|
12. |
Income Taxes |
Income (loss) before provision (benefit) for income taxes includes the following components:
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
United States |
|
$ |
44,523 |
|
|
$ |
(237,486 |
) |
|
$ |
(94,746 |
) |
|
Foreign |
|
|
4,896 |
|
|
|
(2,080 |
) |
|
|
877 |
|
|
Total |
|
$ |
49,419 |
|
|
$ |
(239,566 |
) |
|
$ |
(93,869 |
) |
The components of the provision (benefit) for income taxes are as follows:
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Federal |
|
$ |
(933 |
) |
|
$ |
(19,056 |
) |
|
$ |
(23,515 |
) |
|
State and local |
|
|
197 |
|
|
|
674 |
|
|
|
359 |
|
|
Foreign |
|
|
1,226 |
|
|
|
907 |
|
|
|
1,396 |
|
|
Subtotal |
|
|
490 |
|
|
|
(17,475 |
) |
|
|
(21,760 |
) |
|
Change in deferred taxes |
|
|
(5,156 |
) |
|
|
(81,966 |
) |
|
|
19,821 |
|
|
Total |
|
$ |
(4,666 |
) |
|
$ |
(99,441 |
) |
|
$ |
(1,939 |
) |
The effective tax rate for 2017 was a provision on income, while 2016 and 2015 were provisions on losses. A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
U.S. statutory rate |
|
35.0% |
|
|
35.0% |
|
|
35.0% |
|
|||
|
Increase (decrease) resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
State income taxes, net |
|
|
(2.3 |
) |
|
|
1.5 |
|
|
|
0.2 |
|
|
Foreign tax rate differential and adjustment |
|
|
(1.2 |
) |
|
|
(0.1 |
) |
|
|
0.1 |
|
|
U.S. statutory depletion |
|
|
(30.2 |
) |
|
|
3.7 |
|
|
|
9.7 |
|
|
Manufacturers' deduction |
|
|
0.0 |
|
|
|
(0.1 |
) |
|
|
(4.0 |
) |
|
Unremitted foreign earnings |
|
|
(2.3 |
) |
|
|
0.2 |
|
|
|
(4.1 |
) |
|
Goodwill impairment |
|
|
0.0 |
|
|
|
0.0 |
|
|
|
(6.2 |
) |
|
Valuation allowance |
|
|
12.4 |
|
|
|
(4.4 |
) |
|
|
(27.6 |
) |
|
Deferred tax impact from Tax Reform |
|
|
4.6 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
Change in valuation allowance from Tax Reform |
|
|
(24.5 |
) |
|
|
0.0 |
|
|
|
0.0 |
|
|
Loss carryback |
|
|
0.0 |
|
|
|
6.6 |
|
|
|
0.0 |
|
|
Other items, net |
|
|
(0.9 |
) |
|
|
(0.9 |
) |
|
|
(1.0 |
) |
|
Effective rate |
|
-9.4% |
|
|
41.5% |
|
|
2.1% |
|
|||
The Tax Act, effective January 1, 2018, establishes a corporate income tax rate of 21%, replacing the current 35% rate, and creates a territorial tax system rather than a worldwide system, which generally eliminates the U.S. federal income tax on dividends from foreign subsidiaries. The transition to a territorial system includes a one-time transition tax on certain unremitted foreign earnings. The Tax Act impacted the Company’s effective tax rate in several ways including a tax benefit of $4,347 for the impact of revaluing deferred taxes and related valuation allowances considering the new corporate income tax rate; a tax benefit of $5,439 for the reversal of the valuation allowance from the repeal of the Alternative Minimum Tax; tax expense of $3,046 for the impact from the one-time transition tax on unremitted foreign earnings; and a tax benefit of $4,269 for the reduction of the deferred tax liability previously established for unremitted foreign earnings for which the Company did not assert permanent reinvestment.
The Company believes the accounting for the impacts of the revaluation of its deferred taxes and related valuation allowances as a result of the new corporate income tax rate are complete, except for changes in estimates that can result from finalizing the filing of its 2017 U.S. income tax return, which are not anticipated to be material, and changes that may be a direct impact of other provisional amounts recorded as a result of the Tax Act. Additionally, the Company believes the accounting for the impact of the reversal of the valuation allowance from the repeal of the Alternative Minimum Tax in accordance with the Tax Act is complete. Other provisions of the Tax Act, while substantially complete for which a reasonable estimate of such effects have been recorded, are considered provisional as certain items may differ, potentially materially, due to further refinement of the calculations, changes in interpretations and assumptions made, and further guidance that may become available, including primarily the one-time transition tax on unremitted foreign earnings. The SEC has provided up to a one-year measurement period for the Company to finalize the accounting for the impacts of the Tax Act.
The difference between the statutory U.S. tax rate and the Company’s effective tax in 2017 is principally due to an increase in the valuation allowance primarily related to federal and state net operating loss carryforwards; tax depletion; and the impact from the Tax Act. The difference between the statutory U.S. tax rate and the Company’s effective tax rate in 2016 is principally due to the benefit from a loss carryback; an increase in the valuation allowance primarily related to federal and state net operating loss carryforwards; and tax depletion. The difference between the statutory U.S. tax rate and the Company’s effective tax rate in 2015 is due to the accrual of deferred taxes on the cumulative amount of foreign unremitted earnings resulting from a change in the Company’s indefinite reinvestment assertion; an increase in the valuation allowance primarily related to U.S. alternative minimum tax credits and U.S. research credits; a goodwill impairment charge for which the Company could not record an income tax benefit; tax depletion; and the manufacturers’ deduction.
Significant components of deferred tax assets and liabilities as of December 31, 2017 and 2016 are as follows:
|
|
|
2017 |
|
|
2016 |
|
||
|
Deferred tax assets |
|
|
|
|
|
|
|
|
|
Accrued expenses |
|
$ |
5,399 |
|
|
$ |
2,771 |
|
|
Inventory |
|
|
601 |
|
|
|
775 |
|
|
Stock compensation |
|
|
13,733 |
|
|
|
18,784 |
|
|
Deferred compensation |
|
|
564 |
|
|
|
1,039 |
|
|
Interest rate derivatives |
|
|
667 |
|
|
|
5,189 |
|
|
Pension |
|
|
2,211 |
|
|
|
3,210 |
|
|
Intangibles |
|
|
6,146 |
|
|
|
11,401 |
|
|
Unremitted foreign earnings |
|
|
1,292 |
|
|
|
- |
|
|
Foreign tax credit carryforwards |
|
|
1,210 |
|
|
|
1,662 |
|
|
Alternative minimum tax credit carryforwards |
|
|
5,439 |
|
|
|
6,509 |
|
|
Research and experimentation tax credit carryforwards |
|
|
616 |
|
|
|
540 |
|
|
Net operating loss carryforwards |
|
|
45,189 |
|
|
|
72,901 |
|
|
Other assets |
|
|
799 |
|
|
|
1,985 |
|
|
Total deferred tax assets before valuation allowance |
|
|
83,866 |
|
|
|
126,766 |
|
|
Valuation allowance |
|
|
(20,220 |
) |
|
|
(21,959 |
) |
|
Total deferred tax assets after valuation allowance |
|
|
63,646 |
|
|
|
104,807 |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities |
|
|
|
|
|
|
|
|
|
Property, plant, and equipment |
|
|
(65,941 |
) |
|
|
(107,089 |
) |
|
Unremitted foreign earnings |
|
|
- |
|
|
|
(905 |
) |
|
Other liabilities |
|
|
(961 |
) |
|
|
(2,626 |
) |
|
Total deferred tax liabilities |
|
|
(66,902 |
) |
|
|
(110,620 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets (liabilities) |
|
$ |
(3,256 |
) |
|
$ |
(5,813 |
) |
The deferred tax assets before valuation allowance in the above table for 2016 does not included a deferred tax asset of $4,249 relating to unrealized stock compensation deductions.
Due to enactment of the Tax Act, the year-end balances of U.S. domestic deferred taxes and valuation allowances were revalued considering the reduced corporate rate of 21%. Additionally, the one-time transition tax on unremitted foreign earnings resulted in a reduction of the deferred tax liability previously established for unremitted foreign earnings, for which the Company did not assert permanent reinvestment.
As of December 31, 2017 and 2016, the Company had deferred tax assets relating to U.S. alternative minimum tax credit carryforwards of $5,439 and $6,509, respectively, foreign tax credit carryforwards of $1,210 and $1,662, respectively, research and experimentation tax credit carryforwards of $616 and $540, respectively, federal net operating loss carryforwards of $36,948 and $72,119, respectively, state net operating loss carryforwards of $6,935 and $4,468, respectively, and foreign net operating loss carryforwards $1,306 and $921, respectively. The U.S. alternative minimum tax credit carryforwards will be utilized or refunded before 2022. The foreign tax credit carryforwards will expire in 2024. The research and development tax credit carryforwards and federal net operating loss carryforwards expire between 2034 and 2036. A majority of the state net operating loss carryforwards expire between 2028 and 2036, while the foreign net operating loss carryforwards expire between 2021 and 2037. The Company has provided a valuation allowance to reduce the carrying value of certain of these deferred tax assets, as management has concluded that, based on available evidence, it is more likely than not that the deferred tax assets will not be fully realized. Please refer to Note 23 regarding the effect of Internal Revenue Code (“IRC”) Sections 382 and 383 on merger-related matters.
The Company or its subsidiaries file income tax returns in the United States, Canada, China, Mexico, and Denmark. The Company is subject to income tax examinations for its U.S. Federal income taxes for the preceding three fiscal years and, in general, is subject to state and local income tax examinations for the same periods. The Company is currently under examination by the Internal Revenue Service for the periods related to 2013 through 2016. The Company has tax years that remain open and subject to examination by tax authorities in the following major taxing jurisdictions: Canada for years after 2012, Mexico for years after 2011, and China and Denmark for years after 2013.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Unrecognized tax benefits balance - January 1 |
|
$ |
3,018 |
|
|
$ |
5,200 |
|
|
$ |
5,327 |
|
|
Increases (decreases) for tax positions in prior years |
|
|
(811 |
) |
|
|
(2,685 |
) |
|
|
(222 |
) |
|
Increases (decreases) for tax positions in current year |
|
|
158 |
|
|
|
503 |
|
|
|
95 |
|
|
Unrecognized tax benefits balance - December 31 |
|
$ |
2,365 |
|
|
$ |
3,018 |
|
|
$ |
5,200 |
|
At December 31, 2017 and 2016, the Company had $2,365 and $3,018, respectively, of unrecognized tax benefits. If the $2,365 were recognized, $1,846 would affect the effective tax rate. Interest and penalties are recorded in provision for income taxes. At December 31, 2017 and 2016, the Company had $1,642 and $1,827, respectively, of accrued interest and penalties related to unrecognized tax benefits recorded.