|
19. |
INCOME TAXES |
The components of Income before income taxes for the fiscal years ended March 31 are as follows:
|
(Amounts in thousands) |
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
United States |
|
$ |
59,543 |
|
|
$ |
45,159 |
|
|
$ |
(4,381 |
) |
|
Foreign |
|
|
5,288 |
|
|
|
14,140 |
|
|
|
9,304 |
|
|
Total |
|
$ |
64,831 |
|
|
$ |
59,299 |
|
|
$ |
4,923 |
|
The components of Income tax expense for the fiscal years ended March 31 consisted of the following:
|
(Amounts in thousands) |
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
24,318 |
|
|
$ |
6,889 |
|
|
$ |
20,592 |
|
|
State and local |
|
|
4,652 |
|
|
|
2,126 |
|
|
|
3,655 |
|
|
Foreign |
|
|
3,040 |
|
|
|
3,791 |
|
|
|
831 |
|
|
Total current tax expense |
|
|
32,010 |
|
|
|
12,806 |
|
|
|
25,078 |
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
(5,887 |
) |
|
|
10,019 |
|
|
|
(16,270 |
) |
|
State and local |
|
|
(1,297 |
) |
|
|
1,431 |
|
|
|
(2,626 |
) |
|
Foreign |
|
|
(211 |
) |
|
|
(758 |
) |
|
|
102 |
|
|
Total deferred tax expense (benefit) |
|
|
(7,395 |
) |
|
|
10,692 |
|
|
|
(18,794 |
) |
|
Total Income tax expense |
|
$ |
24,615 |
|
|
$ |
23,498 |
|
|
$ |
6,284 |
|
For the fiscal years ended March 31, the effective tax rate varied from the statutory Federal income tax rate as a result of the following factors:
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Federal statutory rate |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
Redeemable convertible preferred stock dividend |
|
|
(0.8 |
) |
|
|
(0.8 |
) |
|
|
(3.8 |
) |
|
ESOP stock appreciation |
|
|
4.9 |
|
|
|
5.8 |
|
|
|
82.3 |
|
|
ESOP compensation for Special Dividend on unallocated shares |
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
|
Effect of tax rate of foreign subsidiaries |
|
|
1.3 |
|
|
|
0.8 |
|
|
|
(9.3 |
) |
|
State and local taxes—net of federal income tax benefit |
|
|
4.1 |
|
|
|
4.3 |
|
|
|
19.7 |
|
|
Stock-based compensation |
|
|
0.3 |
|
|
|
(1.8 |
) |
|
|
64.7 |
|
|
Uncertain tax position change |
|
|
(1.1 |
) |
|
|
(3.6 |
) |
|
|
(35.2 |
) |
|
Qualified production activity credit |
|
|
(3.3 |
) |
|
|
(0.9 |
) |
|
|
(37.1 |
) |
|
Executive repurchase agreement |
|
|
— |
|
|
|
— |
|
|
|
7.2 |
|
|
Closure of Puerto Rico |
|
|
(4.2 |
) |
|
|
— |
|
|
|
— |
|
|
Other |
|
|
1.8 |
|
|
|
0.8 |
|
|
|
3.9 |
|
|
Effective rate |
|
|
38.0 |
% |
|
|
39.6 |
% |
|
|
127.6 |
% |
The Company’s effective tax rate will vary based on factors, including but not limited to, overall profitability, the geographical mix of income before taxes and discrete events. The fiscal 2015 effective tax rate exceeded the federal statutory rate due in part to the significant permanent differences associated with non-deductible ESOP stock appreciation and stock-based compensation expense, the effect of which was increased by the near break-even amount of pre-tax income, whereas the fiscal year 2017 and 2016 effective tax rates more closely approximate a normal effective tax rate for the Company.
The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at March 31 were comprised of:
|
(Amounts in thousands) |
|
2017 |
|
|
2016 |
|
||
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
State income taxes |
|
$ |
1,474 |
|
|
$ |
1,927 |
|
|
ESOP loan repayment |
|
|
1,363 |
|
|
|
1,390 |
|
|
Receivable and other allowances |
|
|
2,660 |
|
|
|
2,150 |
|
|
Derivatives |
|
|
(15 |
) |
|
|
4,397 |
|
|
Inventory |
|
|
5,820 |
|
|
|
1,433 |
|
|
Non-qualified stock options |
|
|
6,052 |
|
|
|
4,309 |
|
|
Executive termination payments (Note 15) |
|
|
2,044 |
|
|
|
1,852 |
|
|
Accrued Expenses |
|
|
411 |
|
|
|
1,378 |
|
|
Worker’s compensation |
|
|
1,323 |
|
|
|
1,390 |
|
|
Contingent consideration |
|
|
91 |
|
|
|
533 |
|
|
Foreign net operating losses |
|
|
2,223 |
|
|
|
1,507 |
|
|
Other |
|
|
2,856 |
|
|
|
2,491 |
|
|
Total deferred tax assets |
|
|
26,302 |
|
|
|
24,757 |
|
|
Less: valuation allowance |
|
|
(2,223 |
) |
|
|
(1,507 |
) |
|
Total net deferred tax assets |
|
|
24,079 |
|
|
|
23,250 |
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
Intangible assets |
|
|
7,214 |
|
|
|
8,882 |
|
|
Property, plant and equipment |
|
|
51,599 |
|
|
|
52,115 |
|
|
Leases |
|
|
724 |
|
|
|
6,059 |
|
|
Capitalized software costs |
|
|
3,200 |
|
|
|
2,935 |
|
|
Goodwill |
|
|
3,886 |
|
|
|
3,643 |
|
|
Other |
|
|
761 |
|
|
|
1,867 |
|
|
Total deferred tax liabilities |
|
|
67,384 |
|
|
|
75,501 |
|
|
Net deferred tax liability |
|
$ |
43,305 |
|
|
$ |
52,251 |
|
Net deferred tax assets are included in Deferred income taxes and other current assets and Other assets on the Consolidated Balance Sheets. The related balances at March 31 were as follows:
|
(Amounts in thousands) |
|
2017 |
|
|
2016 |
|
||
|
Net current deferred tax assets |
|
$ |
— |
|
|
$ |
11,701 |
|
|
Net non-current deferred tax assets |
|
|
702 |
|
|
|
— |
|
|
Net non-current deferred tax liabilities |
|
|
44,007 |
|
|
|
63,952 |
|
The Company has not provided for U.S. federal income taxes or foreign withholding taxes on approximately $28.0 million of undistributed earnings of its foreign subsidiaries at March 31, 2017 because such earnings are intended to be reinvested indefinitely with the exception of cash dividends paid by our ADS Mexicana joint venture. It is not practicable to estimate the amount of U.S. tax that might be payable on the eventual remittance of such earnings.
Accounting for Uncertain Tax Positions
As of March 31, 2017, the Company had unrecognized tax benefit of $6.2 million, which if resolved favorably, would reduce income tax expense by $6.2 million. A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended March 31, 2017, 2016, and 2015 is as follows:
|
(Amounts in thousands) |
|
|||
|
Balance as of March 31, 2014 |
|
$ |
12,855 |
|
|
Decreases in tax positions for prior years |
|
|
(672 |
) |
|
Increases in tax positions for prior years |
|
|
336 |
|
|
Settlements |
|
|
— |
|
|
Lapse of statute of limitations |
|
|
(2,067 |
) |
|
Balance as of March 31, 2015 |
|
$ |
10,452 |
|
|
Tax positions taken in current year |
|
|
917 |
|
|
Decreases in tax positions for prior years |
|
|
(599 |
) |
|
Increases in tax positions for prior years |
|
|
358 |
|
|
Settlements |
|
|
— |
|
|
Lapse of statute of limitations |
|
|
(3,130 |
) |
|
Balance as of March 31, 2016 |
|
$ |
7,998 |
|
|
Tax positions taken in current year |
|
|
— |
|
|
Decreases in tax positions for prior years |
|
|
(1,786 |
) |
|
Increases in tax positions for prior years |
|
|
80 |
|
|
Settlements |
|
|
— |
|
|
Lapse of statute of limitations |
|
|
(96 |
) |
|
Balance as of March 31, 2017 |
|
$ |
6,196 |
|
The unrecognized tax benefits are primarily recorded in Other liabilities in the Company’s Consolidated Balance Sheets. These amounts include potential accrued interest and penalties of $1.8 million and $2.7 million at March 31, 2017 and 2016, respectively.
It is reasonably possible that there could be a change in the amount of unrecognized tax benefits within the next twelve months due to activities of the IRS or other taxing authorities, including proposed assessments of additional tax, possible settlement of audit issues, or the expiration of applicable statutes of limitation.
The Company is currently open to audit under the statute of limitations by the IRS for the fiscal years ended March 31, 2014 through March 31, 2017. The majority of the Company’s state income tax returns are open to audit under the statute of limitations for the years ended March 31, 2014 through March 31, 2017. The foreign income tax returns are open to audit under the statute of limitations for the years ended March 31, 2013 through March 31, 2017.