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Income Taxes | 12 Months Ended
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Mar. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES The Company operates in the United States and many foreign countries and is subject to the tax laws of many jurisdictions. Changes in tax laws or the interpretation of tax laws can affect the Company’s earnings, as can the resolution of pending and contested tax issues. The Company's consolidated effective income tax rate is affected by a number of factors, including the mix of domestic and foreign earnings and the effect of exchange rate changes on deferred taxes. In December 2017, the Tax Cuts and Jobs Act of 2017 was passed by the United States Congress and signed into law by the President. This new law made significant changes to income taxation at the federal level for individuals, pass-through entities, and corporations. For corporations, the changes include a reduction in the statutory rate on taxable income from 35% to 21%, and a move from a worldwide tax system to a territorial tax system for companies with foreign operations. Under the territorial system, except in limited situations or for limited types of income, earnings from foreign operations will generally no longer be subject to U.S. taxation. The law accommodates the move from the previous worldwide tax system by providing for a one-time transition tax on the undistributed post-1986 earnings of foreign subsidiaries as of either November 2, 2017 or December 31, 2017, whichever undistributed earnings amount is greater. Other provisions of the new law allow for immediate expensing of investments in property, plant, and equipment, and impose limitations on the deductibility of interest, executive compensation, and meals and entertainment expense. For the fiscal year ended March 31, 2018, the Company's U.S. federal statutory tax rate was 31.5%, reflecting a portion of the year at the 35% rate under the old law and a portion at the 21% rate under the new law. Under the applicable accounting guidance, corporations are required to account for the effects of changes in income tax law on their financial statements as a component of taxes provided on income from continuing operations in the period those changes are enacted, which for Universal was the third quarter of fiscal year 2018. Due to the complexities associated with understanding and applying various aspects of the new law and quantifying or estimating amounts upon which calculations required to account for new law are based, the U.S. Securities and Exchange Commission (“SEC”) recognized that it may be difficult for many companies to complete the determination of all accounting effects of the new law within the available time frame for issuing their financial statements for the period of enactment. As a result, the SEC provided guidance permitting corporations to record and report specific items impacted by the new law on the basis of reasonable estimates where final amounts had not been determined and designate them as provisional amounts, or to continue to account for specific items under the previous law if it was not possible to develop reasonable estimates within the time frame for issuance of the financial statements for the period of enactment. As the accounting for provisional amounts is refined or finalized in subsequent reporting periods, companies are expected to record appropriate adjustments to the initial accounting, removing the provisional designation on an item in the period that the accounting for that item is completed. A measurement period of no more than one year from the date of enactment of the new law is provided under the SEC guidance to complete all such adjustments. The most significant effects on Universal’s financial statements for fiscal year 2018 from the enactment of the new law were:
(1) | the reduction in the federal income tax rate on U.S. pretax earnings for fiscal year 2018 from 35% to 31.5%.
(2) | an adjustment of recorded deferred tax assets and liabilities to the tax rates at which they are expected to reverse in the future.
(3) | a reduction of the liability previously recorded for U.S. income taxes on undistributed earnings of foreign subsidiaries to the amounts expected to be paid under the one-time transition tax provisions of the new law.
The net impact of accounting for these and other less significant effects of the new law was a reduction in consolidated income tax expense for fiscal year 2018 of approximately $4.5 million. Upon enactment of the new law in the third quarter of the year, the Company recorded an initial reduction in income tax expense of approximately $10.5 million under the provisional accounting guidance; however, that amount was lowered by approximately $6.0 million in the fourth quarter, reflecting the collection and analysis of additional information for certain foreign subsidiaries, as well as subsequent clarifying guidance issued with respect to the new law. Included in the effect of the new law is a $7.8 million net increase in income tax expense from remeasuring net deferred tax assets to the lower rates at which they are now expected to reverse, generally the new 21% U.S. federal statutory tax rate. That net increase includes approximately $12.4 million of net tax expense from remeasuring net deferred tax assets attributable to pension and other postretirement benefit plans, foreign currency translation adjustments, and other amounts that were recorded through other comprehensive income to the new lower rates, which initially left disproportionate tax effects recorded on the pretax amounts in accumulated other comprehensive income (loss). As discussed in Note 1, the FASB issued ASU 2018-02 "Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" to address this issue by allowing companies to reclassify the disproportionate tax effects from accumulated other comprehensive income (loss) to retained earnings. The Company elected to early-adopt ASU 2018-02 in the fourth quarter of fiscal year 2018 and chose to reclassify the disproportionate tax effects. The reclassification increased accumulated other comprehensive loss and increased retained earnings by approximately $12.4 million. Also included in the $4.5 million net reduction in fiscal year 2018 income tax expense for the effect of the new law is a $10 million reduction of income tax expense primarily related to the undistributed earnings of foreign subsidiaries. Prior to the enactment of the new law, under its accounting for income taxes, the Company had no undistributed earnings of consolidated foreign subsidiaries that were classified as permanently reinvested, and accordingly had recorded the full tax liability on those earnings, including both local country taxes and the U.S. taxes expected to be paid on their future distribution. The new law replaces the U.S. income tax that would have been paid on those earnings in the future with the one-time transition tax, which is allowed to be paid over an eight-year period. The total liability recorded by the Company for this transition tax, net of available foreign tax credits, is approximately $15.8 million, and the $10 million reduction of income tax expense primarily related to undistributed foreign earnings reflects the adjustment of the U.S. tax liability previously recorded on those earnings to the transition tax amount. The Company continues to assume repatriation of all undistributed earnings of its consolidated foreign subsidiaries and has therefore provided for expected foreign withholding taxes on the distribution of those earnings where applicable, net of the U.S. tax credit attributable those withholding taxes. While the Company has not continued to account for any specific items under the previous tax law as permitted by the SEC guidance, the Company is continuing to review the primary component effects of the new law on its financial statements. In addition, the Company continues to analyze certain aspects of the new law, and future treasury regulations, tax law technical corrections, notices, rulings, and other guidance issued by the government could result in changes or refinements to the amounts currently recorded. These include potential refinements of the Company's calculations of the adjustments to deferred tax assets and liabilities and the U.S. tax liability for undistributed foreign earnings, which could be adjusted based on continuing review of the Company's calculation of the one-time transition tax, including further analysis of the undistributed earnings amounts represented by cash and other specified assets held by its foreign subsidiaries. As a result, those amounts continue to be classified as provisional, and additional adjustments, which could be material, may be recorded in future reporting periods within the allowed one-year measurement period as the final accounting is completed. Income Tax Expense Income taxes for the fiscal years ended March 31, 2018, 2017, and 2016 consisted of the following:
| Fiscal Year Ended March 31,
| 2018 |  | 2017 |  | 2016
Current |  |  |  |  |
United States | $ | 1,110 |  |  | $ | 3,422 |  |  | $ | 5,371 |
State and local | 175 |  |  | 147 |  |  | 1,116 |
Foreign | 60,356 |  |  | 36,537 |  |  | 32,897 |
| 61,641 |  |  | 40,106 |  |  | 39,384 |
Deferred |  |  |  |  |
United States | (20,052 | ) |  | 5,434 |  |  | 5,780 |
State and local | 68 |  |  | 561 |  |  | (445 | )
Foreign | 8,852 |  |  | 10,631 |  |  | 9,711 |
| (11,132 | ) |  | 16,626 |  |  | 15,046 |
Total | $ | 50,509 |  |  | $ | 56,732 |  |  | $ | 54,430 |
Foreign taxes include any applicable U.S. tax expense on the earnings of foreign subsidiaries. Consolidated Effective Income Tax Rate A reconciliation of the U.S. federal statutory rate to the Company’s effective income tax rate is as follows:
| Fiscal Year Ended March 31,
| 2018 |  | 2017 |  | 2016
U.S. federal statutory tax rate | 31.5 | % |  | 35.0 | % |  | 35.0 | %
State income taxes, net of federal benefit | 0.1 |  |  | 0.3 |  |  | 0.3 |
Dividends received from deconsolidated operations | (1.4 | ) |  | (2.3 | ) |  | (1.5 | )
Effect of exchange rate changes on deferred income taxes | — |  |  | 0.4 |  |  | (1.6 | )
Effects of new tax law: |  |  |  |  |
Foreign earnings taxed at rates above the U.S. federal statutory tax rate | 2.8 |  |  | — |  |  | — |
Adjustment of deferred tax assets and liabilities | 4.6 |  |  | — |  |  | — |
Reduction of U.S. tax liability on undistributed foreign earnings to estimate of one-time transition tax | (8.3 | ) |  | — |  |  | — |
Other, including changes in liabilities recorded for uncertain tax positions | 1.0 |  |  | 0.1 |  |  | (0.7 | )
Effective income tax rate | 30.3 | % |  | 33.5 | % |  | 31.5 | %
Components of Income Before Income Taxes The U.S. and foreign components of income before income taxes were as follows:
| Fiscal Year Ended March 31,
| 2018 |  | 2017 |  | 2016
United States | $ | 10,442 |  |  | $ | 31,468 |  |  | $ | 37,877 |
Foreign | 156,235 |  |  | 137,770 |  |  | 134,701 |
Total | $ | 166,677 |  |  | $ | 169,238 |  |  | $ | 172,578 |
Deferred Income Tax Liabilities and Assets Significant components of deferred tax liabilities and assets were as follows:
| March 31,
| 2018 |  | 2017
Liabilities |  |  |
Foreign withholding taxes | $ | 25,987 |  |  | $ | 44,702 |
Undistributed earnings | 8,636 |  |  | 24,629 |
Goodwill | 19,529 |  |  | 30,851 |
All other | 9,039 |  |  | 11,015 |
Total deferred tax liabilities | $ | 63,191 |  |  | $ | 111,197 |
Assets |  |  |
Employee benefit plans | $ | 21,714 |  |  | $ | 38,804 |
Reserves and accruals | 9,673 |  |  | 11,756 |
Deferred income | 4,878 |  |  | 4,672 |
Currency translation losses of foreign subsidiaries | 1,993 |  |  | 13,244 |
Local currency exchange losses of foreign subsidiaries | 843 |  |  | 3,669 |
Foreign tax credit carryforward | — |  |  | 2,799 |
All other | 6,522 |  |  | 14,327 |
Total deferred tax assets | 45,623 |  |  | 89,271 |
Valuation allowance | (1,040 | ) |  | (636 | )
Net deferred tax assets | $ | 44,583 |  |  | $ | 88,635 |
At March 31, 2018, the Company had no material net operating loss carryforwards in either its domestic or foreign operations. Combined Income Tax Expense (Benefit) The combined income tax expense (benefit) allocable to continuing operations, other comprehensive income, and direct adjustments to shareholders' equity was as follows:
| Fiscal Year Ended March 31,
| 2018 |  | 2017 |  | 2016
Continuing operations | $ | 50,509 |  |  | $ | 56,732 |  |  | $ | 54,430 |
Other comprehensive income | 23,471 |  |  | 1,503 |  |  | 1,423 |
Direct adjustments to shareholders' equity | — |  |  | — |  |  | (805 | )
Total | $ | 73,980 |  |  | $ | 58,235 |  |  | $ | 55,048 |
Uncertain Tax Positions A reconciliation of the beginning and ending balance of the gross liability for uncertain tax positions for the fiscal years ended March 31, 2018, 2017 and 2016, is as follows:
| Fiscal Year Ended March 31,
| 2018 |  | 2017 |  | 2016
Liability for uncertain tax positions, beginning of year | $ | 2,426 |  |  | $ | 2,407 |  |  | $ | 2,894 |
Additions: |  |  |  |  |
Related to tax positions for the current year | 107 |  |  | 94 |  |  | 98 |
Related to tax positions for prior years | 1,310 |  |  | — |  |  | — |
Reductions: |  |  |  |  |
Due to lapses of statutes of limitations | (104 | ) |  | (112 | ) |  | (215 | )
Related to tax positions for prior years | — |  |  | (3 | ) |  | — |
Effect of currency rate movement | (66 | ) |  | 40 |  |  | (370 | )
Liability for uncertain tax positions, end of year | $ | 3,673 |  |  | $ | 2,426 |  |  | $ | 2,407 |
Of the total liability for uncertain tax positions at March 31, 2018, approximately $3.6 million could have an effect on the consolidated effective tax rate if the tax benefits are recognized. The liability for uncertain tax positions includes $0.1 million related to tax positions for which it is reasonably possible that the amounts could change significantly before March 31, 2019. This amount reflects a possible decrease in the liability for uncertain tax positions that could result from the completion and resolution of tax audits and the expiration of open tax years in various tax jurisdictions. The Company recognizes accrued interest related to uncertain tax positions as interest expense, and it recognizes penalties as a component of income tax expense. Amounts accrued or reversed for interest and penalties were not material for any of the fiscal years 2016 through 2018, and liabilities recorded for interest and penalties at March 31, 2018 and 2017 also were not material. Universal and its subsidiaries file a U.S. federal consolidated income tax return, as well as returns in several U.S. states and a number of foreign jurisdictions. As of March 31, 2018, the Company's earliest open tax year for U.S. federal income tax purposes was its fiscal year ended March 31, 2015. Open tax years in state and foreign jurisdictions generally range from 3 to 6 years.

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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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