Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v2.4.1.9
INCOME TAXES
 12 Months Ended
Mar. 31, 2015
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES
Pre-tax income (loss) reflected in the Consolidated Statements of Operations for the years ended March 31, 2015, 2014 and 2013 follows (in thousands):
 
For the year ended March 31,
 
2015
 
2014
 
2013
U.S
$
13,507

 
$
(22,549
)
 
$
(52,940
)
Foreign
3,971

 
2,292

 
1,922

 
$
17,478

 
$
(20,257
)
 
$
(51,018
)


Income tax provision consists of the following (in thousands):

 
For the year ended March 31,
 
2015
 
2014
 
2013
Federal:
$
(138
)
 
$
—

 
$
—

State:
 
 
 
 
 
Current
125

 
76

 
231

Foreign:
 
 
 
 
 
Current
890

 
1,096

 
1,090

Deferred
(159
)
 
45

 
(160
)
Total foreign
731

 
1,141

 
930

Income tax provision
$
718

 
$
1,217

 
$
1,161



The income tax provision differs from the amount computed by applying the federal statutory rate of 35% to income (loss) before income taxes as follows (in thousands):
 
For the year ended March 31,
 
2015
 
2014
 
2013
Expense (benefit) at federal statutory rate
$
6,117

 
$
(7,090
)
 
$
(17,856
)
State taxes
125

 
76

 
300

Unbenefited (benefited) losses and credits
(4,727
)
 
7,974

 
18,715

Contingent tax reserves
103

 
460

 
(130
)
Foreign rate differential
(778
)
 
(218
)
 
120

Other
(122
)
 
15

 
12

 
$
718

 
$
1,217

 
$
1,161



Significant components of deferred tax assets and liabilities are as follows (in thousands):
 
As of March 31,
 
2015
 
2014
Deferred tax assets:
 
 
 
Inventory valuation method
$
1,588

 
$
1,742

Accrued warranty expense
1,624

 
2,336

Distribution reserves
4,283

 
1,950

Loss carryforwards
75,262

 
81,012

Tax credits
185,578

 
191,372

Restructuring charge accruals
1,866

 
3,191

Other accruals and reserves not currently deductible for tax purposes
34,490

 
32,465

    
304,691

 
314,068

Less valuation allowance
(252,475
)
 
(261,337
)
Deferred tax asset
$
52,216

 
$
52,731

Deferred tax liabilities:
 
 
 
Depreciation
$
(4,302
)
 
$
(3,570
)
Acquired intangibles
(4,920
)
 
(2,794
)
Tax on unremitted foreign earnings
(15,968
)
 
(17,245
)
Other
(26,093
)
 
(28,330
)
Deferred tax liability
$
(51,283
)
 
$
(51,939
)
Net deferred tax asset
$
933

 
$
792



The valuation allowance decreased $8.9 million and $8.0 million in fiscal years 2015 and 2014, respectively, and increased $17.0 million in fiscal year 2013. The decrease in the valuation allowance during fiscal year 2015 was primarily due to NOL usage and expiring tax credits.
A reconciliation of the gross unrecognized tax benefits follows (in thousands):
 
For the year ended March 31,
 
2015
 
2014
 
2013
Beginning balance
$
32,449

 
$
32,549

 
$
32,744

Settlement and effective settlements with tax authorities and related remeasurements
—

 
(488
)
 
(60
)
Lapse of statute of limitations
—

 
—

 
(135
)
Increase in balances related to tax positions taken in prior period
—

 
388

 
—

Ending balance
$
32,449

 
$
32,449

 
$
32,549



During fiscal 2015, excluding interest and penalties, there was no change in our unrecognized tax benefits. Including interest and penalties, the total unrecognized tax benefit at March 31, 2015 was $33.5 million, all of which, if recognized, would favorably affect the effective tax rate. At March 31, 2015 accrued interest and penalties totaled $1.1 million. Our practice is to recognize interest and penalties related to income tax matters in income tax provision in the Consolidated Statements of Operations. Unrecognized tax benefits, including interest and penalties, were recorded in other long-term liabilities in the Consolidated Balance Sheets.
We file our tax returns as prescribed by the laws of the jurisdictions in which we operate. Our U.S. tax returns have been audited for years through 2002 by the Internal Revenue Service. In other major jurisdictions, we are generally open to examination for the most recent three to five fiscal years. Although timing of the resolution and closure on audits is highly uncertain, we do not believe it is likely that the unrecognized tax benefits would materially change in the next 12 months.
As of March 31, 2015, we had federal net operating loss and tax credit carryforwards of approximately $259.3 million and $140.0 million, respectively. Our federal net operating loss carryforwards include $33.6 million attributable to excess tax deductions from stock option exercises, and are not included in the deferred tax assets shown above. The benefit of these loss carryforwards will be credited to equity when realized. The net operating loss and tax credit carryforwards expire in varying amounts beginning in fiscal 2016 if not previously utilized, the utilization of which is limited under the tax law ownership change provision. These carryforwards include $11.1 million of acquired net operating losses and $10.7 million of credits.
Certain changes in stock ownership could result in a limitation on the amount of net operating loss and tax credit carryovers that can be utilized each year. Should the company undergo such a change in stock ownership, it could severely limit the usage of these carryover tax attributes against future income, resulting in additional tax charges.
Due to our history of net losses and the difficulty in predicting future results, we believe that we cannot rely on projections of future taxable income to realize the deferred tax assets. Accordingly, we have established a full valuation allowance against our U.S. net deferred tax assets. Significant management judgment is required in determining our deferred tax assets and liabilities and valuation allowances for purposes of assessing our ability to realize any future benefit from our net deferred tax assets. We intend to maintain this valuation allowance until sufficient positive evidence exists to support the reversal of the valuation allowance. Our income tax expense recorded in the future will be reduced to the extent that sufficient positive evidence materializes to support a reversal of, or decrease in, our valuation allowance.