INCOME TAXES
The components of income (loss) before income taxes for the years ended January 31, 2017, 2016 and 2015 consist of the following: |
| | | | | | | | | | | |
| 2017 | | 2016 | | 2015 |
| (in thousands) |
U.S. | $ | (22,244 | ) | | $ | (53,211 | ) | | $ | (20,825 | ) |
Foreign | (469 | ) | | (3,000 | ) | | (17,515 | ) |
Total | $ | (22,713 | ) | | $ | (56,211 | ) | | $ | (38,340 | ) |
The provision for (benefit from) income taxes charged to income for the years ended January 31, 2017, 2016 and 2015 consists of the following: |
| | | | | | | | | | | |
| 2017 | | 2016 | | 2015 |
| (in thousands) |
Current | | | | | |
Federal | $ | (5,368 | ) | | $ | (9,193 | ) | | $ | 8,615 |
|
State | (85 | ) | | 147 |
| | 1,245 |
|
Foreign | 116 |
| | 235 |
| | 54 |
|
Total current taxes | (5,337 | ) | | (8,811 | ) | | 9,914 |
|
Deferred | | | | | |
Federal | (1,819 | ) | | (7,766 | ) | | (13,372 | ) |
State | (471 | ) | | (1,427 | ) | | (1,504 | ) |
Foreign | (551 | ) | | 22 |
| | 39 |
|
Total deferred taxes | (2,841 | ) | | (9,171 | ) | | (14,837 | ) |
| $ | (8,178 | ) | | $ | (17,982 | ) | | $ | (4,923 | ) |
The reconciliation of the statutory federal income tax rate to the Company's effective rate is as follows: |
| | | | | | | | |
| 2017 | | 2016 | | 2015 |
U.S. statutory rate | (35.0 | )% | | (35.0 | )% | | (35.0 | )% |
Foreign statutory rates | 2.8 | % | | 0.6 | % | | 14.6 | % |
State taxes on income net of federal tax benefit | (4.3 | )% | | (4.1 | )% | | (4.4 | )% |
Valuation allowances | (2.7 | )% | | 5.7 | % | | 14.6 | % |
Impairment of nondeductible goodwill from stock acquisitions | — | % | | — | % | | 6.9 | % |
Foreign currency devaluation | 0.6 | % | | (1.0 | )% | | (11.6 | )% |
All other, net | 2.6 | % | | 1.8 | % | | 2.1 | % |
| (36.0 | )% | | (32.0 | )% | | (12.8 | )% |
Net deferred tax assets and liabilities consist of the following components as of January 31, 2017 and 2016: |
| | | | | | | |
| 2017 | | 2016 |
| (in thousands) |
Deferred tax assets: | | | |
Inventory allowances | $ | 11,622 |
| | $ | 18,494 |
|
Intangible Assets | 6,065 |
| | 6,998 |
|
Net operating losses | 6,679 |
| | 6,176 |
|
Accrued liabilities and other | 4,573 |
| | 3,670 |
|
Receivables | 1,034 |
| | 1,115 |
|
Hedging and derivatives | 541 |
| | 1,085 |
|
Stock-based compensation | 845 |
| | 863 |
|
Other | 1,060 |
| | 778 |
|
Total deferred tax assets | 32,419 |
| | 39,179 |
|
Valuation allowances | (8,968 | ) | | (8,853 | ) |
Deferred tax assets, net of valuation allowances | $ | 23,451 |
| | $ | 30,326 |
|
| | | |
Deferred tax liabilities: | | | |
Property and equipment | $ | (29,942 | ) | | $ | (36,141 | ) |
Senior convertible notes | (2,462 | ) | | (5,320 | ) |
Total deferred tax liabilities | $ | (32,404 | ) | | $ | (41,461 | ) |
| | | |
Net deferred tax liability | $ | (8,953 | ) | | $ | (11,135 | ) |
As of January 31, 2017, the Company had accumulated undistributed earnings in non-U.S. subsidiaries of $1.5 million. The Company has concluded that such earnings are to be reinvested outside of the United States indefinitely. Accordingly, the Company has not recorded a deferred tax liability associated with these undistributed earnings. The Company estimates that the additional U.S. income taxes to be paid upon the repatriation of these undistributed earnings would be approximately $0.6 million.
As of January 31, 2017, the Company has recorded $23.4 million of net operating loss carryforwards within certain of its foreign jurisdictions; $19.0 million of net operating loss carryforwards are within jurisdictions with indefinite carryforward periods, while the remaining $4.4 million of net operating loss carryforwards expire at various dates between the Company's fiscal years 2018 and 2022. As of January 31, 2017, the Company has recorded $40.4 million of net operating loss carryforwards within certain of its state jurisdictions which expire at various dates between the Company's fiscal years 2031 and 2037.
In reviewing our deferred tax assets as of January 31, 2017 and 2016, we concluded that a partial valuation allowance for U.S. federal and state deferred tax assets was warranted. In total, we recognized a valuation allowance of $3.9 million and $2.4 million as of January 31, 2017 and 2016. In addition, as of January 31, 2017 and 2016, we concluded that a valuation allowance for certain of our foreign deferred tax assets, including net operating losses, was warranted in the amount of $5.1 million and $6.5 million. The recognition of the valuation allowance for our U.S. deferred tax assets was based on the presence of historical losses and our expected future sources of taxable income, including taxable income in prior carryback years and the anticipated future reversal of our existing deferred tax assets and liabilities. The valuation allowance for our foreign deferred tax assets was based on the presence of historical losses and the anticipated time period over which we may generate taxable income in excess of these historical losses.
The Company files income tax returns in the U.S. federal jurisdiction and various states and foreign countries. It is no longer subject to income tax examinations by U.S. federal tax authorities for fiscal years ended on or prior to January 31, 2013 and state tax authorities for fiscal years ended on or prior to January 31, 2012. Due to the short period of time in which the Company has had operations in foreign jurisdictions, all tax years are open for income tax examinations for these entities.
The Company's Ukrainian and Austrian subsidiaries are under audit for calendar years 2012 through 2015. The Company is also under audit in the U.S. federal jurisdiction for the 2016 fiscal year.
As of January 31, 2017, the Company has recorded a liability for unrecognized tax benefits of $0.2 million. The liability was recorded as a reduction in the Company's deferred tax assets related to its net operating losses. If recognized, the entire $0.2 million of unrecognized tax benefits would affect the Company's effective tax rate. As of January 31, 2017, the Company had accumulated accrued interest and penalties of $0.2 million, and for the year ended January 31, 2017, the Company recognized $0.1 million in interest and penalties in its provision (benefit) for income taxes. The Company had no unrecognized tax benefits as of January 31, 2016 and January 31, 2015.