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Income Taxes | 12 Months Ended
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Mar. 31, 2018
Income Taxes [Abstract] |
Income Taxes |
Note 7: | Income Taxes
The U.S. and foreign components of earnings before income taxes and the provision or benefit for income taxes consisted of the following:
|  | Years ended March 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Components of earnings (loss) before income taxes: |  |  |  |  |  |  |  |  |
United States |  | $ | 2.5 |  |  | $ | (8.6 | ) |  | $ | (15.4 | )
Foreign |  |  | 60.8 |  |  |  | 29.4 |  |  |  | 5.5 |
Total earnings (loss) before income taxes |  | $ | 63.3 |  |  | $ | 20.8 |  |  | $ | (9.9 | )
Income tax provision (benefit): |  |  |  |  |  |  |  |  |  |  |  |
Federal: |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 11.6 |  |  | $ | 0.1 |  |  | $ | 0.1 |
Deferred |  |  | 23.3 |  |  |  | (3.8 | ) |  |  | (13.0 | )
State: |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | (0.3 | ) |  |  | 0.3 |  |  |  | 0.2 |
Deferred |  |  | 2.0 |  |  |  | (0.2 | ) |  |  | (2.5 | )
Foreign: |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 16.1 |  |  |  | 10.1 |  |  |  | 9.6 |
Deferred |  |  | (13.2 | ) |  |  | (0.6 | ) |  |  | (3.3 | )
Total income tax provision (benefit) |  | $ | 39.5 |  |  | $ | 5.9 |  |  | $ | (8.9 | )
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act includes broad and complex changes to the U.S. tax code, including (i) a reduction in the U.S. federal corporate tax rate from 35 percent to 21 percent effective January 1, 2018, and (ii) a transition tax on certain unrepatriated earnings of foreign subsidiaries. For fiscal 2018, the Company recorded its income tax provision based on a blended U.S. statutory tax rate of 31.5 percent, which is based on a proration of the applicable tax rates before and after the effective date of the Tax Act. The statutory tax rate of 21 percent will apply for fiscal 2019 and beyond. The Tax Act also puts in place new tax laws that may impact the Company’s taxable income beginning in fiscal 2019, which include, but are not limited to (i) creating a base erosion anti-abuse tax (“BEAT”), which is a new minimum tax, (ii) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries, (iii) adding a new provision designed to tax global intangible low taxed income (“GILTI”), (iv) adding a provision that could limit the amount of deductible interest expense, and (v) limiting the deductibility of certain executive compensation. Shortly after the Tax Act was enacted, the Securities and Exchange Commission issued accounting guidance, which provides a one-year measurement period during which a company may complete its accounting for the impacts of the Tax Act. To the extent a company’s accounting for certain income tax effects of the Tax Act is incomplete, the company may determine a reasonable estimate for those effects and record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply the provisions of the tax laws that were in effect immediately prior to the Tax Act being enacted. During fiscal 2018, the Company recorded provisional discrete tax charges of $38.0 million related to the Tax Act. The Company adjusted its U.S. deferred tax assets by $19.0 million due to the reduction in the U.S. federal corporate tax rate. This net reduction in deferred tax assets also included the estimated impact on the Company’s net state deferred tax assets. In addition, the Company recorded a $19.0 million charge for the transition tax. The Company is in process of evaluating whether to utilize its deferred tax attributes for the transition tax. If the Company does not utilize its deferred tax attributes for the transition tax, it expects to pay the estimated $19.0 million tax liability over the next eight years, beginning with an estimated payment of $1.5 million in fiscal 2019. The Company is also awaiting additional technical guidance on the treatment of the deemed inclusion and its impact on fiscal year taxpayers. The Company is in process of analyzing other provisions of the Tax Act to determine whether they will impact the Company’s effective tax rate in the future. These provisions include BEAT, as described above, the elimination of U.S. federal income taxes on dividends from foreign subsidiaries, new limits on the deductibility of interest expense and executive compensation, and the state tax implications of the Tax Act, including the impact of the transition tax and the impact on the realizability of tax attributes and valuation allowances. The Tax Act includes a provision designed to tax GILTI, as described above, starting in fiscal 2019. The Company has elected to record the tax effects of the GILTI provision as a period expense in the applicable tax year. As a result, GILTI did not impact the Company’s fiscal 2018 income tax provision. As of March 31, 2018, the Company is still assessing the impact GILTI will have on its deferred tax attributes. The Company has not yet completed its accounting for the income tax effects of certain elements of the Tax Act. In regards to the reduction in the U.S. corporate tax rate, the Company will continue to analyze its temporary differences through finalization of the fiscal 2018 U.S. federal return. In regards to the transition tax, the Company is awaiting further interpretative guidance, continuing to assess available tax methods and elections, and continuing to gather additional information in order to more precisely compute the amount of this tax. Previously, the Company’s practice and intention was to reinvest, with certain insignificant exceptions, the earnings of its non-U.S. subsidiaries outside of the U.S. As a result, the Company did not record U.S. deferred income taxes or foreign withholding taxes for these earnings. The Company is currently analyzing its global working capital requirements and the potential tax liabilities that would be incurred if the non-U.S. subsidiaries distribute cash to the U.S. parent, which include local country withholding tax and potential U.S. state taxes. The Company expects to complete its analysis of the accounting guidance related to the Tax Act and its evaluation of the impacts of the Tax Act in first half of fiscal 2019. The Company’s accounting policy is to allocate the income tax provision between net earnings and other comprehensive income. The Company applies its accounting for income taxes by tax jurisdiction, and in periods in which there is a loss before income taxes and pre-tax income in other comprehensive income, it first allocates the income tax provision to other comprehensive income, and then records a related tax benefit in the income tax provision. The reconciliation between the U.S. federal statutory rate and the Company’s effective tax rate was as follows:
|  | Years ended March 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Statutory federal tax |  |  | 31.5 | % |  |  | 35.0 | % |  |  | 35.0 | %
State taxes, net of federal benefit |  |  | 2.9 |  |  |  | (3.3 | ) |  |  | 11.5 |
Taxes on non-U.S. earnings and losses |  |  | (3.8 | ) |  |  | (3.5 | ) |  |  | 26.4 |
Valuation allowances |  |  | (5.6 | ) |  |  | 1.2 |  |  |  | (20.9 | )
Tax credits |  |  | (17.3 | ) |  |  | (9.0 | ) |  |  | 20.5 |
Compensation |  |  | (0.8 | ) |  |  | 2.9 |  |  |  | (3.7 | )
Tax rate or law changes |  |  | 60.1 |  |  |  | (2.5 | ) |  |  | 1.3 |
Uncertain tax positions, net of settlements |  |  | (0.8 | ) |  |  | 5.6 |  |  |  | (4.3 | )
Notional interest deductions |  |  | (3.2 | ) |  |  | (8.8 | ) |  |  | - |
Dividend repatriation |  |  | 0.2 |  |  |  | 7.1 |  |  |  | 16.0 |
Other |  |  | (0.8 | ) |  |  | 3.7 |  |  |  | 8.1 |
Effective tax rate |  |  | 62.4 | % |  |  | 28.4 | % |  |  | 89.9 | %
During fiscal 2018, the Company recorded provisional charges totaling $38.0 million related to the Tax Act, as discussed above, and recognized a $9.0 million Hungarian development tax credit. Also in fiscal 2018, the Company reversed a portion of the valuation allowance on certain deferred tax assets in a foreign jurisdiction after determining it was more likely than not these assets would be realized, and, as a result, recorded an income tax benefit of $2.8 million. In addition, the Company recorded a $1.8 million income tax benefit in fiscal 2018 associated with the reduction in unrecognized tax benefits resulting from a lapse in statues of limitations. During fiscal 2017, the Company recorded a valuation allowance of $2.0 million on certain deferred tax assets in a foreign jurisdiction after determining it was more likely than not the deferred tax assets would not be realized. Also during fiscal 2017, the Company recorded a net reduction of deferred tax asset valuation allowances totaling $1.8 million in other tax jurisdictions. During fiscal 2016, the Company reversed a valuation allowance of $3.0 million on certain deferred tax assets in a foreign jurisdiction after determining it was more likely than not the deferred tax assets would be realized. Also during fiscal 2016, the Company recorded a net increase in deferred tax asset valuation allowances totaling $5.0 million in other tax jurisdictions. The Company may release the valuation allowance (approximately $3.0 million) on certain deferred tax assets in a foreign jurisdiction during fiscal 2019. The Company will continue to provide valuation allowances against its net deferred tax assets in each applicable tax jurisdiction until the need for a valuation allowance is eliminated. The need for a valuation allowance is eliminated when the Company determines it is more likely than not the deferred tax assets will be realized. The tax effects of temporary differences that gave rise to deferred tax assets and liabilities were as follows:
|  | March 31, |
|  | 2018 |  |  | 2017 |
Deferred tax assets: |  |  |  |  |  |
Accounts receivable |  | $ | 0.3 |  |  | $ | 0.4 |
Inventories |  |  | 4.1 |  |  |  | 5.0 |
Plant and equipment |  |  | 2.3 |  |  |  | 3.7 |
Pension and employee benefits |  |  | 36.0 |  |  |  | 51.8 |
Net operating loss, capital loss, and credit carryforwards |  |  | 139.2 |  |  |  | 147.5 |
Other, principally accrued liabilities |  |  | 9.9 |  |  |  | 10.9 |
Total gross deferred tax assets |  |  | 191.8 |  |  |  | 219.3 |
Less: valuation allowances |  |  | (48.9 | ) |  |  | (49.6 | )
Net deferred tax assets |  |  | 142.9 |  |  |  | 169.7 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Plant and equipment |  |  | 17.6 |  |  |  | 21.2 |
Goodwill |  |  | 5.2 |  |  |  | 4.7 |
Intangible assets |  |  | 32.4 |  |  |  | 43.3 |
Other |  |  | 0.7 |  |  |  | 1.8 |
Total gross deferred tax liabilities |  |  | 55.9 |  |  |  | 71.0 |
Net deferred tax assets |  | $ | 87.0 |  |  | $ | 98.7 |
Unrecognized tax benefits were as follows:
|  | Years ended March 31, |
|  | 2018 |  |  | 2017 |
Beginning balance |  | $ | 14.2 |  |  | $ | 5.9 |
Gross increases - tax positions in prior period |  |  | 0.8 |  |  |  | 0.3 |
Gross decreases - tax positions in prior period (a) |  |  | (1.2 | ) |  |  | (0.2 | )
Gross increases - due to acquisition |  |  | 1.4 |  |  |  | 7.3 |
Gross increases - tax positions in current period |  |  | 0.5 |  |  |  | 0.9 |
Settlements |  |  | (0.3 | ) |  |  | - |
Lapse of statute of limitations |  |  | (1.8 | ) |  |  | - |
Ending balance |  | $ | 13.6 |  |  | $ | 14.2 |
| (a) | Includes $1.0 million related to the reduction of the U.S. federal corporate tax rate as a result of the Tax Act.
The Company’s liability for unrecognized tax benefits as of March 31, 2018 was $13.6 million, and if recognized, $12.1 million would have an effective tax rate impact. The Company estimates a $2.2 million decrease in unrecognized tax benefits during fiscal 2019 due to lapses in statutes of limitations and settlements. If recognized, these reductions would have a $1.6 million impact on the Company’s effective tax rate. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. During fiscal 2018 and 2017, interest and penalties included within income tax expense in the consolidated statements of operations were not significant. At March 31, 2018 and 2017, accrued interest and penalties totaled $1.0 million and $0.8 million, respectively. The Company files income tax returns in multiple jurisdictions and is subject to examination by taxing authorities throughout the world. At March 31, 2018, the Company was under income tax examination in the United States and a number of foreign jurisdictions. The following tax years remain subject to examination for the Company’s major tax jurisdictions:
Germany | Fiscal 2011 - Fiscal 2017
Italy | Calendar 2013 - Fiscal 2017
United States | Fiscal 2015 - Fiscal 2017
At March 31, 2018, the Company had federal and state tax credits of $31.5 million that, if not utilized against U.S. taxes, will expire between fiscal 2019 and 2038. The Company also had state and local tax loss carryforwards totaling $183.1 million that, if not utilized against state apportioned taxable income, will expire between fiscal 2019 and 2038. In addition, the Company had tax loss and foreign attribute carryforwards totaling $475.0 million in various tax jurisdictions throughout the world. Certain of the carryforwards in the U.S. and in foreign jurisdictions are offset by valuation allowances. If not utilized against taxable income, $132.7 million of these carryforwards will expire between fiscal 2019 and 2038, and $342.3 million, mainly related to Germany and Italy, will not expire due to an unlimited carryforward period. Prior to the Tax Act, the Company considered substantially all earnings in its foreign subsidiaries to be permanently reinvested and recorded no provision for taxes that would be payable upon the distribution of such earnings. The Company’s current intention is to continue to permanently reinvest its undistributed earnings in its foreign operations, subject to certain insignificant exceptions, although, as discussed above, the Company has not completed its evaluation of the impacts of the Tax Act. At this time, the Company estimates the net amount of unrecognized foreign withholding tax and deferred tax liabilities would total approximately $6.0 million if the accumulated foreign earnings were distributed; however, the actual tax expense would be dependent on circumstances existing when remittance occurs.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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