Income Taxes (Tables)

12 Months Ended

Sep. 30, 2017

Income Taxes

Components of income (loss) before income taxes

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

Years ended September 30,	2017		2016		2015
	(in thousands)
United States	$	(70,566)	$	(76,136)	$	(33,827)
Foreign		59,484		49,699		90,623
Total	$	(11,082)	$	(26,437)	$	56,796

Significant components of the provision for income taxes

Significant components of the provision (benefit) for income taxes from continuing operations are as follows:

Years ended September 30,	2017		2016		2015
	(in thousands)
Current:
Federal	$	(4,070)	$	(1,679)	$	(4,567)
State		878		(618)		617
Foreign		13,869		8,249		20,266
Total current		10,677		5,952		16,316
Deferred:
Federal		2,257		(16,256)		24,834
State		569		(4,333)		4,857
Foreign		1,155		280		619
Total deferred		3,981		(20,309)		30,310
Provision (benefit) for income taxes	$	14,658	$	(14,357)	$	46,626

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,	2017		2016		2015
	(in thousands)
Tax expense at U.S. statutory rate	$	(3,877)	$	(9,252)	$	19,875
State income taxes, net of federal tax effect		(923)		(1,754)		(584)
Nondeductible expenses (1)		(169)		7,765		1,487
Change in reserve for tax contingencies		(4,435)		27		(1,192)
Change in deferred tax asset valuation allowance (2)		17,374		(5,382)		40,869
Foreign income taxed at less than statutory rate (3)		9,912		(2,999)		(11,924)
Research and development credits (4)		(3,459)		(2,542)		(1,897)
Other		235		(220)		(8)
Provision (benefit) for income taxes	$	14,658	$	(14,357)	$	46,626

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

(2) In 2017, we recorded $13.1 million of tax expense related to an increase in the valuation allowance related to tax credit carryforwards generated in the current year. 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 2017, we provided for deferred taxes on all unremitted foreign earnings, as the earnings are no longer considered permanently reinvested resulting in a charge of $9.5 million.

(4) 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,	2017		2016
	(in thousands)
Deferred tax assets:
Accrued employee benefits	$	15,863	$	12,044
Long-term contracts and inventory valuation reductions		13,974		12,422
Allowances for loss contingencies		4,212		3,786
Deferred compensation		4,830		4,369
Retirement benefits		6,214		12,282
Tax credit carryforwards		31,161		16,512
Net operating losses carryforwards		3,968		12,713
Other		2,509		2,563
Total gross deferred tax assets		82,731		76,691
Valuation allowance		(57,106)		(42,179)
Total deferred tax assets		25,625		34,512
Deferred tax liabilities:
Deferred revenue		(3,729)		(11,192)
Unremitted foreign earnings		(11,910)		(2,347)
Property, plant and equipment		(3,137)		(1,443)
Intangible assets		(9,713)		(16,068)
Foreign currency mark-to-market		—		(191)
Other		(158)		(601)
Total deferred tax liabilities		(28,647)		(31,842)
Net deferred tax asset (liability)	$	(3,022)	$	2,670

Expiration of tax credit carryforwards

Such credit carryforwards (in thousands) expire as follows:

U.S. foreign tax credits	$	15,567	2027
U.S. research and development tax credits		6,303	2035-2037
State research and development tax credits		20,486	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	$	—	—
State net operating loss carryforwards		37,138	2020-2037
Foreign net operating loss carryforwards		10,903	Do not expire

Net changes in the liability for unrecognized tax benefits

During fiscal 2017 and 2016, the aggregate changes in our total gross amount of unrecognized tax benefits are summarized as follows:

Years ended September 30,	2017		2016
	(in thousands)
Balance at beginning of year	$	16,932	$	12,619
Additions (reductions) for tax positions taken in prior years:		399		3,641
Recognition of benefits from expiration of statutes		(26)		(359)
Recognition of benefits from open years effectively settled		(5,359)		—
Additions for tax positions related to the current year		1,302		986
Additions for tax positions related to current year acquisitions		—		45
Balance at end of year	$	13,248	$	16,932