Income Taxes

On December 22, 2017, the Tax Cuts and Jobs Act was enacted, which among numerous provisions reduced the federal statutory corporate tax rate from 35% to 21%. Based on the provisions of the Tax Reform, the Company re-measured its deferred tax assets and liabilities and adjusted its annual effective income tax rate to incorporate the lower federal corporate tax rate into the tax provision for the year ended March 31, 2018.

During the year ended March 31, 2018, the Company applied the newly enacted corporate federal income tax rate, resulting in a reduction of $1,831 of the income tax benefit, which is reflected in the Company’s consolidated statements of income. The revaluation of deferred tax assets and liabilities at the lower enacted corporate tax rate resulted in a tax expense of $14,232. The change represents a discrete item for purposes of income tax accounting. Pursuant to SEC Staff Accounting Bulletin 118 (regarding the application of ASC 740 associated with the enactment of the Tax Reform), the Company continues to evaluate the impact of various domestic and international provisions of the Tax Reform as well as the impact of additional guidance that may be provided. The final impact of the Tax Reform may differ due to changes in interpretations, assumptions made by the Company, and the issuance of additional guidance.

Because of the complexity of the new Global Intangible Low-Taxed Income (GILTI) tax rules, the Company continues to evaluate this provision of the Tax Reform Act and the application of ASC 740, Income Taxes. Under U.S. GAAP, the Company is allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into the Company’s measurement of its deferred taxes (the “deferred method”). The Company’s selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing its global income to determine whether it expects to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. Whether the Company expects to have future U.S. inclusions in taxable income related to GILTI depends on the Company’s current structure and estimated future results of global operations. The Company’s currently in the process of analyzing this and, as a result, is not yet able to reasonably estimate the effect of this provision of the Tax Reform Act. Therefore, the Company has not made any adjustments related to potential GILTI tax in its financial statements and has not made a policy decision regarding whether to record deferred tax on GILTI.

The domestic and foreign components of Income (loss) before provision (benefit) for income taxes are as follows:



	Fiscal
	2018			2017			2016
Domestic	$	(46,093	)	$	(8,212	)	$	(184,598	)
Foreign	(6,226		)	2,918			(8,486		)
Consolidated	$	(52,319	)	$	(5,294	)	$	(193,084	)

The provision (benefit) for income taxes consists of the following:



	Fiscal
	2018			2017			2016
Current
Federal	$	(3,028	)	$	(10	)	$	1,037
State	503			(1,200		)	1,058
Foreign	1,698			1,600			2,067
Total current	(827		)	390			4,162
Deferred
Federal	44,779			210			(23,012		)
State	6,013			1,258			(3,785		)
Foreign	(2,189		)	(101		)	653
Total deferred	48,603			1,367			(26,144		)
Total provision (benefit) for income taxes	$	47,776		$	1,757		$	(21,982	)

Reconciliations between income taxes computed using the federal statutory income tax rate and the Company’s effective tax rate are as follows:



	Fiscal
	2018					2017					2016
	$			%		$			%		$			%
Federal statutory tax rate	$	(16,480	)	31.5	%	$	(1,853	)	35.0	%	$	(67,580	)	35.0	%
Foreign taxes, net of foreign tax credits	870			(1.7	)	143			(2.7	)	419			(0.2	)
Non-deductible expenses	86			(0.2	)	317			(6.0	)	588			(0.3	)
State income taxes, net of federal benefit	(1,359		)	2.6		(336		)	6.3		(2,242		)	1.2
Tax reform	15,220			(29.1	)	—			—		—			—
Valuation allowance	45,115			(86.2	)	498			(9.4	)	1,317			(0.7	)
Permanent book/tax differences	—			—		—			—		45,732			(23.7	)
Equity awards	2,184			(4.2	)	2,800			(52.9	)	1,814			(0.9	)
Other, net	2,140			(4.0	)	188			(3.5	)	(2,030		)	1.0
Effective tax rate	$	47,776		(91.3	)%	$	1,757		(33.2	)%	$	(21,982	)	11.4	%

The negative effective tax rate of 91.3% for Fiscal 2018 was primarily due to U.S. tax reform and valuation allowances booked against foreign tax credits, U.S. federal and state net operating loss carry-forwards, certain foreign net operating loss carry-forwards, and other U.S. deferred tax assets. The negative effective tax rate of 33.2% for Fiscal 2017 was primarily due to the reduction of deferred tax assets associated with equity awards and the mix of income across various taxing jurisdictions. The effective tax rate of 11.4% for Fiscal 2016 was primarily due to a tax benefit from an international legal entity restructuring which was partially offset by the write-off of certain deferred tax assets related to equity awards.

The components of current and long-term deferred tax liabilities and assets are as follows:



	March 31,
	2018			2017
Deferred Tax Liabilities
Goodwill and intangibles	$	—		$	854
Other	123			857
Gross deferred tax liabilities	123			1,711
Deferred Tax Assets
Net operating losses	37,273			37,611
Basis of finished goods inventory	2,151			5,264
Goodwill and intangibles	1,141			—
Foreign tax credit carry-forwards	8,292			3,805
Accrued employee costs	6,232			10,904
Stock-based compensation	1,957			2,999
Gross deferred tax assets	57,046			60,583
Valuation allowance	(50,449		)	(5,333		)
Net deferred tax assets	6,597			55,250
Net deferred tax assets/(liabilities)	$	6,474		$	53,539

At March 31, 2018, the Company had $85,920, $218,320 and $33,143 of federal, state and foreign gross net operating loss carryforwards, respectively. As a result of the past acquisitions, Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), limits the amount of net operating losses available to the Company related to those acquisitions to approximately $2,876 per year and expire pro-ratably through Fiscal 2031. Current federal losses expire in Fiscal 2038. The state gross net operating loss carry-forwards expire at various times through Fiscal 2038 and the foreign gross net operating loss carry-forwards expire at various times through Fiscal 2028, with the exception of several foreign jurisdictions, which have no expirations.

A valuation allowance is provided on deferred tax assets if determined that it is more likely than not that the asset will not be realized. The Company considers all available evidence, both positive and negative, in assessing the need for a valuation allowance in each taxing jurisdiction. The evidence considered in evaluating deferred tax assets includes but is not limited to cumulative financial income over the three-year period ended March 31, 2018, excluding significant one-time charges for impairment (goodwill and other), the composition and reversal patterns of existing taxable and deductible temporary differences between financial reporting and tax, and subjective projected future income.

Based on the available evidence, a valuation allowance has been recorded against U.S. Federal and state deferred tax assets and deferred tax assets for net operating losses in certain foreign taxing jurisdictions, totaling $50,449 in the aggregate. Future positive and negative events, such as the significant underperformance relative to projected or future operating results, will be monitored accordingly and a determination will be made on the ability to realize deferred tax assets at that time.

In general, except for certain earnings associated with inter-company loan balances, it is the Company’s intention to reinvest all undistributed earnings of non-U.S. subsidiaries for an indefinite period of time. Therefore, except for the exceptions noted above, no deferred U.S. income taxes have been provided on undistributed earnings of non-U.S. subsidiaries, which aggregate to a deficit of approximately $6,307 based on exchange rates at March 31, 2018.

A reconciliation of the change in the tax liability for unrecognized tax benefits is as follows:



	Fiscal
	2018		2017			2016
Balance at beginning of year	$	2,006	$	2,016		$	4,083
Additions for tax positions related to the current year	12		78			85
Additions for tax positions related to prior years	337		60			—
Reductions for tax positions related to prior years	—		(148		)	(2,152		)
Balance at end of year	$	2,355	$	2,006		$	2,016

Unrecognized tax benefits are classified as either current or non-current under Other liabilities within the Company's Consolidated Balance Sheets. Of the $2,355 noted above, the Company expects that $0 will reverse in the next twelve months. As of March 31, 2018, 2017 and 2016, the Company recorded $0, $494 and $435, respectively, of interest and penalties related to uncertain tax positions in current liabilities within Income taxes, all of which impacted the Company's effective tax rate.

Fiscal 2013 through Fiscal 2017 remain open to examination by the Internal Revenue Service ("IRS") and Fiscal 2011 through Fiscal 2017 remain open to examination by certain state and foreign taxing jurisdictions.