Income Taxes

Income taxes consisted of the following:



	Nine Months Ended December 31, 2015		Years Ended
	Nine Months Ended December 31, 2015		March 31, 2015			March 31, 2014
	As Restated		As Restated			As Restated
Current:
Federal	$	27,068	$	21,321		$	43,358
State	2,258		3,508			1,562
Deferred:
Federal	55,301		17,314			(110,792		)
State	2,286		(4,844		)	(8,547		)
Income taxes	$	86,913	$	37,299		$	(74,419	)

Differences between the federal statutory rate and the Company's effective rate related to the following:



	Nine Months Ended December 31, 2015		Years Ended
	Nine Months Ended December 31, 2015		March 31, 2015		March 31, 2014
	As Restated		As Restated		As Restated
Statutory federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal impact	2.1		(0.1	)	7.2
Domestic manufacturing deduction	(1.5	)	(5.6	)	3.9
Goodwill impairment	—		11.2		—
Research and development tax credit	(5.2	)	(3.2	)	2.7
Change in prior year contingent tax liabilities	1.0		(3.7	)	7.1
Nondeductible transaction costs	—		7.2		—
Other	(1.1	)	(3.3	)	(1.9	)
Change in valuation allowance	1.6		(2.7	)	(0.3	)
Income tax provision	31.9	%	34.8	%	53.7	%

Deferred Income Taxes

Deferred income taxes arise because of temporary differences in the timing of the recognition of income and expense items for financial statement reporting and income tax purposes. As discussed in Note 1, as of December 31, 2015 the Company prospectively adopted a new accounting standard which requires all deferred income tax assets and liabilities to be classified as noncurrent on the balance sheet. Accordingly, net deferred income taxes are classified as noncurrent assets at December 31, 2015. Net deferred income taxes at March 31, 2015 are classified as current or noncurrent assets based upon the classification of the related assets and liabilities, or, if there is no corresponding balance on the balance sheet, the expected period of reversal, and were not retrospectively adjusted.

In December 2015, the Protecting Americans from Tax Hikes (PATH) Act was enacted to permanently reinstate the Research & Development tax credit (R&D tax credit) which had expired on December 31, 2014. The impact of this extension was included in the tax rate for the period ended December 31, 2015. In addition, we recorded additional R&D tax credit during the acquisition accounting measurement period.

Deferred income tax assets and liabilities resulting from temporary differences related to the following:



	Years Ended
	December 31, 2015			March 31, 2015
	As Restated			As Restated
Deferred income tax assets:
Retirement benefits	$	306,008		$	344,674
Federal carryforwards	35,957			10,269
Other	42,733			49,082
Other reserves	25,676			28,697
Accruals for employee benefits	41,719			46,691
Inventory	14,206			10,893
Contract method of revenue recognition	108,513			134,329
Total deferred income tax assets before valuation allowance	574,812			624,635
Valuation allowance	(13,190		)	(8,836		)
Total deferred income tax assets	561,622			615,799
Deferred income tax liabilities:
Intangible assets	(98,300		)	(114,598		)
Property, plant and equipment	(129,188		)	(123,154		)
Debt-related	(15,596		)	(21,290		)
Total deferred income tax liabilities	(243,084		)	(259,042		)
Net deferred income tax assets	$	318,538		$	356,757

The Company believes it is more likely than not that the recorded deferred benefits will be realized through the reduction of future taxable income. The Company's recorded valuation allowance of $13,190 at December 31, 2015 relates to certain capital loss, tax credits and net operating losses that are not expected to be realized before their expiration.

Included in the net deferred tax asset are net operating loss and credit carryovers of $35,539 (as restated), net of valuation allowances, which expire in years ending from December 31, 2016 through December 31, 2036, and $8,799 that may be carried over indefinitely.

The following summarizes activity related to valuation allowances for deferred tax assets:



	Nine Months Ended December 31, 2015			Years Ended
	Nine Months Ended December 31, 2015			March 31, 2015			March 31, 2014
Beginning Balance	$	8,836		$	2,771		$	3,849
Additions, charged to expense	4,655			84			123
Additions, due to the Merger	—			6,974			—
Deductions	(301		)	(993		)	(1,201		)
Ending Balance	$	13,190		$	8,836		$	2,771

The Company has significant deferred tax assets in the U.S. against which valuation allowances have been established to reduce such deferred tax assets to an amount that is more likely than not to be realized. The establishment of valuation allowances requires significant judgment and is impacted by various estimates. Both positive and negative evidence, as well as the objectivity and verifiability of that evidence, is considered in determining the appropriateness of recording a valuation allowance on deferred tax assets. While the Company believes positive evidence exists with regard to the realizability of these deferred tax assets, it is not considered sufficient to outweigh the objectively verifiable negative evidence.

Unrecognized Tax Benefits

Unrecognized tax benefits consist of the carrying value of the Company's recorded uncertain tax positions as well as the potential tax benefits that could result from other tax positions that have not been recognized in the financial statements under current authoritative guidance. At December 31, 2015 and March 31, 2015, unrecognized tax benefits that have not been recognized in the financial statements amounted to $82,643 and $35,549, respectively (as restated), of which $78,988 and $32,185, respectively (as restated), would affect the effective tax rate, if recognized. The remaining balance is related to deferred tax items which only impact the timing of tax payments. Although the timing and outcome of audit settlements are uncertain, it is reasonably possible that a $3,015 reduction of the uncertain tax benefits will occur in the next 12 months. The settlement of these unrecognized tax benefits could result in earnings from $0 to $2,599.

Changes in unrecognized tax benefits, excluding interest and penalties, were as follows:



	Nine Months Ended December 31, 2015			Years Ended
	Nine Months Ended December 31, 2015			March 31, 2015			March 31, 2014
	As Restated			As Restated			As Restated
Unrecognized tax benefits, beginning of period	$	33,784		$	32,232		$	25,657
Gross increases—tax positions in prior periods	42,264			21,369			15,412
Gross decreases—tax positions in prior periods	(1,147		)	(16,721		)	(13,172		)
Gross increases—current-period tax positions	5,818			1,469			4,488
Settlements	—			(2,786		)	—
Lapse of statute of limitations	(74		)	(1,779		)	(153		)
Unrecognized tax benefits, end of period	$	80,645		$	33,784		$	32,232

The Company reports income tax-related interest income within income taxes. Penalties and tax-related interest expense are also reported as a component of income taxes. At December 31, 2015 and March 31, 2015, $1,690 and $1,476 of income tax-related interest (as restated) and $307 and $289 of penalties (as restated) were included in accrued income taxes, respectively.

The Company or one of its subsidiaries files income tax returns in the U.S. federal, various U.S. state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or foreign income tax examinations by tax authorities for years prior to 2008. The IRS has completed the audits of the Company through fiscal 2012 and is currently auditing the Company's tax returns for fiscal 2013 and 2014. The Company believes appropriate provisions for all outstanding issues have been made for all remaining open years in all jurisdictions.