

	Fiscal year ended March 31,
	2018			2017		2016
Current income tax expense
Current:
Federal	$	115,315		$	30,362	$	29,082
State	3,461			4,855		4,750
Foreign	20,030			17,800		17,034
Total current income tax expense	138,806			53,017		50,866
Deferred income tax expense (benefit)
Federal	(9,551		)	857		(3,706		)
State	789			590		124
Foreign	(11,551		)	8		2,829
Total deferred income tax expense (benefit)	(20,313		)	1,455		(753		)
Total income tax expense	$	118,493		$	54,472	$	50,113

On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was enacted into law. Among the significant changes resulting from the law, the Tax Act reduces the U.S. federal income tax rate from 35% to 21% effective January 1, 2018, requires companies to pay a one-time transition tax on unrepatriated cumulative non-U.S. earnings of foreign subsidiaries, and creates new taxes on certain foreign sourced earnings. In accordance with ASC 740, “Income Taxes,” the Company is required to record the effects of tax law changes in the period enacted. As a result of the rate change in the Tax Act, the Company’s blended U.S. statutory tax rate for fiscal 2018 is 31.55%.

As of March 31, 2018, the Company has not completed its accounting for the tax effects of enactment of the Tax Act; however, in certain cases, as described below, the Company has made a reasonable estimate of the effects on existing deferred tax balances and the Transition Tax. The results for fiscal 2018 contain estimates of the impact of the Tax Act as permitted by Staff Accounting Bulletin 118 “SAB 118” issued by the Securities and Exchange Commission on December 22, 2017. These amounts are considered provisional and may be affected by future guidance, if and when issued.

Foreign tax effects: The Transition Tax is based on the Company's total post-1986 earnings and profits (“E&P”) that were previously deferred from U.S. income taxes. The Company recorded a provisional amount for the Transition Tax liability, resulting in an increase in income tax expense of $97,500; an increase of $3,500 from the amount reported in the third quarter of fiscal 2018. The estimated Transition Tax of $97,500 is recorded under current income tax payable and non-current income tax payable, at $7,800 and $89,700, respectively, and is payable over eight years. Further, the Transition Tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when the Company finalizes both the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and the amounts held in cash or other specified assets.

Deferred tax assets and liabilities: The Company remeasured its deferred tax assets and liabilities based on the reduced U.S. federal income tax rate of 21%. However, the Company is still analyzing certain aspects of the Tax Act and refining its calculations, which could potentially affect the measurement of these balances or give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement of the Company's deferred tax balance was a tax benefit of $14,100; a decrease of $606 from the amount reported in the third quarter of fiscal 2018.

In all cases, the Company may adjust these provisional amounts which could potentially affect the measurement and impact on tax expense as the Company refines its calculations within a reasonable period not to exceed one year from the enactment date.



	March 31,
	2018			2017
Deferred tax assets:
Accounts receivable	$	1,790		$	2,419
Inventories	3,660			6,521
Net operating loss carryforwards	50,928			46,178
Accrued expenses	21,274			29,783
Other assets	16,832			20,282
Gross deferred tax assets	94,484			105,183
Less valuation allowance	(15,255		)	(27,053		)
Total deferred tax assets	79,229			78,130
Deferred tax liabilities:
Property, plant and equipment	21,045			24,319
Other intangible assets	46,058			67,388
Other liabilities	1,331			759
Total deferred tax liabilities	68,434			92,466
Net deferred tax assets (liabilities)	$	10,795		$	(14,336	)

The Company has approximately $1,617 in United States federal net operating loss carryforwards, all of which are limited by Section 382 of the Internal Revenue Code, with expirations between 2023 and 2027. The Company has approximately $161,929 of foreign net operating loss carryforwards, of which $115,420 may be carried forward indefinitely and $46,509 expire between fiscal 2019 and fiscal 2034. In addition, the Company also has approximately $33,246 of state net operating loss carryforwards with expirations between fiscal 2019 and fiscal 2038.

As of March 31, 2018 and 2017, the federal valuation allowance was $630 and $1,050, respectively. The decrease is due to the Tax Act rate change. As of March 31, 2018 and 2017, the valuation allowance associated with the state tax jurisdictions was $895 and $705, respectively. As of March 31, 2018 and 2017, the valuation allowance associated with certain foreign tax jurisdictions was $13,730 and $25,298, respectively. Of the net decrease of $11,568, $9,049 was recorded as a decrease to tax expense. The $9,049 net decrease to tax expense includes a decrease of $11,954 due to the reversal of previously recognized deferred tax valuation allowances related to certain of the Company’s foreign subsidiaries, and an increase of $2,905 primarily related to net operating loss carryforwards generated in the current year that the Company believes are not more likely than not to be realized. The remaining net decrease of $2,519 is primarily related to foreign currency translation adjustments and an offset to adjustments to foreign net operating losses for which a full valuation allowance was recorded.



	Fiscal year ended March 31,
	2018			2017			2016
United States statutory income tax expense	$	75,196		$	74,444		$	63,678
Increase (decrease) resulting from:
Impact of Tax Act	83,400			—			—
State income taxes, net of federal effect	3,146			3,677			3,282
Nondeductible expenses, domestic manufacturing deduction and other	1,078			1,993			(1,407		)
Legal proceedings charge - European Competition Investigations - See Note 18	—			7,873			668
Goodwill impairment - See Note 5	—			3,812			6,475
Effect of foreign operations	(35,048		)	(39,377		)	(28,845		)
Valuation allowance	(9,279		)	2,050			6,262
Income tax expense	$	118,493		$	54,472		$	50,113

The effective income tax rates for the fiscal years ended March 31, 2018, 2017 and 2016 were 49.7%, 25.6% and 27.5%, respectively. The effective income tax rate with respect to any period may be volatile based on the mix of income in the tax jurisdictions in which the Company operates and the amount of its consolidated income before taxes. The increase in the effective income tax rate in fiscal 2018 is primarily due to the Tax Act.

In fiscal 2018, the foreign effective income tax rate on foreign pre-tax income of $163,886 was 5.2%. In fiscal 2017, the foreign effective income tax rate on foreign pre-tax income of $132,259 was 13.5% and in fiscal 2016, the foreign effective income tax rate on foreign pre-tax income of $117,702 was 16.9%. The rate decrease in fiscal 2018 compared to fiscal 2017 is primarily due to the reversal of previously recognized deferred tax valuation allowances related to certain of the Company’s foreign subsidiaries in fiscal 2018, decreases due to non-deductible goodwill impairment charges and non-deductible legal proceedings charge related to the European competition investigation in fiscal 2017, and changes in the mix of earnings among tax jurisdictions. The rate decrease in fiscal 2017 compared to fiscal 2016 is primarily due to changes in the mix of earnings among tax jurisdictions and a decrease in non-deductible goodwill impairment charges compared to fiscal 2016, partially offset by an increase in non-deductible legal proceedings charge relating to the European competition investigation in fiscal 2017 compared to fiscal 2016.

The Company has approximately $1,126,000 and $960,000 of undistributed earnings of foreign subsidiaries for fiscal years 2018 and 2017, respectively. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the Transition Tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations.



	Fiscal year ended March 31,
	2018			2017			2016
Balance at beginning of year	$	1,450		$	2,375		$	4,112
Increases related to current year tax positions	397			252			422
Increases related to prior year tax positions	11			31			470
Decreases related to prior tax positions due to foreign currency translation	—			(352		)	—
Decreases related to prior year tax positions settled	(1		)	(678		)	(2,315		)
Lapse of statute of limitations	(289		)	(178		)	(314		)
Balance at end of year	$	1,568		$	1,450		$	2,375

All of the balance of unrecognized tax benefits at March 31, 2018, if recognized, would be included in the Company’s Consolidated Statements of Income and have a favorable impact on both the Company’s net earnings and effective tax rate.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2015.