Plantronics 2015 Annual Report Download - page 42

Gain from Litigation Settlements
During the fiscal year ended March 31, 2015 we recognized gains of approximately $8.7 million, net of immaterial legal contingency
fees, within operating income. These gains were the result of net receipts of $6.5 million from a competitor to dismiss litigation
involving the alleged infringement of a patent assigned to us and $2.2 million related to the resolution of an insurance coverage
dispute with one of our insurance carriers.
Income Tax Expense
Fiscal Year Ended Fiscal Year Ended
(in thousands)
March 31,
2015
March 31,
2014 Change
March 31,
2014
March 31,
2013 Change
Income before income
taxes $145,251 $141,139 $ 4,112 2.9 % $ 141,139 $138,425 $ 2,714 2.0 %
Income tax expense 32,950 28,722 4,228 14.7 % 28,722 32,023 (3,301) (10.3)%
Net income $112,301 $112,417 $ (116) (0.1)% $112,417 $ 106,402 $ 6,015 5.7 %
Effective tax rate 22.7% 20.4% 20.4% 23.1%
The effective tax rate for fiscal year 2015 is higher than the previous year due primarily to the absence of several one-time, discrete
items that benefited the tax rate in the previous year, such as the generation of a foreign tax credit carryover, changes in Mexican
tax law that resulted in the reversal of a valuation allowance, and a deduction for qualifying domestic production activities. These
factors were offset by a higher proportion of income earned in foreign jurisdictions that is taxed at lower rates and by an increase
in the benefit from the U.S. federal research tax credit. Our fiscal year 2015 included four quarters of benefit from the U.S. federal
research tax credit because the credit expired on December 31, 2014 but was retroactively reinstated in January 2015. In contrast,
during our fiscal year 2014, the credit was only available for three quarters as the credit expired December 31, 2013 and was not
renewed.
In comparison to fiscal year 2013, the decrease in the effective tax rate for fiscal year 2014 was due primarily to changes in Mexican
tax law that resulted in the reversal of a valuation allowance, a deduction for qualifying domestic production activities, and the
generation of a foreign tax credit carryover, offset by a decrease in the benefit from the U.S. federal research tax credit. The U.S.
federal research tax credit expired December 31, 2013 and was therefore only available for three quarters in our fiscal year 2014,
compared to fiscal year 2013, which included a five quarters of benefit due to the timing of the retroactive reinstatement of the
credit. On January 2, 2013, the American Taxpayer Relief Act of 2012, which included a provision that retroactively extended
the federal tax research credit to January 1, 2012 for two years, was signed into law. We recognized an approximate $1.8 million
discrete tax benefit in the fourth quarter of fiscal year 2013 for the previously expired period from January 1, 2012 to December
31, 2012.
Our effective tax rate for fiscal years 2015, 2014, and 2013 differs from the statutory rate due to the impact of foreign operations
taxed at different statutory rates, income tax credits, state taxes, and other factors. Our future tax rate could be impacted by a shift
in the mix of domestic and foreign income, tax treaties with foreign jurisdictions, changes in tax laws in the U.S. or internationally,
or a change in estimate of future taxable income, which could result in a valuation allowance being required.
We had $12.8 million of unrecognized tax benefits as of March 31, 2015 compared to $12.6 million and $11.1 million as of
March 31, 2014 and 2013, respectively. The unrecognized tax benefits as of the end of fiscal year 2015 would favorably impact
the effective tax rate in future periods, if recognized.
It is our continuing practice to recognize interest and/or penalties related to income tax matters in income tax expense. As of
March 31, 2015, we had approximately $1.8 million of accrued interest related to uncertain tax positions, compared to $1.7 million
and $2.0 million as of March 31, 2014 and 2013, respectively. No penalties have been accrued.
The liability for uncertain tax positions may be reduced for liabilities that are settled with taxing authorities or on which the statute
of limitations could expire without assessment from tax authorities. Currently, we cannot reasonably estimate the amount of
reductions, if any, during the next twelve months.
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