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Income Taxes | 12 Months Ended
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Apr. 30, 2018
Income Taxes [Abstract] |
Income Taxes | Note 11 – Income Taxes The provisions for income taxes for the years ended April 30 were as follows:
|  | 2018 |  |  | 2017 |  |  | 2016 |
Current Provision |  |  |  |  |  |  |  |  |
U.S. – Federal |  | $ | (2,216 | ) |  | $ | 912 |  |  | $ | (5,365 | )
International |  |  | 46,112 |  |  |  | 105,228 |  |  |  | 31,958 |
State and Local |  |  | 961 |  |  |  | 100 |  |  |  | 1,657 |
Total Current Provision |  | $ | 44,857 |  |  | $ | 106,240 |  |  | $ | 28,250 |
Deferred Provision (Benefit) |  |  |  |  |  |  |  |  |  |  |  |
U.S. – Federal |  | $ | (26,062 | ) |  | $ | (13,852 | ) |  | $ | 6,625 |
International |  |  | 2,420 |  |  |  | (15,330 | ) |  |  | (6,459 | )
State and Local |  |  | 530 |  |  |  | 415 |  |  |  | 595 |
Total Deferred (Benefit) Provision |  | $ | (23,112 | ) |  | $ | (28,767 | ) |  | $ | 761 |
Total Provision |  | $ | 21,745 |  |  | $ | 77,473 |  |  | $ | 29,011 |
International and United States pretax income for the years ended April 30 were as follows:
|  | 2018 |  |  | 2017 |  |  | 2016 |
International |  | $ | 219,178 |  |  | $ | 192,910 |  |  | $ | 159,152 |
United States |  |  | (5,247 | ) |  |  | (1,794 | ) |  |  | 15,641 |
Total |  | $ | 213,931 |  |  | $ | 191,116 |  |  | $ | 174,793 |
Our effective income tax rate as a percentage of pretax income differed from the U.S. federal statutory rate as shown below:
|  | 2018 |  |  | 2017 |  |  | 2016 |
U.S. Federal Statutory Rate |  |  | 30.4 | % |  |  | 35.0 | % |  |  | 35.0 | %
German Tax Litigation Expense |  |  | — |  |  |  | 25.7 |  |  |  | — |
Benefit from Lower Taxes on Non-U.S. Income |  |  | (8.4 | ) |  |  | (12.7 | ) |  |  | (14.6 | )
State Income Taxes, Net of U.S. Federal Tax Benefit |  |  | 0.4 |  |  |  | 0.1 |  |  |  | 0.8 |
U.S. Tax Reform |  |  | (11.7 | ) |  |  | — |  |  |  | — |
Deferred Tax Benefit From U.K. Statutory Tax Rate Change |  |  | — |  |  |  | (1.3 | ) |  |  | (3.4 | )
Tax Credits and Related Benefits |  |  | (1.7 | ) |  |  | (6.2 | ) |  |  | (1.6 | )
Tax Adjustments and Other |  |  | 1.2 |  |  |  | (0.1 | ) |  |  | 0.4 |
Effective Income Tax Rate |  |  | 10.2 | % |  |  | 40.5 | % |  |  | 16.6 | %
Note: A substantial portion of our income is earned outside the U.S. in jurisdictions with lower statutory income tax rates than our U.S. statutory rate in 2018 including: U.K. (63%), Germany (25%), and Australia (7%). On December 22, 2017, the U.S. government enacted comprehensive Federal tax legislation originally known as the Tax Cuts and Jobs Act of 2017 (the "Tax Act"). In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act ("SAB 118"), which allows us to record provisional amounts related to the effect of the Tax Act during a measurement period not to extend beyond one year of the enactment date. As the Tax Act was passed late in December 2017, and ongoing guidance and accounting interpretation are expected over the 12 months following enactment, we consider the accounting of the transition tax, deferred tax re-measurements and other items to be provisional due to the forthcoming guidance and our ongoing analysis of final data and tax positions. We expect to complete our analysis within the measurement period in accordance with SAB 118. The effective tax rate for fiscal year 2018 was lower than fiscal 2017 due to the estimated net tax benefit from non-recurring items in the Tax Act and the effect of the German Tax litigation in fiscal year 2017 as described below. Estimated non-recurring items in the Tax Act reduced our income tax expense by $25.1 million ($0.43/share) or a reduction in our effective tax rate of 11.7 percentage points for fiscal year 2018. Excluding the effect of the Tax Act, the rate was 21.9% for fiscal year 2018. The rate excluding the benefit from the non-recurring items in the Tax Act was lower than the U.S. statutory rate for the year ended April 30, 2018, primarily due to lower rates applicable to non-U.S. earnings. German Tax Litigation Expense: In fiscal 2017, the German Federal Fiscal Court affirmed a lower court decision disallowing deductions related to a stepped-up basis in certain assets. As a result, we incurred an income tax charge of approximately $49 million ($0.85 per share). Deferred Tax Benefit from U.K. Statutory Tax Rate Change: In fiscal year 2016, the U.K. reduced its statutory rate to 19% beginning April 1, 2017, and 18% beginning April 1, 2020, and in fiscal year 2017, the U.K. further reduced its statutory rate beginning on April 1, 2020, from 18% to 17%. This resulted in a non-cash deferred tax benefit from the re-measurement of our applicable U.K. deferred tax balances of $5.9 million ($0.10 per share) in fiscal year 2016 and $2.6 million ($0.04 per share) in fiscal year 2017. Tax Adjustments and Other: In fiscal year 2018, we recorded a tax benefit of $0.6 million related to the expiration of the statute of limitations or favorable resolutions of federal, state, and foreign tax matters with tax authorities. No benefit was recorded in fiscal year 2017 and a benefit of $1.3 million was recorded in fiscal year 2016 related to such matters. The Tax Act On December 22, 2017, the U.S. government enacted comprehensive tax legislation. The Tax Act significantly revises the future ongoing U.S. corporate income tax system by, among other changes, the following:
| · | lowering the U.S. federal corporate income tax rate to 21% with a potentially lower rate for certain foreign derived income;
| · | accelerating deductions for certain business assets;
| · | changing the U.S. system from a worldwide tax system;
| · | requiring companies to pay a one-time transition tax on post-1986 unrepatriated cumulative non-U.S. earnings and profits ("E&P") of foreign subsidiaries;
| · | eliminating certain deductions such as the domestic production deduction;
| · | establishing limitations on the deductibility of certain expenses including interest and executive compensation; and
| · | creating new taxes on certain foreign earnings.
The key impacts for the period were the re-measurement of U.S. deferred tax balances to the new U.S. corporate tax rate and the accrual for the one-time transition tax liability. While we have not yet completed our assessment of the effects of the Tax Act, we are able to determine reasonable estimates for the impacts of these key items and reported provisional amounts for these items. In accordance with SAB 118, we are providing additional disclosures related to these provisional amounts. Deferred tax balances – We remeasured our U.S. deferred tax assets and liabilities based on the federal rate at which they are expected to reverse in the future, generally 21% for reversals anticipated to occur after April 30, 2018. We are still analyzing certain aspects of the Tax Act and refining our calculations, including our estimates of expected reversals, which could affect the measurement of these balances and give rise to new deferred tax amounts. The provisional amount recorded related to the re-measurement of our net deferred tax liability was an estimated benefit of $47 million. Foreign tax effects – In connection with the transition from a global tax system, the Tax Act establishes a mandatory deemed repatriation tax. The tax is computed using our post-1986 E&P that was previously deferred from U.S. income taxes. The tax is based on the amount of foreign earnings held in cash equivalents and certain net assets, which are taxed at 15.5%, and those held in other assets, which are taxed at 8%. We recorded a provisional amount of $14.2 million. We also established an estimated valuation allowance of $6.5 million. This resulted in a corresponding decrease in deferred tax assets due to the utilization of foreign tax credit carryforwards. The determination of the transition tax requires further guidance as to its applicability to non-calendar year end taxpayers and analysis regarding the amount and composition of our historical foreign earnings. We no longer assert that we intend to permanently reinvest earnings outside the U.S. and accrued a provisional $2.0 million related to our estimated taxes from repatriating earnings with available cash. In addition, we accrued a $0.1 million provisional state tax liability, pending further guidance and legislative action from various states regarding conformity with the Tax Act. The Tax Act reduces the Federal statutory tax rate from 35% to 21% effective January 1, 2018. As a result, our U.S. federal statutory tax rate for our fiscal year ended April 30, 2018, is a blended rate of 30.4%. Other than the benefit from remeasuring our U.S. deferred tax assets and liabilities, the reduced rate did not have a significant impact on our effective tax rate for fiscal year 2018 We have not determined a reasonable estimate of the tax liability, if any, under the Tax Act for our remaining outside basis difference. We will continue to evaluate our position for this matter as we finalize our Tax Act calculations. The Tax Act creates new taxes, effective for us on May 1, 2018, including a provision designed to tax global low taxed income ("GILTI") and a provision establishing new minimum taxes, such as the base erosion anti-abuse tax ("BEAT"). We continue to evaluate the Tax Act, but due to the complexity and incomplete guidance of various provisions, we have not completed our accounting for the income tax effects of certain elements of the Tax Act, including the new GILTI and BEAT taxes. We have not yet determined whether such taxes should be recorded as a current-period expense when incurred or factored into the measurement of our deferred taxes. As a result, we have not included an estimate of any tax expense or benefit related to these items for the year ended April 30, 2018. Accounting for Uncertainty in Income Taxes: As of April 30, 2018 and April 30, 2017, the total amount of unrecognized tax benefits were $6.8 million and $6.1 million, respectively, of which $0.6 million and $0.4 million represented accruals for interest and penalties recorded as additional tax expense in accordance with our accounting policy. Within the income tax provision for both fiscal years 2018 and 2017, we recorded net interest expense on reserves for unrecognized and recognized tax benefits of $0.2 million and $0.3 million respectively. As of April 30, 2018, and April 30, 2017, the total amount of unrecognized tax benefits that would reduce our income tax provision, if recognized, were approximately $6.8 million and $6.1 million, respectively. During the year ended April 30, 2017, our tax position with respect to certain assets in Germany was finally rejected by the German Federal Fiscal Court. Substantially, all of the reduction for prior year tax positions in the table below relates to the resolution of that matter. We do not expect any significant changes to the unrecognized tax benefits within the next twelve months. A reconciliation of the unrecognized tax benefits included within the Other Long-Term Liabilities line item on the Consolidated Statements of Financial Position follows:
|  | 2018 |  |  | 2017 |
Balance at May 1st |  | $ | 6,124 |  |  | $ | 19,863 |
Additions for Current Year Tax Positions |  |  | 1,372 |  |  |  | 2,566 |
Additions for Prior Year Tax Positions |  |  | 69 |  |  |  | 31,802 |
Reductions for Prior Year Tax Positions |  |  | (38 | ) |  |  | — |
Foreign Translation Adjustment |  |  | 45 |  |  |  | (419 | )
Payments and Settlements |  |  | (124 | ) |  |  | (47,688 | )
Reductions for Lapse of Statute of Limitations |  |  | (615 | ) |  |  | — |
Balance at April 30th |  | $ | 6,833 |  |  | $ | 6,124 |
Tax Audits: We file income tax returns in the U.S. and various states and non-U.S. tax jurisdictions. Our major taxing jurisdictions include the United States, the United Kingdom, and Germany. Except for one immaterial item, we are no longer subject to income tax examinations for years prior to fiscal year (2013) in the major jurisdictions in which we are subject to tax. Our last completed U.S. federal tax audit was for fiscal years 2011 through 2013, which resulted in minimal adjustments related to temporary differences. Deferred Taxes: Deferred taxes result from temporary differences in the recognition of revenue and expense for tax and financial reporting purposes. It is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets. The significant components of deferred tax assets and liabilities at April 30 were as follows:
|  | 2018 |  |  | 2017 |
Net Operating Losses |  | $ | 8,976 |  |  | $ | 5,453 |
Reserve for Sales Returns and Doubtful Accounts |  |  | 2,506 |  |  |  | 8,331 |
Accrued Employee Compensation |  |  | 20,096 |  |  |  | 34,305 |
Foreign and Federal Credits |  |  | 31,109 |  |  |  | 15,472 |
Other Accrued Expenses |  |  | 4,632 |  |  |  | 14,303 |
Retirement and Post-Employment Benefits |  |  | 39,160 |  |  |  | 56,633 |
Total Gross Deferred Tax Assets |  | $ | 106,479 |  |  | $ | 134,497 |
Less Valuation Allowance |  |  | (8,811 | ) |  |  | (1,300 | )
Total Deferred Tax Assets |  | $ | 97,668 |  |  | $ | 133,197 |
Prepaid Expenses and Other Current Assets |  | $ | (3,203 | ) |  | $ | (16,385 | )
Unremitted Foreign Earnings |  |  | (1,985 | ) |  |  | — |
Intangible and Fixed Assets |  |  | (231,869 | ) |  |  | (272,008 | )
Total Deferred Tax Liabilities |  | $ | (237,057 | ) |  | $ | (288,393 | )
Net Deferred Tax Liabilities |  | $ | (139,389 | ) |  | $ | (155,196 | )
Reported As |  |  |  |  |  |  |  |
Non-current Deferred Tax Assets |  | $ | 4,129 |  |  | $ | 5,295 |
Non-current Deferred Tax Liabilities |  |  | (143,518 | ) |  |  | (160,491 | )
Net Deferred Tax Liabilities |  | $ | (139,389 | ) |  | $ | (155,196 | )
The decrease in net deferred tax liabilities is primarily attributable to the re-measurement of our U.S. deferred tax liabilities related to the Tax Act as well as foreign and federal credit carryforwards, net of an estimated $6.5 million valuation allowance related to the Tax Act, for fiscal year ended April 30, 2018. We have concluded that after valuation allowances, it is more likely than not that we will realize substantially all of the net deferred tax assets at April 30, 2018. In assessing the need for a valuation allowance, we take into account related deferred tax liabilities and estimated future reversals of existing temporary differences, future taxable earnings and tax planning strategies to determine which deferred tax assets are more likely than not to be realized in the future. Changes to tax laws, statutory tax rates and future taxable earnings can have an impact on our valuation allowances. A $2.3 million valuation allowance has also been provided based on the uncertainty of utilizing the tax benefits related to our deferred tax assets for state and, to a small extent, Federal net operating loss carry forwards. As of April 30, 2018, we have apportioned state net operating loss carryforwards totaling $81 million, with a tax effected value of $4.8 million net of federal benefits, expiring in various amounts over one to 20 years. We no longer intend to permanently reinvest earnings outside the U.S., As such, we established a $2.0 million permanent reinvestment assertion related to the estimated taxes that would be incurred upon repatriating our non-U.S. earnings.

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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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