INCOME TAXES

The domestic and foreign source component of income (loss) from continuing operations before income taxes was:



	Year Ended December 31, 2018			November 22, 2017 to March 31, 2018			April 01, 2017 to November 21, 2017
	2018			Successor			Predecessor
U.S.	$	(14,321	)	$	—		$	—
Foreign	(4,385		)	(3,530		)	8,553
Total	$	(18,706	)	$	(3,530	)	$	8,553

Significant components of the provision for income taxes from continuing operations were:



	Year Ended December 31, 2018			November 22, 2017 to March 31, 2018			April 01, 2017 to November 21, 2017
				Successor			Predecessor
Current:
Federal	$	(93	)	$	—		$	—
State	(13		)	—			—
Foreign	3,669			2,214			3,252
Total current (benefit) expense	$	3,563		$	2,214		$	3,252

Deferred:
Federal	$	—		$	—		$	—
State	—			—			—
Foreign	7			(909		)	(74		)
Total deferred (benefit) expense	$	7		$	(909	)	$	(74	)

Income tax expense	$	3,570		$	1,305		$	3,178

GAAP requires all items be considered, including items recorded in other comprehensive income, in determining the amount of tax benefit that results from a loss from continuing operations that should be allocated to continuing operations.

Significant components of deferred tax assets and deferred tax liabilities included in the accompanying consolidated balance sheets are as follows:



	As of December 31, 2018			As of March 31, 2018
Long-term deferred tax assets (liabilities):
Property, plant and equipment	$	(3,336	)	$	(4,484	)
Prepaid expenses	(325		)	(12		)
Accrued stock compensation and other employee benefits	2,722			2,432
Accrued restructuring costs and other expenses	2,541			538
Tax credit carryforwards	5,233			—
Loss carryforwards	18,628			5,653
Intangibles and goodwill	(21,153		)	(17,357		)
Translation adjustments and withholdings taxes	(3,472		)	—
Other	540			—
Net long-term deferred tax assets	$	1,378		$	(13,230	)

Valuation allowance	(15,231		)	—

Total net deferred tax asset (liability)	$	(13,853	)	$	(13,230	)

We consider all available evidence to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), and projected taxable income in assessing the realizability of deferred tax assets. In making such judgments, significant weight is given to evidence that can be objectively verified. In order to fully realize the U.S. deferred tax assets, we will need to generate sufficient taxable income in future periods before the expiration of the deferred tax assets governed by the tax code.

We do not provide for deferred taxes on the excess of the financial reporting basis over the tax basis in our investments in foreign subsidiaries that are essentially permanent in duration or not subject to taxation in the U.S. or in the local country. In general, it is our practice and intention to reinvest the earnings of our foreign subsidiaries in those operations. Generally, the earnings of our foreign subsidiaries become subject to U.S. taxation based on certain provisions in U.S. tax law such as the recently enacted territorial transition tax under section 965 and under certain other circumstances. Exceptions may be made on a year-by-year basis to repatriate current year earnings of certain foreign subsidiaries based on cash needs in the global structure.

Differences between U.S. federal statutory income tax rates and our effective tax rates for the nine months ended December 31, 2018, the successor period from November 22, 2017 to March 31, 2018 and the predecessor period from April 1, 2017 to November 21, 2017 are as follows:



	Nine Months Ended December 31, 2018		November 22, 2017 to March 31, 2018		April 1, 2017 to November 21, 2017
			Successor		Predecessor
Statutory tax rate	21.0	%	17.0	%	3.0	%
Effect of state taxes (net of federal benefit)	1.4	%	—	%	—	%
Rate differential on foreign earnings	(3.8	)%	(44.4	)%	16.9	%
Valuation allowance	(13.6	)%	—	%	—	%
Unutilized losses for tax purposes	(7.6	)%	—	%	—	%
Transaction costs	(6.0	)%	—	%	—	%
Disallowances for income tax purposes	(2.2	)%	(33.7	)%	7.0	%
Tax relating to origination or reversal of temporary differences	(2.1	)%	—	%	—	%
Income exempt for tax purposes	—	%	24.7	%	(2.4	)%
Reversal of tax benefits	—	%	—	%	12.7	%
Other, net	(6.2	)%	(0.6	)%	—	%
Total	(19.1	)%	(37.0	)%	37.2	%

As of December 31, 2018, we had gross federal net operating loss carry forwards of approximately $60.4 million and gross state net operating loss carry forwards of approximately $66.3 million, which may be available to offset federal and state income tax liabilities, respectively, in the future. In general, under Section 382 (“Section 382”) of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre‑change NOLs to offset future taxable income. The Aegis Transactions resulted in a change of ownership under Section 382 for federal and state income tax purposes. Section 382 provides limitation on the utilization of NOL carryforwards after an ownership change and we have analyzed the potential Section 382 impacts on our NOL carryforwards in the event of a Section 382 ownership change. We determined that our fair market value and our net unrealized built-in gain position resulted in a significant increase in our Section 382 limitation. Accordingly, we believe that our Section 382 limitation will not result in any significant impacts on our ability to utilize our NOL carryforwards to offset future taxable income or will have any significant impact on future operating cash flows. Future changes in our stock ownership could result in an additional ownership change under Section 382 of the Code. Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations. There is also a risk that that due to regulatory changes, such as suspensions of the use of NOLs or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities.

We have been granted “Tax Holidays” as an incentive to attract foreign investment by the governments of Honduras, Jamaica, and certain qualifying locations in the Philippines. Generally, a Tax Holiday is an agreement between us and a foreign government under which we receive certain tax benefits in that country. In Honduras, we have been granted approval for an indefinite exemption from income taxes. The tax holidays for our qualifying Philippines facilities expire at staggered dates through 2019. Our Tax Holidays could be eliminated if there are future changes in our operations or the governmental authorities approve legislation to modify the Tax Holidays in the various taxing jurisdictions. The aggregate reduction in income tax expense for the nine months ended December 31, 2018 was $392.

Under accounting standards for uncertainty in income taxes (ASC 740-10), a company recognizes a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is “more likely than not” (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” in the accounting standards for income taxes refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods.

The following table indicates the changes to our unrecognized tax benefits for the nine months ended December 31, 2018, the successor period from November 22, 2017 to March 31, 2018 and the predecessor period from April 1, 2017 to November 21, 2017. The term “unrecognized tax benefits” in the accounting standards for income taxes refers to the differences between a tax position taken or expected to be taken in a tax return and the benefit measured and recognized in the financial statements. If recognized, all of these benefits would impact our income tax expense, before consideration of any related valuation allowance.



	Nine Months Ended December 31, 2018		November 22, 2017 to March 31, 2018		April 01, 2017 to November 21, 2017
			Successor		Predecessor
Unrecognized, beginning	$	—	$	—	$	—
Additions due to acquisition	$	3,122	$	—	$	—
Additions based on tax positions taken in the period	$	201	$	—	$	—
Reductions based on tax positions taken in the period	$	—	$	—	$	—
Unrecognized, ending	$	3,323	$	—	$	—

We file numerous consolidated and separate income tax returns in the U.S. federal and many state jurisdictions as well as in many foreign jurisdictions. Our U.S. federal returns and most state returns for tax years 2015 and forward are subject to examination. Tax return filings in India for the year ended March 2018 are still open for examination as well as Malaysian tax returns for their tax years ending March 2014 and onwards.