Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.8.0.1
Income Taxes
 12 Months Ended
Mar. 31, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
    
Income taxes included in the consolidated income statement consisted of the following:
 
 
 
Year Ended March 31, 2018
 
Year Ended March 31, 2017
 
Year Ended March 31, 2016
Current provision:
 
 
 
 
 
 
 
Federal provision
 
$
3,937

 
$
1,588

 
$
4,185

 
Foreign provision
 
12,768

 
6,341

 
8,503

 
State provision
 
301

 
155

 
311

Deferred provision:
 
 
 
 
 
 
 
Federal deferred benefit
 
(8,506
)
 
(1,907
)
 
(1,964
)
 
Foreign deferred benefit
 
(3,178
)
 
(2,025
)
 
(2,263
)
 
State deferred benefit
 
(152
)
 
(54
)
 
(56
)
Total provision for income taxes
 
$
5,170

 
$
4,098

 
$
8,716


    
Deferred income tax assets and liabilities were as follows:
 
 
 
March 31,
 
 
 
2018
 
2017
Deferred tax assets:
 
 
 
 
 
 
 
 
 
 
Accrued liabilities and reserves
 
$
1,987

 
$
1,617

 
Stock option compensation
 
821

 
932

 
Foreign deferred benefits
 
3,575

 
2,340

 
Net operating loss carry-forward
 
1,688

 
1,250

 
Inventories
 
371

 
440

 
Capitalized transaction costs
 
207

 
390

 
Interest rate swap included in Other Comprehensive Loss
 
—

 
18

 
Foreign tax credit carry forward
 
104

 
65

 
Valuation allowance
 
(878
)
 
(659
)
Total deferred tax assets
 
$
7,875

 
$
6,393

Deferred tax liabilities:
 
 
 
 
Intangible assets
 
$
(9,498
)
 
$
(17,952
)
Intangible assets - foreign
 
(25,674
)
 
(7,452
)
Property, plant and equipment
 
(2,522
)
 
(3,637
)
Prepaid expenses
 
(104
)
 
(161
)
Unrealized loss on hedge
 
(45
)
 
(19
)
Undistributed foreign earnings
 
(859
)
 
(10
)
Total deferred tax liabilities
 
(38,702
)
 
(29,231
)
 
 
 
 
 
 
Net deferred tax asset (liability)
 
$
(30,827
)
 
$
(22,838
)


    


The U.S. and non-U.S. components of income (loss) from continuing operations before income taxes were as follows:
 
 
 
Year Ended March 31, 2018
 
Year Ended March 31, 2017
 
Year Ended March 31, 2016
U.S.
 
 
$
(13,568
)
 
$
(83
)
 
$
13,043

Non-U.S.
 
 
31,957

 
19,165

 
19,323

Income from continuing operations
 
$
18,389

 
$
19,082

 
$
32,366



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, 2018
 
Year Ended March 31, 2017
 
Year Ended March 31, 2016
Notional U.S. federal income tax expense at statutory rate
 
$
5,792

 
$
6,679

 
$
11,328

Adjustments to reconcile to the income tax provision:
 
 
 
 
 
 
Transition tax for United States tax reform
 
5,125

 
—

 
—

 
Impact on deferred tax liability for statutory rate change
 
(5,849
)
 
—

 
455

U.S. state income tax provision, net
 
111

 
45

 
150

 
Undistributed foreign earnings
 
1,786

 
—

 
—

 
Rate difference-international subsidiaries
 
(1,769
)
 
(2,622
)
 
(1,727
)
 
Charges/(benefits) related to uncertain tax positions
 
(533
)
 
(128
)
 
(1,227
)
 
Non-deductible charges
 
758

 
296

 
51

 
Foreign purchase price adjustment
 
—

 
(379
)
 
—

 
Change in valuation allowance
 
219

 
490

 
—

 
Other, net
 
(470
)
 
(283
)
 
(314
)
Provision for income taxes
 
$
5,170

 
$
4,098

 
$
8,716



    
On December 22, 2017, the United States enacted significant changes to U.S. tax law following the passage and signing of H.R.1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” (the “Tax Act”) (previously known as “The Tax Cuts and Jobs Act”).  The Tax Act included significant changes to existing tax law, including a permanent reduction to the U.S. federal corporate income tax rate from 35% to 21%, a one-time repatriation tax on deferred foreign income (“Transition Tax”), deductions, credits and business-related exclusions. 
On December 22, 2017, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin 118 (“SAB 118”).  SAB 118 expresses views of the SEC regarding ASC Topic 740, Income Taxes (“ASC 740”) in the reporting period that includes the enactment date of the Tax Act.  The SEC staff issuing SAB 118 (the “Staff”) recognized that a registrant’s review of certain income tax effects of the Tax Act may be incomplete at the time financial statements are issued for the reporting period that includes the enactment date, including interim periods therein. The Staff’s view of the enactment of the Tax Act has been developed considering the principles of ASC Topic 805, Business Combinations, which addresses the accounting for certain items in a business combination for which the accounting is incomplete upon issuance of the financial statements that include the reporting period in which the business combination occurs.  Specifically, the Staff provides that the accounting guidance in ASC Topic 805 may be analogized to the accounting for impacts of the Tax Act.  If a company does not have the necessary information available, prepared or analyzed for certain income tax effects of the Tax Act, SAB 118 allows a company to report provisional numbers and adjust those amounts during the measurement period not to extend beyond one year.  The Company has recorded all known and estimable impacts of the Tax Act that are effective for fiscal year 2018.  Future adjustments to the provisional numbers will be recorded as discrete adjustments to income tax expense in the period in which those adjustments become estimable and/or are finalized.
Accordingly, our income tax provision as of March 31, 2018 reflects (i) the current fiscal year impacts of the Tax Act on the estimated annual effective tax rate and (ii) the following discrete items resulting directly from the enactment of the Tax Act based on the information available, prepared, or analyzed (including computations) in reasonable detail. 
 
Year Ended
 
March 31,
2018
Transition Tax (provisional)
$
5,126

Net impact on U.S. deferred tax assets and liabilities (provisional)
(6,030
)
Net changes in deferred tax liability associated with anticipated repatriation taxes (provisional)
1,704

Net discrete impacts of the enactment of the Tax Act
$
800



Consistent with provisions allowed under the Tax Act, the $5,126 estimated Transition Tax liability will be paid over an eight year period beginning in fiscal year 2019.  The non-current portion of the estimated Transition Tax liability has been included in “Other liabilities- long term” in the Condensed Consolidated Balance Sheets.  
The net benefit of $6,030 related to deferred tax assets and liabilities is primarily associated with a reduction in deferred liabilities for unamortized intangible assets. Since these intangible assets are not tax deductible, the reduction of the liability is non-cash and will not reduce future tax payments.
Given the Tax Act’s significant changes and potential opportunities to repatriate cash tax free, we have reevaluated our current permanent reinvestment position. Accordingly, we will no longer assert a permanent reinvestment position in most of our foreign subsidiaries. We expect to repatriate certain earnings which will be subject to withholding taxes.  These additional withholding taxes are being recorded as an additional deferred tax liability associated with the basis difference in such jurisdictions.  The uncertainty related to the taxation of such withholding taxes on distributions under the Tax Act and finalization of the cash repatriation plan makes the deferred tax liability a provisional amount. 
We continue to review the anticipated impacts of the global intangible low taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”), which are not effective until fiscal year 2019.  We have not recorded any impact associated with either GILTI or BEAT in the tax rate for fiscal year 2018. 
Within the calculation of our annual effective tax rate we have used assumptions and estimates that may change as a result of future guidance, interpretation, and rule-making from the Internal Revenue Service, the SEC, and the Financial Accounting Standards Board and/or various other taxing jurisdictions.  For example, we anticipate that the state jurisdictions will continue to determine and announce their conformity to the Tax Act which could have an impact on the annual effective tax rate.

As of March 31, 2018, the Company had foreign tax net operating loss carry-forwards ("NOLs") of $5,731. Of this amount, $4,024 may be carried forward indefinitely. As of March 31, 2018, the tax years 2014 through 2017 remain open to examination by the major taxing jurisdictions to which we are subject.

During the fiscal year ended March 31, 2018, the Company released its remaining reserve for uncertain tax positions as the tax periods to which they relate had closed.  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, 2018
 
Year Ended March 31, 2017
Beginning balance
 
$
533

 
$
661

Reductions for tax positions of prior years
 
(533
)
 
(176
)
Interest and penalties on prior reserves
 
—

 
48

Reserve for uncertain income taxes
 
$
—

 
$
533