INCOME TAXES
Income before income taxes was comprised of the following (in thousands):
|
| | | | | | | | | | | | |
| | Fiscal Years Ended March 31, |
| | 2017 | | 2016 | | 2015 |
U.S. Federal | | $ | 18,910 |
| | $ | 40,981 |
| | $ | 39,511 |
|
Foreign | | 2,634 |
| | 3,244 |
| | 5,417 |
|
Income before income taxes | | $ | 21,544 |
| | $ | 44,225 |
| | $ | 44,928 |
|
Income tax expense consists of the following (in thousands):
|
| | | | | | | | | | | | |
| | Current | | Deferred | | Total |
Fiscal year ended March 31, 2017: | | | | | | |
U.S. Federal | | $ | 5,686 |
| | $ | 2,469 |
| | $ | 8,155 |
|
State and local | | 1,481 |
| | 317 |
| | 1,798 |
|
Foreign | | 1,201 |
| | (681 | ) | | 520 |
|
Provision for income taxes | | $ | 8,368 |
| | $ | 2,105 |
| | $ | 10,473 |
|
Fiscal year ended March 31, 2016: | | | | | | |
U.S. Federal | | $ | 9,210 |
| | $ | 7,573 |
| | $ | 16,783 |
|
State and local | | 1,368 |
| | (136 | ) | | 1,232 |
|
Foreign | | 914 |
| | (175 | ) | | 739 |
|
Provision for income taxes | | $ | 11,492 |
| | $ | 7,262 |
| | $ | 18,754 |
|
Fiscal year ended March 31, 2015: | | | | | | |
U.S. Federal | | $ | 14,920 |
| | $ | (1,848 | ) | | $ | 13,072 |
|
State and local | | 933 |
| | 3 |
| | 936 |
|
Foreign | | 1,637 |
| | (422 | ) | | 1,215 |
|
Provision for income taxes | | $ | 17,490 |
| | $ | (2,267 | ) | | $ | 15,223 |
|
Income tax expense differed from the amounts computed by applying the U.S. federal statutory income tax rate of 35% to income before income taxes as a result of the following (in thousands):
|
| | | | | | | | | | | | |
| | Fiscal Years Ended March 31, |
| | 2017 | | 2016 | | 2015 |
Computed tax expense at statutory rate | | 7,540 |
| | 15,479 |
| | 15,727 |
|
Increase (reduction) in income taxes resulting from: | | | | | | |
FIN 48 liability | | 1,593 |
| | 1,277 |
| | — |
|
State and local income taxes, net of federal benefits | | 1,319 |
| | 1,055 |
| | 569 |
|
Permanent differences | | 687 |
| | 1,399 |
| | 529 |
|
Domestic production activity deduction | | (545 | ) | | (420 | ) | | (817 | ) |
Foreign rate differential | | (457 | ) | | (642 | ) | | (75 | ) |
Difference in U.S. rate | | — |
| | (107 | ) | | (45 | ) |
Other, net | | 336 |
| | 713 |
| | (665 | ) |
Provision for income taxes | | $ | 10,473 |
| | $ | 18,754 |
| | $ | 15,223 |
|
The effective tax rates for the fiscal years ended March 31, 2017, 2016 and 2015 were 48.6%, 42.4% and 33.9%, respectively. The current year tax rate was higher, compared to the prior years, as a result of transaction costs incurred with the Share Distribution that are not deductible for tax purposes, an increase in the reserve for uncertain tax positions and an increase in state and local income taxes. Other items impacting the effective tax rate include foreign operations activities in countries with lower statutory rates and domestic operations activity in states with higher statutory rates.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at March 31 are presented below (in thousands):
|
| | | | | | | | |
| | As of March 31, |
| | 2017 | | 2016 |
Deferred tax assets: | | | | |
Pension and other employee benefits | | $ | 3,289 |
| | $ | 38 |
|
Accrued compensation | | 2,621 |
| | 1,712 |
|
Inventory reserves | | 1,876 |
| | 2,319 |
|
Net operating loss carryforwards | | 565 |
| | 160 |
|
Accrued expenses | | 2 |
| | 370 |
|
Other | | 1,485 |
| | 2,289 |
|
Deferred tax assets | | 9,838 |
| | 6,888 |
|
Valuation allowance | | (107 | ) | | (107 | ) |
Deferred tax assets, net of valuation allowance | | 9,731 |
| | 6,781 |
|
Deferred tax liabilities: | | | | |
Property, plant and equipment | | (6,719 | ) | | (5,819 | ) |
Goodwill and intangible assets | | (5,313 | ) | | (2,567 | ) |
Deferred gain | | (783 | ) | | (716 | ) |
Other | | (6 | ) | | (195 | ) |
Deferred tax liabilities | | (12,821 | ) | | (9,297 | ) |
Net deferred tax liabilities | | $ | (3,090 | ) | | $ | (2,516 | ) |
As of March 31, 2017 and 2016, we had $0.6 million and $0.2 million, respectively, in tax effected net operating loss carryforwards. Net operating loss carryforwards will expire in periods beyond the next 5 years. Our acquisition of Greco resulted in an ownership change under Section 382 of the Internal Revenue Code. We believe that the total tax effected net operating loss carryforward of Greco as of February 28, 2017, the date of acquisition, is less than $0.5 million. The ability to utilize such net operating loss carryforward to offset post-acquisition net income of other members of the Company's U.S. consolidated group is limited under Section 382 of the Internal Revenue Code. For the fiscal year ended March 31, 2017, the annual limitation was pro-rated resulting in utilization of the net operating loss carryforward equal to one-twelfth of the annual limitation. No provision is made for U.S. income and foreign withholding taxes applicable to undistributed earnings of certain foreign entities since these earnings are considered to be permanently reinvested.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
|
| | | | | | | | |
| | March 31, |
| | 2017 | | 2016 |
Balance at beginning of year | | $ | 900 |
| | $ | — |
|
Increases related to prior year tax positions | | 916 |
| | 900 |
|
Increases related to current year tax positions | | 730 |
| | — |
|
Settlement | | (521 | ) | | — |
|
Balance at end of year | | $ | 2,025 |
| | $ | 900 |
|
We have accrued interest and penalties on uncertain tax positions of $0.2 million and $0.2 million, respectively, for the year ended March 31, 2017 and $0.2 million and $0.2 million, respectively, for the year ended March 31, 2016. We did not recognize any interest and penalties for uncertain tax positions for the year ended March 31, 2015. We are currently not under examination for any of our U.S. federal income taxes.