Thermon Group Holdings, Inc.
Thermon Group Holdings, Inc. Income Taxes Disclosure
Income Taxes
Income taxes included in the consolidated income statement consisted of the following:
| Year Ended March 31, 2025 | Year Ended March 31, 2024 | Year Ended March 31, 2023 | ||||||||||||||||||
| Current provision: | ||||||||||||||||||||
| Federal provision | $ | 3,725 | $ | 5,643 | $ | 6,329 | ||||||||||||||
| Foreign provision | 12,795 | 11,315 | 12,619 | |||||||||||||||||
| State provision | 1,164 | 1,207 | 1,181 | |||||||||||||||||
| Deferred provision: | ||||||||||||||||||||
| Federal deferred benefit | 252 | (329) | (2,648) | |||||||||||||||||
| Foreign deferred benefit | (1,426) | (1,626) | (1,649) | |||||||||||||||||
| State deferred benefit | 94 | (124) | (265) | |||||||||||||||||
| Total provision for income taxes | $ | 16,604 | $ | 16,086 | $ | 15,567 | ||||||||||||||
Deferred income tax assets and liabilities were as follows:
| March 31, | |||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Deferred tax assets: | |||||||||||||||||
| Accrued liabilities and reserves | $ | 6,752 | $ | 7,776 | |||||||||||||
| Capitalized research and development costs | 3,744 | 2,869 | |||||||||||||||
| Foreign deferred benefits | 1,162 | 1,326 | |||||||||||||||
| Stock option compensation | 886 | 899 | |||||||||||||||
| Net operating loss carryforward | 428 | 441 | |||||||||||||||
| Inventories | 801 | 773 | |||||||||||||||
| Capitalized transaction costs | 373 | 431 | |||||||||||||||
| Tax credit carryforward | 674 | 218 | |||||||||||||||
| Unrealized gain on hedge | 21 | 25 | |||||||||||||||
| Valuation allowance | (553) | (201) | |||||||||||||||
| Total deferred tax assets | $ | 14,289 | $ | 14,557 | |||||||||||||
| Deferred tax liabilities: | |||||||||||||||||
| Intangible assets | $ | (6,278) | $ | (5,916) | |||||||||||||
| Intangible and other - foreign | (9,632) | (10,121) | |||||||||||||||
| Property, plant and equipment | (5,546) | (5,994) | |||||||||||||||
| Prepaid expenses | (327) | (281) | |||||||||||||||
| Undistributed foreign earnings | (1,367) | (610) | |||||||||||||||
| Total deferred tax liabilities | $ | (23,150) | $ | (22,922) | |||||||||||||
| Net deferred tax liability | $ | (8,861) | $ | (8,365) | |||||||||||||
The Company expects that it is more likely than not that the results of future operations will generate sufficient taxable income to realize its domestic and foreign deferred tax assets, net of valuation allowance reserves.
The U.S. and non-U.S. components of income from continuing operations before income taxes were as follows:
| Year Ended March 31, 2025 | Year Ended March 31, 2024 | Year Ended March 31, 2023 | ||||||||||||||||||
| U.S. | $ | 30,135 | $ | 28,065 | $ | 17,792 | ||||||||||||||
| Non-U.S. | 39,984 | 39,609 | 31,441 | |||||||||||||||||
| Income from continuing operations | $ | 70,119 | $ | 67,674 | $ | 49,233 | ||||||||||||||
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:
| Year Ended March 31, 2025 | Year Ended March 31, 2024 | Year Ended March 31, 2023 | ||||||||||||||||||||||||
| Notional U.S. federal income tax expense at statutory rate | $ | 14,725 | $ | 14,252 | $ | 10,339 | ||||||||||||||||||||
| Adjustments to reconcile to the income tax provision: | ||||||||||||||||||||||||||
| Rate difference-international subsidiaries | 1,252 | 482 | 1,602 | |||||||||||||||||||||||
| Withholding on intercompany dividends and income | 1,726 | — | — | |||||||||||||||||||||||
| Charges/(benefits) related to uncertain tax positions | (1,046) | 84 | 77 | |||||||||||||||||||||||
| U.S. state income tax provision, net | 994 | 912 | 654 | |||||||||||||||||||||||
| Undistributed foreign earnings | 683 | 371 | (315) | |||||||||||||||||||||||
| Tax credits available in the U.S. | (902) | (425) | (307) | |||||||||||||||||||||||
| Change in valuation allowance | 353 | (37) | 10 | |||||||||||||||||||||||
| Russian loss not benefited | — | 207 | 2,768 | |||||||||||||||||||||||
| Non-deductible charges | (39) | 741 | 421 | |||||||||||||||||||||||
| Stock compensation | (58) | 178 | 825 | |||||||||||||||||||||||
| Impact of U.S. global intangible taxes and benefits | (612) | (560) | (622) | |||||||||||||||||||||||
| Other, net | (472) | (119) | 115 | |||||||||||||||||||||||
| Provision for income taxes | $ | 16,604 | $ | 16,086 | $ | 15,567 | ||||||||||||||||||||
We operate in multiple international geographies. Our tax expense is reflective of the blended tax rate across those jurisdictions. We do not assert a permanent reinvestment position in any of our foreign subsidiaries. Accordingly, we expect to repatriate certain earnings that will be subject to withholding taxes. At March 31, 2025 we have accrued $1,367 as an additional deferred tax liability associated with the future repatriation of earnings from jurisdictions that withhold taxes on foreign paid dividends.
During the year ended March 31, 2023 and in connection with the strategic assessment related to our Russian subsidiary, the Company had losses that were primarily not benefited for tax. The net tax impact of the losses for the write-down of the Russian subsidiary was $2,768 or a 5.6% increase in tax expense.
As of March 31, 2025, the Company had foreign tax net operating loss carry-forwards ("NOLs") of $1,512. Of this amount, $544 may be carried forward indefinitely. As of March 31, 2025, the tax years 2021 through 2024 remain open to examination by the major taxing jurisdictions to which we are subject.
During fiscal 2025, we released our reserves for uncertain tax position which consisted of positions related to the final Transition Tax, which is associated with the Tax Act of 2018. We released these reserves as they are no longer subject to examination by tax authorities. Activity within our reserve for uncertain tax positions as well as the 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, 2025 | Year Ended March 31, 2024 | |||||||||||||
| Beginning balance | $ | 1,046 | $ | 962 | ||||||||||
| Release of reserve | (1,046) | — | ||||||||||||
| Interest and penalties on prior reserves | — | 84 | ||||||||||||
| Reserve for uncertain income taxes - included in "Other non-current liabilities" | $ | — | $ | 1,046 | ||||||||||
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About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.