Income Taxes
Income tax expense (benefit) included in the consolidated statements of operations for the years ended December 31 was as follows (in thousands):
|
| | | | | | | | | | | |
| 2016 | | 2015 | | 2014 |
| (in thousands) |
Continuing operations: | | | | | |
Current: | | | | | |
Federal | $ | — |
| | $ | 15 |
| | $ | 238 |
|
State | — |
| | 148 |
| | 641 |
|
Foreign | (25 | ) | | (23 | ) | | 18 |
|
Total current income tax (benefit) expense | $ | (25 | ) | | $ | 140 |
| | $ | 897 |
|
Deferred: | | | | | |
Federal | $ | (96 | ) | | $ | (16,562 | ) | | $ | (4,008 | ) |
State | 293 |
| | (192 | ) | | 51 |
|
Total deferred income tax expense (benefit) | $ | 197 |
| | $ | (16,754 | ) | | $ | (3,957 | ) |
Total income tax expense (benefit) | $ | 172 |
| | $ | (16,614 | ) | | $ | (3,060 | ) |
The provision for income taxes attributable to loss from continuing operations differed from the amount obtained by applying the federal statutory income tax rate to loss from continuing operations before taxes, as follows:
|
| | | | | | | | | | | |
| 2016 | | 2015 | | 2014 |
| (in thousands) |
Income tax benefit at statutory rate of 35% | $ | (38,135 | ) | | $ | (21,941 | ) | | $ | (3,983 | ) |
Nondeductible expenses | 5,293 |
| | 2,531 |
| | 654 |
|
State taxes, net of federal benefit | — |
| | 60 |
| | 374 |
|
Change in deferred tax valuation allowance | 33,177 |
| | 2,790 |
| | — |
|
Other | (163 | ) | | (54 | ) | | (105 | ) |
| $ | 172 |
| | $ | (16,614 | ) | | $ | (3,060 | ) |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of December 31 were as follows:
|
| | | | | | | |
| 2016 | | 2015 |
| (in thousands) |
Deferred tax assets: | | | |
Net operating loss carryforwards | $ | 52,274 |
| | $ | 30,991 |
|
Foreign tax credits | 796 |
| | 796 |
|
Alternative minimum tax credit | 1,228 |
| | 1,228 |
|
Share-based compensation | 1,062 |
| | 3,568 |
|
Bad debts | 484 |
| | 644 |
|
Other | 2,595 |
| | 3,068 |
|
Total deferred tax assets | 58,439 |
| | 40,295 |
|
Less: valuation allowance | (36,762 | ) | | (3,586 | ) |
Total deferred tax assets, net | $ | 21,677 |
| | $ | 36,709 |
|
Deferred tax liabilities: | | | |
Tax over book depreciation | $ | (21,411 | ) | | $ | (30,689 | ) |
Intangible assets | (1,362 | ) | | (6,919 | ) |
Total deferred tax liabilities | (22,773 | ) | | (37,608 | ) |
Net deferred tax liability | $ | (1,096 | ) | | $ | (899 | ) |
During the preparation of its 2016 consolidated financial statements, the Company identified an error in its 2015 deferred tax analysis. The Company has corrected the 2015 tax information noted above to reflect an adjustment to reduce deferred income tax assets relating to stock-based compensation by $2.0 million with a similar reduction of the valuation allowance. This adjustment had no impact on the Company's consolidated balance sheet or annual statement of operations, cash flows, or stockholders' equity for any periods presented. The Company has evaluated the impact of this restatement and determined that it was not material. See Note 18.
As of December 31, 2016, the Company had federal net operating loss carryforwards of approximately $149.2 million, which will begin to expire in 2028 if not utilized prior to that time. Realization of deferred tax assets associated with net operating loss carryforwards is dependent upon generating sufficient taxable income in the appropriate jurisdiction prior to their expiration. The existence of reversing taxable temporary differences supports the recognition by the Company of deferred tax assets. It is not more likely than not that those deferred tax assets would be realized due to the Company's lack of earnings history. Therefore, a valuation allowance in the amount of $0.8 million was established as of December 31, 2014, and increased by approximately $2.8 million during 2015 and by approximately $33.2 million during 2016.
Deferred taxes have not been recognized on undistributed earnings of foreign subsidiaries since these amounts were not material at December 31, 2016 and 2015.
The Company files U.S. federal, U.S. state, and foreign tax returns, and is generally no longer subject to tax examinations for fiscal years prior to 2011.