Note

. Income Taxes

Earnings before income taxes are as follows (in thousands):

	Year Ended March 31,
	201 8			201 7		201 6
Domestic	$	12,708		$	12,913	$	14,427
Foreign		(12,407	)		1,383		1,128
Total earnings before income taxes	$	301		$	14,296	$	15,555

The components of our provision for income taxes are as follows (in thousands):

	Year E nded March 31,
	201 8			201 7			201 6
Current tax provision
Federal	$	3,732		$	2,282		$	3,666
State		715			510			627
Foreign		1,299			849			658
Total current tax expense		5,746			3,641			4,951
Deferred tax provision:
Federal		(1,589	)		(126	)		(189	)
State		(216	)		(32	)		(138	)
Foreign		(678	)		(370	)		(238	)
Total deferred tax expense		(2,483	)		(528	)		(565	)
Total income tax expense	$	3,263		$	3,113		$	4,386

The components of net deferred tax assets and liabilities are as follows (in thousands):

	March 3 1,
	201 8			201 7
Current deferred tax assets:
Accrued employee-related expenses	$	277		$	242
Allowances and reserves		101			132
Stock compensation deductible differences		779			898
Inventories		1,388			691
Currency translation adjustment		51			--
Net operating loss		90			--
Foreign tax credit		100			--
Other		--			9
Total current deferred tax assets		2,786			1,972

Long-term deferred tax liabilities:
Property, plant and equipment		(1,236	)		(1,635	)
Goodwill and intangible assets		(3,940	)		(3,807	)
Currency translation adjustment		--			(3	)
Other		(4	)		(81	)
Total long-term deferred tax liabilities		(5,180	)		(5,526	)

Valuation allowance		(100	)		--

Net deferred tax liability	$	(2,494	)	$	(3,554	)

A reconciliation of our income tax provision and the amounts computed by applying statutory rates to income before income taxes is as follows (in thousands):

	Year E nded March 31,
	201 8			201 7			201 6
Federal income taxes at statutory rates	$	93		$	4,861		$	5,445
State income taxes, net of federal benefit		328			302			293
Tax benefit of stock option exercises		(1,087	)		(1,576	)		(751	)
Section 199 manufacturing deduction		(381	)		(304	)		(440	)
Research and development credit		(162	)		(385	)		(345	)
Tax Cuts and Jobs Act		(59	)		--			--
Impairment of non-deductible goodwill		4,257			--			--
Other		274			215			184
Total income tax expense	$	3,263		$	3,113		$	4,386

December 22, 2017,

the Tax Cuts and Jobs Act ("TCJA") was enacted in the U.S., making significant changes to U.S. tax law. The TCJA reduces the U.S. federal corporate income tax rate from

percent to

percent, requires companies to pay a

one

-time transition tax on certain un-remitted earnings of foreign subsidiaries that were previously tax deferred, generally eliminates U.S. federal income tax on dividends from foreign subsidiaries, creates new taxes on certain foreign-sourced earnings, repeals the Section

199

deduction and imposes limitations on executive compensation under Section

162

(m). During the year ended

March 31, 2018,

we revised our estimated annual effective tax rate to reflect the change in the federal statutory rate. The rate change results in the Company using a blended statutory rate for the annual period of

30.8

percent.

Shortly thereafter, the SEC staff issued SAB

118,

which provides guidance on accounting for the tax effects of the TCJA for which the accounting under ASC

740

is incomplete. To the extent that a company's accounting for certain income tax effects of the TCJA is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC

740

on the basis of the provisions of the tax laws that were in effect immediately before enactment of the TCJA.

Accordingly, as of

March 31, 2018,

we have

not

completed our accounting for the tax effects of the TCJA. However, we made a reasonable estimate of the

one

-time transition tax and recognized a provisional tax liability of

$220,000.

We also re-measured the applicable deferred tax assets and liabilities based on the rates at which they are expected to reverse. However, we are still analyzing certain aspects of the TCJA and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to the re-measurement of our deferred tax balance was a benefit of

$279,000.

Overall, the TCJA resulted in a net tax benefit of

$59,000.

Such amount was recorded as a tax benefit and is included as a component of income tax expense in the accompanying condensed consolidated statements of operations for the year ending

March 31, 2018.

We or

one

of our subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Our federal tax returns for all years after

2014,

state tax returns after

2013

and foreign tax returns after

2013

are subject to future examination by tax authorities for all our tax jurisdictions. Although the outcome of tax audits, if any, is always uncertain, we believe that we have adequately accrued for all amounts of tax, including interest and penalties and any adjustments that

may

result.

As of

March 31, 2018,

the gross amount of unrecognized tax benefits was

$827,000.

There would have been

material impact on our effective tax rate for the year ended

March 31, 2018

had these benefits been recognized. We recognize interest and penalties related to unrecognized tax benefits in other expense and general and administrative expense, respectively. Accrued interest and penalties related to unrecognized tax benefits were

$24,000,

$17,000

and

$3,000

as of

March 31, 2018,

2017

and

2016,

respectively.

A reconciliation of the changes in the gross balance of unrecognized tax benefit amounts is as follows (in thousands):

	Year Ended March 31,
	2018		2017		2016
Beginning balance	$	331	$	221	$	--
Increases related to current period tax positions		496		110		221
Ending balance	$	827	$	331	$	221

We expect that the amount of unrecognized tax benefits will change in the next

months; however, we do

not

expect the change to have a significant impact on our consolidated statements of operations or consolidated balance sheets. At this time, we expect resolution of the uncertain tax position within

months.

As of

March 31, 2018,

undistributed earnings of our foreign subsidiaries amounted to

$3,724,450.

Those earnings are considered indefinitely reinvested and, accordingly,

U.S. federal and state income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, we would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is

not

practicable because of the complexities associated with its hypothetical calculation; however, unrecognized foreign tax credits would be available to reduce a portion of the U.S. tax liability.

As of

March 31, 2018,

we had

$272,000

of net operating losses for foreign tax purposes. The foreign net operating losses do

not

expire. In addition, we had

$100,000

of foreign tax credit carryovers which will expire in the tax year

2028.