Note 8: Income Taxes

The U.S. and foreign components of earnings (loss) from continuing operations before income taxes and the provision (benefit) for income taxes consisted of the following:

	Years ended March 31,
	2015			2014			2013
Components of earnings (loss) from continuing operations before income taxes:
United States	$	31.1		$	14.1		$	10.2
Foreign		10.1			9.9			(23.2	)
Total earnings (loss) from continuing operations before income taxes	$	41.2		$	24.0		$	(13.0	)

Income tax expense (benefit):
Federal:
Current	$	0.4		$	(2.0	)	$	2.6
Deferred		7.1			(95.8	)		(2.6	)
State:
Current		-			0.2			0.2
Deferred		1.1			(21.4	)		(0.2	)
Foreign:
Current		12.7			10.0			6.4
Deferred		(2.3	)		1.1			3.4
Total income tax expense (benefit)	$	19.0		$	(107.9	)	$	9.8

The Company allocates income tax expense among continuing operations, discontinued operations, and other comprehensive income. The Company applies accounting for income taxes by tax jurisdiction, and in periods in which there is a loss from continuing operations before income taxes and pre-tax income in other categories (e.g., discontinued operations or other comprehensive income), it first allocates income tax expense to the other sources of income, and records a related tax benefit in continuing operations.

Income tax expense attributable to earnings (loss) from continuing operations before income taxes differed from the amounts computed by applying the statutory U.S. federal income tax rate as a result of the following:

	Years ended March 31,
	2015			2014			2013
Statutory federal tax		35.0	%		35.0	%		35.0	%
State taxes, net of federal benefit		2.4			2.1			(1.3	)
Taxes on non-U.S. earnings and losses		(4.9	)		(3.8	)		(23.8	)
Valuation allowance		8.3			(471.7	)		(59.3	)
Tax credits		(6.1	)		(7.1	)		37.0
Compensation		1.0			0.4			(13.0	)
Tax rate or law changes		1.2			(9.2	)		0.9
Uncertain tax positions net of settlements		2.2			0.4			(41.9	)
Brazil interest on equity		-			(1.7	)		3.2
Dividend repatriation		2.4			5.8			(11.4	)
Other		4.6			0.2			(0.8	)
Effective tax rate		46.1	%		(449.6	%)		(75.4	%)

The Company recorded an additional valuation allowance of $2.6 million and $12.3 million in fiscal 2015 and 2014, respectively, against net deferred tax assets in certain foreign jurisdictions after determining it was more likely than not that the net deferred tax assets in these jurisdictions will not be realized. The Company will continue to provide a valuation allowance against its net deferred tax assets in each of the applicable jurisdictions going forward until the need for a valuation allowance is eliminated. The need for a valuation allowance is eliminated when the Company determines it is more likely than not the deferred tax assets will be realized.

During fiscal 2014, the Company concluded it no longer needed a valuation allowance on certain U.S. deferred tax assets after determining it was more likely than not they would be realized. As a result, the Company recorded a $119.2 million reversal of its deferred tax asset valuation allowance. Also during fiscal 2014, the Company recorded income tax benefits totaling $2.2 million related to foreign tax law changes.

The tax effects of temporary differences that gave rise to deferred tax assets and liabilities were as follows:

	March 31,
	2015			2014
Deferred tax assets:
Accounts receivable	$	0.3		$	0.2
Inventories		3.8			4.1
Plant and equipment		0.8			2.4
Pension and employee benefits		50.5			39.1
Net operating loss, capital loss, and credit carryforwards		105.0			122.4
Other, principally accrued liabilities		6.8			10.3
Total gross deferred tax assets		167.2			178.5
Less: valuation allowance		(48.0	)		(61.2	)
Net deferred tax assets		119.2			117.3

Deferred tax liabilities:
Goodwill		0.6			4.2
Plant and equipment		5.3			7.6
Other		1.0			1.7
Total gross deferred tax liabilities		6.9			13.5
Net deferred tax asset	$	112.3		$	103.8

Deferred tax assets and liabilities are reported in the consolidated balance sheets as follows:

	March 31,
	2015			2014
Current deferred tax asset	$	13.4		$	13.0
Noncurrent deferred tax asset		102.7			98.6
Current deferred tax liability (other current liabilities)		(0.4	)		(0.5	)
Noncurrent deferred tax liability		(3.4	)		(7.3	)
Total	$	112.3		$	103.8

Unrecognized tax benefits were as follows:

	Years ended March 31,
	2015		2014
Beginning balance	$	2.1	$	9.0
Gross increases - tax positions in prior period		3.1		2.5
Gross decreases - tax positions in prior period		-		(7.0	)
Gross increases - tax positions in current period		0.4		0.1
Settlements		-		(1.9	)
Lapse of statute of limitations		-		(0.8	)
Effect of exchange rate changes		-		0.2
Ending balance	$	5.6	$	2.1

The Company’s liability for unrecognized tax benefits as of March 31, 2015 was $5.6 million, and if recognized, $3.0 million would have an effective tax rate impact.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. At March 31, 2015 and 2014, accrued interest and penalties were not significant.

The Company files income tax returns in multiple jurisdictions and is subject to examination by taxing authorities throughout the world. At March 31, 2015, the Company was under income tax examination in a number of foreign jurisdictions. The Company does not anticipate a significant change in unrecognized tax benefits during the next twelve months.

The following tax years remain subject to examination for the Company’s major tax jurisdictions:

Austria	Fiscal 2012 - 2014
Brazil	Calendar 2010 - 2014
Germany	Fiscal 2011 - 2014
United States	Fiscal 2012 – 2014

At March 31, 2015, the Company had foreign tax credit carry forwards of $1.8 million that, if not utilized against domestic taxes, will expire in fiscal 2016 and 2017. The Company also had federal and state research and development tax credits of $20.9 million that, if not utilized against domestic taxes, will expire between fiscal 2018 and 2035. The Company also had various state and local tax loss carry forwards of $186.0 million that, if not utilized against state apportioned taxable income, will expire at various times during fiscal 2016 through 2034. In addition, the Company had tax loss carry forwards of $304.6 million in various tax jurisdictions throughout the world. Certain of the carry forwards in the U.S. and many in foreign jurisdictions are offset by a valuation allowance. If not utilized against taxable income, $159.3 million of these tax losses will expire at various times during fiscal 2016 through 2035, and $145.3 million, mainly related to India, Austria and Germany, will not expire due to an unlimited carry-forward period.

At March 31, 2015, the Company provided $0.8 million of tax on undistributed earnings for certain subsidiaries not considered permanently reinvested. Undistributed earnings totaling $442.0 million are considered permanently reinvested in the remaining foreign operations, and no provision has been made for any taxes that would be payable upon the distribution of such earnings. It is not practicable to estimate the amount of unrecognized withholding taxes and deferred tax liability on such earnings.