Income Taxes
The domestic and foreign components of Income (loss) before provision (benefit) for income taxes are as follows:
|
| | | | | | | | | |
| Fiscal |
| 2017 |
| 2016 |
| 2015 |
|
Domestic | $ | (8,212 | ) | $ | (184,598 | ) | $ | 17,865 |
|
Foreign | 2,918 |
| (8,486 | ) | 5,723 |
|
Consolidated | $ | (5,294 | ) | $ | (193,084 | ) | $ | 23,588 |
|
The provision (benefit) for income taxes consists of the following:
|
| | | | | | | | | |
| Fiscal |
| 2017 |
| 2016 |
| 2015 |
|
Current | | | |
Federal | $ | (10 | ) | $ | 1,037 |
| $ | 279 |
|
State | (1,200 | ) | 1,058 |
| 1,259 |
|
Foreign | 1,600 |
| 2,067 |
| 2,052 |
|
Total current | 390 |
| 4,162 |
| 3,590 |
|
Deferred | | | |
Federal | 210 |
| (23,012 | ) | 4,802 |
|
State | 1,258 |
| (3,785 | ) | 220 |
|
Foreign | (101 | ) | 653 |
| (366 | ) |
Total deferred | 1,367 |
| (26,144 | ) | 4,656 |
|
Total provision (benefit) for income taxes | $ | 1,757 |
| $ | (21,982 | ) | $ | 8,246 |
|
Reconciliations between income taxes computed using the federal statutory income tax rate and the Company’s effective tax rate are as follows:
|
| | | | | | | | | | | | | | | |
| Fiscal |
| 2017 | 2016 | 2015 |
| $ | % | $ | % | $ | % |
Federal statutory tax rate | $ | (1,853 | ) | 35.0 | % | $ | (67,580 | ) | 35.0 | % | $ | 8,256 |
| 35.0 | % |
Foreign taxes, net of foreign tax credits | 143 |
| (2.7 | ) | 419 |
| (0.2 | ) | (418 | ) | (1.8 | ) |
Non-deductible expenses | 317 |
| (6.0 | ) | 588 |
| (0.3 | ) | (338 | ) | (1.4 | ) |
State income taxes, net of federal benefit | (336 | ) | 6.3 |
| (2,242 | ) | 1.2 |
| 1,082 |
| 4.6 |
|
Valuation allowance | 498 |
| (9.4 | ) | 1,317 |
| (0.7 | ) | — |
| — |
|
International legal entity restructuring | — |
| — |
| — |
| — |
| (1,574 | ) | (6.6 | ) |
Permanent book/tax differences | — |
| — |
| 45,732 |
| (23.7 | ) | — |
| — |
|
Equity awards | 2,800 |
| (52.9 | ) | 1,814 |
| (0.9 | ) | 1,940 |
| 8.2 |
|
Other, net | 188 |
| (3.5 | ) | (2,030 | ) | 1.0 |
| (702 | ) | (3.0 | ) |
Effective tax rate | $ | 1,757 |
| (33.2 | )% | $ | (21,982 | ) | 11.4 | % | $ | 8,246 |
| 35.0 | % |
The negative effective tax rate of 33.2% for Fiscal 2017 was primarily due to the reduction of deferred tax assets associated with equity awards and the mix of income across various taxing jurisdictions. The effective tax rate of 11.4% for Fiscal 2016 was primarily due to a tax benefit from an international legal entity restructuring which was partially offset by the write-off of certain deferred tax assets related to equity awards. The effective tax rate of 35.0% for Fiscal 2015 was primarily due to $114,920 of non-deductible goodwill impairment loss (see Note 5), a decrease in uncertain income tax positions (including interest and penalties) and the benefit associated with the Fiscal 2013 federal return to provision reconciliation partially offset by the write-off of certain deferred tax assets related to equity awards.
The components of current and long-term deferred tax liabilities and assets are as follows:
|
| | | | | | |
| March 31, |
| 2017 |
| 2016 |
|
Deferred Tax Liabilities | | |
Goodwill and intangibles | $ | 854 |
| $ | — |
|
Unremitted earnings of foreign subsidiaries | — |
| — |
|
Other | 857 |
| 1,076 |
|
Gross deferred tax liabilities | 1,711 |
| 1,076 |
|
Deferred Tax Assets | | |
Net operating losses | 37,611 |
| 25,563 |
|
Basis of finished goods inventory | 5,264 |
| 8,599 |
|
Goodwill and intangibles | — |
| 1,272 |
|
Reserve for bad debts | — |
| 2,684 |
|
Foreign tax credit carry-forwards | 3,804 |
| 3,755 |
|
Accrued employee costs | 10,904 |
| 15,302 |
|
Stock-based compensation | 2,999 |
| 5,616 |
|
Other | — |
| — |
|
Gross deferred tax assets | 60,582 |
| 62,791 |
|
Valuation allowance | (5,333 | ) | (4,835 | ) |
Net deferred tax assets | 55,249 |
| 57,956 |
|
Net deferred tax assets/(liabilities) | $ | 53,538 |
| $ | 56,880 |
|
At March 31, 2017, the Company had $70,386, $156,920 and $23,037 of federal, state and foreign gross net operating loss carryforwards, respectively. As a result of the past acquisitions, Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), limits the amount of net operating losses available to the Company related to those acquisitions to approximately $2,876 per year and expire pro-ratably through Fiscal 2031. Current federal losses expire in Fiscal 2036. The state gross net operating loss carry-forwards expire at various times through Fiscal 2036 and the foreign gross net operating loss carry-forwards expire at various times through Fiscal 2026, with the exception of several foreign jurisdictions, which have no expirations.
A valuation allowance is provided on deferred tax assets if determined that it is more likely than not that the asset will not be realized. The Company considers all available evidence, both positive and negative, in assessing the need for a valuation allowance in each taxing jurisdiction. The evidence considered in evaluating deferred tax assets includes but is not limited to cumulative financial income over the three-year period ended March 31, 2017, excluding significant one-time charges for impairment (goodwill and other), the composition and reversal patterns of existing taxable and deductible temporary differences between financial reporting and tax, and subjective projected future income.
Based on the available evidence, a valuation allowance has not been recorded against U.S. Federal deferred tax assets, however, an additional valuation allowance of $498 has been recorded against deferred tax assets in certain state and foreign taxing jurisdictions, totaling $5,333 in the aggregate. Future positive and negative events, such as the significant underperformance relative to projected or future operating results, will be monitored accordingly and a determination will be made on the ability to realize deferred tax assets at that time.
In general, except for certain earnings associated with inter-company loan balances, it is the Company’s intention to reinvest all undistributed earnings of non-U.S. subsidiaries for an indefinite period of time. Therefore, except for the exceptions noted above, no deferred U.S. income taxes have been provided on undistributed earnings of non-U.S. subsidiaries, which aggregate approximately $4,441 based on exchange rates at March 31, 2017.
A reconciliation of the change in the tax liability for unrecognized tax benefits is as follows:
|
| | | | | | | | | |
| Fiscal |
| 2017 |
| 2016 |
| 2015 |
|
Balance at beginning of year | $ | 2,016 |
| $ | 4,083 |
| $ | 4,384 |
|
Additions for tax positions related to the current year | 78 |
| 85 |
| 62 |
|
Additions for tax positions related to prior years | 60 |
| — |
| 170 |
|
Reductions for tax positions related to prior years | (148 | ) | (2,152 | ) | — |
|
Settlements | — |
| — |
| (533 | ) |
Balance at end of year | $ | 2,006 |
| $ | 2,016 |
| $ | 4,083 |
|
Unrecognized tax benefits are classified as either current or non-current under Other liabilities within the Company's Consolidated Balance Sheets. Of the $2,006 noted above, the Company expects that $39 will reverse in the next twelve months. As of March 31, 2017, 2016 and 2015, the Company recorded $494, $435 and $1,065, respectively, of interest and penalties related to uncertain tax positions in current liabilities within Income taxes, all of which impacted the Company's effective tax rate.
Fiscal 2013 through Fiscal 2016 remain open to examination by the Internal Revenue Service ("IRS") and Fiscal 2011 through Fiscal 2016 remain open to examination by certain state and foreign taxing jurisdictions.