Note 17. Income Taxes
The components of loss before taxes were as follows:
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
United States |
|
$ |
(18,064 |
) |
|
$ |
(15,585 |
) |
|
$ |
(13,138 |
) |
|
Foreign |
|
|
(1,915 |
) |
|
|
1,054 |
|
|
|
(12,900 |
) |
|
Loss before income taxes |
|
$ |
(19,979 |
) |
|
$ |
(14,531 |
) |
|
$ |
(26,038 |
) |
The provision (benefit) for income taxes consisted of the following:
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||||||||||||||||||||||||||
|
|
|
Current |
|
|
Deferred |
|
|
Total |
|
|
Current |
|
|
Deferred |
|
|
Total |
|
|
Current |
|
|
Deferred |
|
|
Total |
|
|||||||||
|
United States |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(20 |
) |
|
$ |
(20 |
) |
|
Foreign |
|
|
37 |
|
|
|
1 |
|
|
|
38 |
|
|
|
96 |
|
|
|
(29 |
) |
|
|
67 |
|
|
|
95 |
|
|
|
(248 |
) |
|
|
(153 |
) |
|
Provision (benefit) for income taxes |
|
$ |
37 |
|
|
$ |
1 |
|
|
$ |
38 |
|
|
$ |
96 |
|
|
$ |
(29 |
) |
|
$ |
67 |
|
|
$ |
95 |
|
|
$ |
(268 |
) |
|
$ |
(173 |
) |
The net benefit for deferred income taxes for 2016 and 2015 includes approximately $3 and $116, respectively, associated with net operating loss carryforwards.
A reconciliation of the provision (benefit) for income taxes at the United States statutory rate of 34.0% to the effective rate of the Company for the years ended December 31 is as follows:
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
United States statutory rate (34.0%) |
|
$ |
(6,793 |
) |
|
$ |
(4,941 |
) |
|
$ |
(8,853 |
) |
|
Effect of foreign disregarded entity |
|
|
(199 |
) |
|
|
269 |
|
|
|
(2,599 |
) |
|
Effect of intercompany asset transfers |
|
|
(182 |
) |
|
|
(756 |
) |
|
|
(53 |
) |
|
Taxes on foreign operations |
|
|
35 |
|
|
|
(97 |
) |
|
|
648 |
|
|
Net change in valuation allowances |
|
|
8,017 |
|
|
|
5,300 |
|
|
|
9,173 |
|
|
Indebtedness income not subject to income tax |
|
|
(1,208 |
) |
|
|
— |
|
|
|
— |
|
|
Goodwill impairment |
|
|
— |
|
|
|
— |
|
|
|
1,031 |
|
|
Permanent differences and other |
|
|
368 |
|
|
|
292 |
|
|
|
480 |
|
|
Provision (benefit) for income taxes |
|
$ |
38 |
|
|
$ |
67 |
|
|
$ |
(173 |
) |
|
Effective tax rate |
|
|
(0.2 |
)% |
|
|
(0.5 |
)% |
|
|
0.7 |
% |
The components of deferred income tax assets and liabilities consist of the following at December 31:
|
|
|
2017 |
|
|
2016 |
|
||
|
Deferred tax assets |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
311 |
|
|
$ |
554 |
|
|
Inventories |
|
|
1,024 |
|
|
|
705 |
|
|
Accrued expenses and other current liabilities |
|
|
549 |
|
|
|
234 |
|
|
Net operating loss carryforwards |
|
|
22,864 |
|
|
|
23,516 |
|
|
Tax credit carryforwards |
|
|
676 |
|
|
|
676 |
|
|
Other |
|
|
1,495 |
|
|
|
1,305 |
|
|
Valuation allowance |
|
|
(25,690 |
) |
|
|
(25,177 |
) |
|
Total deferred tax assets |
|
|
1,229 |
|
|
|
1,813 |
|
|
Deferred tax liabilities |
|
|
|
|
|
|
|
|
|
Property and equipment |
|
|
689 |
|
|
|
1,243 |
|
|
Other |
|
|
541 |
|
|
|
570 |
|
|
Total deferred tax liabilities |
|
|
1,230 |
|
|
|
1,813 |
|
|
Net deferred tax liabilities* |
|
$ |
1 |
|
|
$ |
— |
|
|
* |
At December 31, 2017, net deferred tax liabilities were reflected in other noncurrent liabilities in the consolidated balance sheet. |
The Tax Act reduces the federal statutory corporate tax rate from 34.0% to 21.0% for the Company’s tax years beginning in 2018, which resulted in the re-measurement of the federal portion of its deferred tax assets and liabilities, and its related valuation allowance against net deferred tax assets, at December 31, 2017, from 34.0% to the new 21.0% tax rate. Refer to Note 1 for further discussion related to the impact of the Tax Act on the Company’s accounting for income taxes at December 31, 2017. On a gross basis, the Tax Act resulted in a reduction to the Company’s deferred tax assets, deferred tax liabilities and valuation allowance of approximately $8,130, $460 and $7,670, respectively.
The Company has provided a valuation allowance for its net deferred tax assets as a result of the Company not generating consistent net operating profits in jurisdictions in which it operates. As such, any benefit from deferred taxes in any of the periods presented has been fully offset by changes in the valuation allowance for net deferred tax assets. The Company continues to assess its future taxable income by jurisdiction based on recent historical operating results, the expected timing of reversal of temporary differences, various tax planning strategies that the Company may be able to enact in future periods, the impact of potential operating changes on the business and forecast results from operations in future periods based on available information at the end of each reporting period. To the extent that the Company is able to reach the conclusion that its net deferred tax assets are realizable based on any combination of the above factors in a single, or in multiple, taxing jurisdictions, a reversal of the related portion of the Company’s existing valuation allowances may occur.
The following table summarizes changes to the Company’s valuation allowances for the years ended December 31:
|
|
|
2017 |
|
|
2016 |
|
||
|
Balance at beginning of period |
|
$ |
25,177 |
|
|
$ |
20,089 |
|
|
Net increases in allowances |
|
|
8,017 |
|
|
|
5,300 |
|
|
Tax Act rate change adjustment |
|
|
(7,670 |
) |
|
|
— |
|
|
Foreign currency translation and other adjustments |
|
|
166 |
|
|
|
(212 |
) |
|
Balance at end of period |
|
$ |
25,690 |
|
|
$ |
25,177 |
|
As a result of the Tax Act, the Company’s accumulated foreign earnings are subject to a one-time deemed repatriation tax in the United States at a rate of either 8.0% or 15.5%. Due to the history of losses associated with the Company’s foreign subsidiaries, the Company does not expect to be liable for any tax associated with the deemed repatriation provisions of the Tax Act, nor has any such tax has been recorded at December 31, 2017.
At December 31, 2017, the Company had approximately $73,644 in net operating loss carryforwards, subject to certain limitations, which expire from 2033 to 2037, and $676 in tax credit carryforwards which expire in 2023, to offset the future taxable income of its United States subsidiary. At December 31, 2017, the Company had approximately $3,832 in net operating loss carryforwards which expire from 2018 through 2026, to offset the future taxable income of its Japanese subsidiary. At December 31, 2017, the Company had approximately $21,487 in net operating loss carryforwards, which do not expire, to offset the future taxable income of its collective German and Italian subsidiaries.
The Company has a liability for uncertain tax positions related to certain capitalized expenses and intercompany transactions. At December 31, 2017 and 2016, the liability for uncertain tax positions was approximately $858 and $754, respectively, and is included in accrued expenses and other current liabilities in the accompanying consolidated balance sheet. At December 31, 2017 and 2016, the Company had an additional liability for uncertain tax positions related to its ExOne GmbH (Germany) subsidiary of approximately $323 and $232, respectively, which was fully offset against net operating loss carryforwards. At December 31, 2017 and 2016, the Company had an additional liability for uncertain tax positions related to its ExOne KK (Japan) subsidiary of approximately $594 and $416, respectively, which were fully offset against net operating loss carryforwards.
A reconciliation of the beginning and ending amount of unrecognized tax benefits at December 31 was as follows:
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Balance at beginning of period |
|
$ |
754 |
|
|
$ |
781 |
|
|
$ |
871 |
|
|
Increases related to current year tax positions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Foreign currency translation adjustments |
|
|
104 |
|
|
|
(27 |
) |
|
|
(90 |
) |
|
Balance at end of period |
|
$ |
858 |
|
|
$ |
754 |
|
|
$ |
781 |
|
The Company includes interest and penalties related to income taxes as a component of the provision (benefit) for income taxes in the accompanying statement of consolidated operations and comprehensive loss.
The Company files income tax returns in the United States, Germany, Italy, Sweden and Japan. The following table summarizes tax years remaining subject to examination for each of the Company’s subsidiaries at December 31, 2017:
|
Jurisdiction |
|
Tax Years Remaining Subject to Examination |
|
|
|
United States |
|
2013-2017 |
|
|
|
Germany |
|
2010-2017 |
|
|
|
Italy |
|
2014-2017 |
|
|
|
Sweden |
|
2015-2017 |
|
|
|
Japan |
|
|
2017 |
|
In July 2017, local taxing authorities in Japan completed their examination of the Company’s ExOne KK subsidiary for the years ended December 31, 2014 through December 31, 2016, resulting in an income tax obligation of approximately $5, which was reflected in the provision (benefit) for income taxes in the accompanying statement of consolidated operations and comprehensive loss. This amount has been settled by the Company with local taxing authorities in Japan.
At December 31, 2017, the Company’s ExOne GmbH (2010-2013) and ExOne Property GmbH (2013) subsidiaries were under examination by local taxing authorities. The Company is unable to reasonably predict an outcome related to this examination, the result of which may be material in a future period to the financial position, results from operations and cash flows of the Company.