net operating losses as it is more likely than not (i.e., greater than a 50% likelihood) that these items will not be utilized. For the Company’s fiscal year ended March 28, 2026 the valuation allowance increased by $1.0, which primarily related to the valuation allowance established on Dodge China’s deferred tax assets. For the fiscal year ended March 29, 2025 the valuation allowance decreased by $1.3. These valuation allowances are required because management has determined, based on financial projections and available tax strategies, that it is unlikely the net operating losses and credits will be utilized before they expire. If events or circumstances change, valuation allowances are adjusted at that time resulting in an income tax benefit or charge.

 

At March 28, 2026, the Company had State net operating loss carryovers in different jurisdictions at varying amounts up to $4.7, which expire at various dates through 2036. At March 28, 2026, the Company had foreign net operating loss carryovers in different jurisdictions at varying amounts totaling $7.0, which will expire at various dates through fiscal 2032. At March 28, 2026, the Company had U.S. federal and state credits in different jurisdictions at varying amounts up to $12.3 which principally expire at various dates through 2040.

 

Under accounting standards (ASC 740) a deferred tax liability is not recorded for the excess of the tax basis over the financial reporting (book) basis of an investment in a foreign subsidiary if the indefinite reinvestment criteria is met. The Tax Cuts and Jobs Act (TCJA) required a mandatory deemed repatriation of certain undistributed earnings of the Company’s foreign subsidiaries as of December 31, 2017, and income taxes were accrued accordingly. If these deemed repatriated earnings were distributed in the form of cash dividends, the Company would not be subject to additional U.S. income taxes, other than tax arising from the movement of foreign exchange rates on previously taxed earnings, but could be subject to foreign income and withholding taxes. A provision had not been made for additional U.S. and foreign taxes at March 28, 2026 on approximately $103.9 of undistributed earnings of foreign subsidiaries or for any additional tax on the deemed repatriated earnings because the Company intends to reinvest these funds indefinitely to support foreign growth opportunities and foreign operations. Due to the inherent complexity of the multinational tax environment in which the Company operates, it is not practicable to estimate the unrecognized deferred tax liability on these undistributed earnings. These earnings could become subject to additional tax under certain circumstances including, but not limited to, loans to the Company, or upon sale or pledging of the foreign subsidiary’s stock.

Uncertain Tax Positions

 

Unrecognized income tax benefits represent income tax positions taken on income tax returns but not yet recognized in the consolidated financial statements. If recognized, substantially all of the unrecognized tax benefits for the Company’s fiscal years ended March 28, 2026 and March 29, 2025 would affect the effective income tax rate.

 

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

 

		March 28, 2026				March 29, 2025				March 30, 2024
Balance, beginning of year		$	19.8			$	15.2			$	13.1
Gross increases (decreases) – tax positions taken during a prior period			(0.7	)			1.5				2.0
Gross increases – tax positions taken during the current period			3.7				4.5				1.7
Reductions due to lapse of the applicable statute of limitations			(2.1	)			(1.4	)			(1.6	)
Balance, end of year		$	20.7			$	19.8			$	15.2

 

The Company recognizes the interest and penalties accrued related to unrecognized tax benefits in income tax expense. The Company recognized an expense of $0.5 for the fiscal year ended March 28, 2026 and an expense of $0.3 and benefit of $0.3 related to interest and penalties on its statement of operations for the fiscal years ended March 29, 2025 and March 30, 2024, respectively. The Company had approximately $2.0 and $1.6 of accrued interest and penalties at March 28, 2026 and March 29, 2025, respectively.

 

The Company believes it is reasonably possible that some of its unrecognized tax positions may be effectively settled by the end of the Company’s fiscal year ending March 28, 2026, due to the closing of audits and the statute of limitations expiring in various jurisdictions. The decrease, pertaining primarily to federal and state credits and state tax, is estimated to be $2.1.

 

The Company files income tax returns in numerous U.S. and foreign jurisdictions, with returns subject to examination for varying periods, but generally back to and including the fiscal year ending April 1, 2023, although certain tax credits generated in earlier years are open under statute from March 29, 2008. The Company is no longer subject to U.S. federal tax examination by the Internal Revenue Service for years ending before April 1, 2023.

 

Disclosure Of Income Taxes Paid

 

		Fiscal Year Ended
		March 28, 2026
Federal		$	55.3
State			11.8
Foreign			4.5
Total cash paid for income taxes, net of refunds		$	71.6

 

The company paid $71.6 in cash (net of refunds) in income taxes for the year ended March 28, 2026. No single foreign jurisdiction or U.S. state comprised greater than 5% of the total.