INCOME TAXES (Tables)

12 Months Ended

Sep. 30, 2016

INCOME TAXES

Components of income (loss) before income taxes

Income (loss) before income taxes includes the following components (in thousands):

Years ended September 30,	2016		2015		2014
	(in thousands)
United States	$	(57,176)	$	(18,712)	$	(22,788)
Foreign		49,699		90,623		112,199
Total	$	(7,477)	$	71,911	$	89,411

Significant components of the provision for income taxes

Significant components of the provision for income taxes are as follows:

Years ended September 30,	2016		2015		2014
	(in thousands)
Current:
Federal	$	2,469	$	(2,433)	$	(8,049)
State		(231)		723		918
Foreign		8,249		20,266		25,705
Total current		10,487		18,556		18,574
Deferred:
Federal		(15,614)		24,112		1,296
State		(4,365)		5,710		(1,232)
Foreign		280		619		1,193
Total deferred		(19,699)		30,441		1,257
Provision for income taxes	$	(9,212)	$	48,997	$	19,831

Reconciliation of income tax computed at the U.S. federal statutory tax rate to income tax expense

The reconciliation of income tax computed at the U.S. federal statutory tax rate to income tax expense is as follows:

Years ended September 30,	2016		2015		2014
	(in thousands)
Tax expense at U.S. statutory rate	$	(2,616)	$	25,169	$	31,294
State income taxes, net of federal tax effect		(1,199)		(34)		111
Nondeductible expenses (1)		7,828		1,555		1,319
Change in reserve for tax contingencies		1,320		(1,192)		(601)
Change in deferred tax asset valuation allowance (2)		(9,228)		37,589		921
Foreign income taxed at less than statutory rate		(2,999)		(11,924)		(12,783)
Research and development credits (3)		(2,542)		(2,248)		(584)
Other		224		82		154
Provision for income taxes	$	(9,212)	$	48,997	$	19,831

(1) In 2016, we recorded $6.3 million of tax expense related to nondeductible acquisition related compensation expenses

(2) In 2016, we recorded a net tax benefit primarily related to a business combination in which we acquired significant U.S. deferred tax liabilities as well as a utilization and subsequent release of the deferred tax valuation allowance in Australia. In 2015, we recorded a full valuation allowance on U.S. net deferred tax assets with a charge to expense of $35.8 million. 

(3) In both 2016 and 2015, we recorded tax benefits of $1.0 million and $1.2 million, respectively, related to the reinstatement of the research and development tax credit.

Significant components of deferred tax assets and liabilities

Significant components of our deferred tax assets and liabilities are as follows:

September 30,	2016		2015
	(in thousands)
Deferred tax assets:
Accrued employee benefits	$	15,133	$	12,597
Long-term contracts and inventory valuation reductions		12,697		13,297
Allowances for loss contingencies		5,754		3,793
Deferred compensation		4,369		4,252
Property, plant and equipment		—		1,611
Intangible assets		—		8,037
Retirement benefits		12,282		8,040
Tax credit carryforwards		16,512		11,151
Net operating losses carryforwards		12,713		14,795
Other		2,796		1,380
Total gross deferred tax assets		82,256		78,953
Valuation allowance		(47,887)		(54,759)
Total deferred tax assets		34,369		24,194
Deferred tax liabilities:
Deferred revenue		(19,952)		(23,981)
Unremitted foreign earnings		(2,347)		(535)
Property, plant and equipment		(33)		—
Intangible assets		(12,894)		—
Foreign currency mark-to-market		(191)		—
Other		(740)		(2,226)
Total deferred tax liabilities		(36,157)		(26,742)
Net deferred tax asset (liability)	$	(1,788)	$	(2,548)

Expiration of tax credit carryforwards

Such credit carryforwards (in thousands) expire as follows:

U.S. foreign tax credits	$	4,818	2023-2026
U.S. research and development tax credits		3,405	2035-2036
State research and development tax credits		17,911	Do not expire

Expiration of federal, state and foreign net operating losses

We have federal, state and foreign net operating losses (in thousands) which expire as follows:

U.S. net operating loss carryforwards	$	12,933	2036
State net operating loss carryforwards		51,791	2020-2036
Foreign net operating loss carryforwards		23,046	Do not expire

Net changes in the liability for unrecognized tax benefits

During fiscal 2016 and 2015, the aggregate changes in our total gross amount of unrecognized tax benefits are summarized as follows:

Years ended September 30,	2016		2015
	(in thousands)
Balance at beginning of year	$	12,619	$	7,306
Additions (reductions) for tax positions taken in prior years:		3,641		—
Recognition of benefits from expiration of statutes		(359)		(1,068)
Other		—		3,125
Additions for tax positions related to the current year		986		472
Additions for tax positions related to current year acquisitions		45		2,784
Balance at end of year	$	16,932	$	12,619