INCOME TAXES

The provision for income taxes includes federal, state and foreign taxes currently payable and those deferred because of net operating losses and temporary differences between the financial statement and tax bases of assets and liabilities. The components of income (loss) before income taxes and minority interest, and the (benefit) provision for income taxes are as follows:



	Fiscal Year Ended
	March 31, 2013			March 31, 2012			March 31, 2011
	(In thousands)
Income (loss) before income taxes and minority interest:
U.S.	$	(131,563	)	$	(30,726	)	$	(3,692	)
Foreign	8,387			31,477			24,008
	$	(123,176	)	$	751		$	20,316
Income tax (benefit) provision:
Current
U.S.	$	440		$	(825	)	$	(268	)
Foreign	6,297			23,535			5,155
	$	6,737		$	22,710		$	4,887
Deferred
U.S.	$	87,468		$	(9,809	)	$	(1,311	)
Foreign	5,710			(68,104		)	(10,072		)
	93,178			(77,913		)	(11,383		)
Total (benefit) provision	$	99,915		$	(55,203	)	$	(6,496	)

Major differences between the federal statutory rate and the effective tax rate are as follows:



	Fiscal Year Ended
	March 31, 2013		March 31, 2012		March 31, 2011
Federal statutory rate	35.0	%	35.0	%	35.0	%
Dividend income	—		(0.2	)	0.4
Withholding tax	(2.2	)	—		—
Change in tax rate	0.2		(6.7	)	(4.2	)
Change in uncertain tax positions	2.4		(312.1	)	(15.2	)
Local tax provision	(1.4	)	527.0		9.3
Change in valuation allowances	(123.3	)	(8,109.8	)	(2.1	)
Revaluation of warrants	—		(3.2	)	(0.4	)
Rate differences on foreign subsidiaries	10.5		(1,795.2	)	(59.1	)
Executive compensation	—		72.2		2.8
Thin cap disallowance	(0.7	)	84.1		—
Spain tax settlement	—		1,787.0		—
Sub part F income	—		28.0		1.0
Other, net	(1.6	)	343.3		0.5
Effective tax rate	(81.1	)%	(7,350.6	)%	(32.0	)%

The following is a summary of the significant components of the Company’s deferred tax assets and liabilities:



	March 31, 2013			March 31, 2012
Deferred tax assets:	(In thousands)
Operating loss and tax credit carry-forwards	$	289,895		$	259,657
Compensation reserves	66,709			64,628
Environmental reserves	9,235			9,446
Sales Returns	8,281			8,753
Other	11,837			26,069
Valuation allowance	(242,735		)	(103,539		)
	$	143,222		$	265,014
Deferred tax liabilities:
Property, plant and equipment	$	(11,151	)	$	(32,022	)
Foreign exchange	(76		)	(4,880		)
Intangible assets	(38,552		)	(39,865		)
	(49,779		)	(76,767		)
Net deferred tax assets	$	93,443		$	188,247

The net deferred income tax asset is classified in the consolidated balance sheet as follows:



	March 31, 2013			March 31, 2012
	(In thousands)
Current asset	$	11,470		$	30,804
Current liability	(8,721		)	—
Noncurrent asset	107,865			174,601
Noncurrent liability	(17,171		)	(17,158		)
	$	93,443		$	188,247

As of March 31, 2013, the Company has net operating loss carry-forwards (“NOLs”) for U.S. and state income tax purposes of $333.0 million. These loss carry-forwards will expire in years 2014 through 2033. The Company determined that a Sec. 382 ownership change occurred during the fiscal year ending March 31, 2007 related to the September 2006 rights offering. IRC Sec. 382 places annual limits on the amount of the Company's U.S. and state NOLs that may be used to offset future taxable income. The Company has calculated its Sec. 382 limitation on U.S. and state losses incurred prior to September 15, 2006 to approximate $5.0 million per year over the next nineteen years.

At March 31, 2013, certain of the Company's foreign subsidiaries have NOLs for income tax purposes of approximately $906.5 million, of which approximately $68.0 million expire in fiscal years 2014 through 2028. The remaining NOLs are available for carry-forward indefinitely.

Valuation allowances have been recognized in the U.S. and certain foreign tax jurisdictions to reduce the deferred tax assets for loss carryforwards and deductible temporary differences for which it is more likely than not that the tax benefits associated with those assets will not be realized. In other jurisdictions (primarily France and Germany), the Company's net deferred tax assets include loss carryforwards and deductible temporary differences which management believes are realizable through future taxable income. Each quarter, the Company reviews the need to report the future realization of tax benefits of deductible temporary differences or loss carryforwards on its financial statements. All available evidence is considered to determine whether a valuation allowance should be established against these future tax benefits or previously established valuation allowances should be released. This review is performed on a jurisdiction by jurisdiction basis. As global market conditions and the Company's financial results in certain jurisdictions change, the continued release and establishment of related valuation allowances may occur.

During fiscal 2013, the Company determined that tax benefits from deferred tax assets relating to its United States operations is not more likely than not to be realized, and established a valuation allowance on these deductible temporary differences and loss carryforwards. This determination was based on the results of operations in recent years and its expected profitability in the current and future years. The establishment of the valuation allowance resulted in a non-cash income tax expense of $85.1 million. Also during fiscal 2013, the Company determined that it was not more likely than not that the tax benefits from deferred tax assets relating to some of its India and Portugal operations would be realized and established a valuation allowance on these deductible temporary differences and loss carryforwards. This determination was based on the results of operations in recent years and their expected profitability in the current and future years. Establishment of the valuation allowance resulted in a non-cash income tax charge in India and Portugal aggregating $3.5 million.

During fiscal 2012, the Company determined that tax benefits from deferred tax assets relating to its France operations is more likely than not, and reversed the valuation allowance on these deductible temporary differences and loss carryforwards. This determination was based on the results of operations in recent years and its expected profitability in the current and future years. Reversal of the valuation allowance resulted in a non-cash income tax benefit of $73.6 million. Also during fiscal 2012, the Company determined that it was not more likely than not that the tax benefits from deferred tax assets relating to some of its India and Portugal operations would be realized and established a valuation allowance on these deductible temporary differences and loss carryforwards. This determination was based on the results of operations in recent years and their expected profitability in the current and future years. Establishment of the valuation allowance resulted in a non-cash income tax charge in India and Portugal aggregating $4.2 million.

During fiscal 2012, the Company recorded a $13.4 million settlement with the Spanish tax authorities regarding its current and certain former Spanish subsidiaries. The settlement permanently closes income tax audits for fiscal years 2003 through 2010. As part of the settlement, the Company agreed to withdraw its appeal of audit results for the periods 2003 through 2006. This withdrawal resulted in the forfeiture of the $13.4 million previously paid during the appeal process.

As of March 31, 2013, the Company had not provided for withholding or U.S. Federal income taxes on current or prior year undistributed earnings of certain foreign subsidiaries, since such earnings are expected to be reinvested indefinitely or be substantially offset by available foreign tax credits and operating loss carry forwards. As of March 31, 2013 and 2012, the Company had approximately $58.8 million and $137.3 million, respectively, of undistributed earnings in its foreign subsidiaries. It is not practicable to determine the amount of unrecognized deferred U.S. income tax liability on these unremitted earnings. During fiscal 2013, the Company has provided for $2.2 million in withholding taxes for earnings in China in which the Company no longer is asserting the permanent reinvestment exception.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years ended before March 31, 2010.

With respect to state and local jurisdictions and countries outside of the United States, with limited exceptions, the Company and its subsidiaries are no longer subject to income tax audits for years ended before March 31, 2007. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties have been provided for any adjustments that could result from these years.

A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:



	March 31, 2013			March 31, 2012
	(In thousands)
Beginning of year	$	41,523		$	51,523
Increases for tax positions taken during current period	—			2,345
Decreases for currency fluctuation on tax positions	(849		)	(3,037		)
Decreases for settlements with taxing authorities	(4,083		)	(3,197		)
Decreases for lapse of the applicable statute of limitations	(1,629		)	(6,111		)
End of year	$	34,962		$	41,523

The amount, if recognized, that would affect the Company's effective tax rate at March 31, 2013 and 2012 is $30.9 million and $38.3 million, respectively.

The Company classifies interest and penalties on uncertain tax benefits as income tax expense. At March 31, 2013 and 2012, before any tax benefits, the Company had $1.2 million and $3.0 million, respectively, of accrued interest and penalties on unrecognized tax benefits.

During the next twelve months, the Company does not expect the resolution of any tax audits which could potentially reduce unrecognized tax benefits by a material amount. However, expiration of the statute of limitations for a tax year in which the Company has recorded uncertain tax benefits will occur in the next twelve months. The removal of these uncertain tax benefits would affect the Company's effective tax rate by $0.3 million.