15. INCOME TAXES
The components of loss from continuing operations before income tax provision consist of the following (in thousands):
|
|
|
Year Ended December 31, |
|
|||||||||
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
U.S. operations |
|
$ |
(130,603 |
) |
|
$ |
(305,813 |
) |
|
$ |
(184,524 |
) |
|
Foreign operations |
|
|
34,479 |
|
|
|
12,142 |
|
|
|
14,273 |
|
|
|
|
$ |
(96,124 |
) |
|
$ |
(293,671 |
) |
|
$ |
(170,251 |
) |
The income tax provision from continuing operations consists of the following (in thousands):
|
|
|
Year Ended December 31, |
|
|||||||||
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Current income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal |
|
$ |
(995 |
) |
|
$ |
(216 |
) |
|
$ |
597 |
|
|
U.S. state |
|
|
160 |
|
|
|
181 |
|
|
|
1,042 |
|
|
Foreign |
|
|
8,564 |
|
|
|
4,479 |
|
|
|
4,677 |
|
|
Total current income taxes |
|
|
7,729 |
|
|
|
4,444 |
|
|
|
6,316 |
|
|
Deferred income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal |
|
|
(69,829 |
) |
|
|
(9,893 |
) |
|
|
6,095 |
|
|
U.S. state |
|
|
460 |
|
|
|
(935 |
) |
|
|
919 |
|
|
Foreign |
|
|
920 |
|
|
|
(469 |
) |
|
|
(1,074 |
) |
|
Total deferred income taxes |
|
|
(68,449 |
) |
|
|
(11,297 |
) |
|
|
5,940 |
|
|
Total income tax (benefit) provision |
|
$ |
(60,720 |
) |
|
$ |
(6,853 |
) |
|
$ |
12,256 |
|
The difference between the income tax provision (benefit) derived by applying the U.S. federal statutory income tax rate of 35% and the recognized income tax provision is as follows (in thousands):
|
|
|
Year Ended December 31, |
|
|||||||||
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Income tax benefit derived by applying the U.S. federal statutory income tax rate to loss before income taxes |
|
$ |
(33,643 |
) |
|
$ |
(102,785 |
) |
|
$ |
(59,586 |
) |
|
Add (deduct) the effect of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
State tax benefit, net |
|
|
(1,960 |
) |
|
|
(5,126 |
) |
|
|
(4,996 |
) |
|
Change in state effective tax rates |
|
|
20 |
|
|
|
449 |
|
|
|
(604 |
) |
|
Foreign earnings repatriation |
|
|
190 |
|
|
|
236 |
|
|
|
(622 |
) |
|
Unrecognized tax benefits |
|
|
2,191 |
|
|
|
129 |
|
|
|
1,678 |
|
|
Goodwill impairment |
|
|
— |
|
|
|
38,988 |
|
|
|
— |
|
|
Revaluation of deferred taxes |
|
|
48,529 |
|
|
|
— |
|
|
|
— |
|
|
Reclass of tax expense for gain in OCI |
|
|
(6,982 |
) |
|
|
— |
|
|
|
— |
|
|
Research tax credit |
|
|
(1,124 |
) |
|
|
(489 |
) |
|
|
(758 |
) |
|
Permanent differences and other, net |
|
|
331 |
|
|
|
3,346 |
|
|
|
(2,726 |
) |
|
Foreign rate differential |
|
|
(5,238 |
) |
|
|
(897 |
) |
|
|
5,875 |
|
|
Other |
|
|
(2,202 |
) |
|
|
1,220 |
|
|
|
1,340 |
|
|
Valuation allowance |
|
|
(60,832 |
) |
|
|
58,076 |
|
|
|
72,655 |
|
|
|
|
$ |
(60,720 |
) |
|
$ |
(6,853 |
) |
|
$ |
12,256 |
|
ASC 740-20 requires total income tax expense or benefit to be allocated among continuing operations, discontinued operations, extraordinary items, other comprehensive income and items charged directly to shareholders’ equity. This allocation is referred to as intra-period tax allocation. As a result of the gain recognized in other comprehensive income, the Company is subject to ASC 740-20-45-7 which requires us to record a tax expense to other comprehensive income and a corresponding tax benefit to continuing operations. The amount of income tax benefit recorded as part of continuing operations is limited to the income tax expense from other comprehensive income. Accordingly, the Company has recorded a tax expense of $7.0 million in other comprehensive income and a corresponding income tax benefit from continuing operations.
The components of deferred income tax assets and liabilities are as follows (in thousands):
|
|
|
December 31, 2017 |
|
|
December 31, 2016 |
|
||
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards |
|
$ |
219,488 |
|
|
$ |
308,615 |
|
|
Receivables reserve |
|
|
7,291 |
|
|
|
14,619 |
|
|
Accrued expenses and reserves |
|
|
30,887 |
|
|
|
52,646 |
|
|
Gross deferred tax assets |
|
|
257,666 |
|
|
|
375,880 |
|
|
Valuation allowance |
|
|
(219,365 |
) |
|
|
(286,974 |
) |
|
Net deferred tax assets |
|
|
38,301 |
|
|
|
88,906 |
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
Intangible assets |
|
|
(169,145 |
) |
|
|
(269,196 |
) |
|
Foreign earnings repatriation |
|
|
(6,975 |
) |
|
|
(11,080 |
) |
|
Other |
|
|
(3,346 |
) |
|
|
(9,573 |
) |
|
Gross deferred tax liabilities |
|
|
(179,466 |
) |
|
|
(289,849 |
) |
|
Net deferred tax liabilities |
|
$ |
(141,165 |
) |
|
$ |
(200,943 |
) |
At December 31, 2017, we maintain federal and state net operating loss carryforwards of $894.8 million and $559.2 million, respectively, which expire over a period of 1 to 20 years. Our foreign net operating loss carryforwards of $14.8 million will begin to expire in 2019.
At December 31, 2017 and 2016 we had gross deferred tax assets of $257.7 million and $375.9 million, respectively, which we reduced by valuation allowances of $219.4 million and $287.0 million, respectively.
We do not intend to permanently reinvest the earnings of foreign operations. Accordingly, we recorded a deferred tax (benefit) expense of $0.2 million, $0.2 million and $(0.6) million for the years ended December 31, 2017, 2016 and 2015, respectively, for unrepatriated foreign earnings in those years.
The Company qualifies for a tax holiday in Tunisia. Without the tax holiday, the Company would have tax expense of $1.0 million, $0.5 million and $0.3 million in Tunisia for the years ended December 31, 2017, 2016 and 2015, respectively. The tax incentive will last at least through 2021.
We file income tax returns in U.S. federal, state and foreign jurisdictions. With few exceptions, we are no longer subject to income tax examinations by tax authorities for years before 2012. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating loss or credit carryforward amount.
The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. Accordingly, the Company’s deferred tax assets and liabilities were re-measured to reflect the reduction in the U.S. corporate income tax rate from 35 percent to 21 percent .The re-measurement of the deferred tax assets and liabilities resulted in an income tax expense of $48.5 million, which was offset by a $(118.4) million benefit from the change in the valuation allowance, resulting in a net income tax benefit of $69.9 million that impacted the Company’s effective tax rate. We are still refining our calculations, in particular the potential utilization of indefinite lived deferred tax liabilities as a source of future taxable income when assessing the realizability of indefinite lived deferred assets, which could potentially affect the re-measurement of these balances in a future period.
In December 2017, the Tax Cuts and Jobs Act (the “2017 Act”) was enacted. The 2017 Act includes a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate income tax rate from 35 percent to 21 percent for tax years beginning after December 31, 2017. The 2017 Act also provides for a one-time transition tax on certain foreign earnings and the acceleration of depreciation for certain assets placed in service after September 27, 2017. The 2017 Act also includes prospective changes beginning in 2018, including additional limitations on executive compensation, limitations on the deductibility of interest and capitalization of research and development expenditures. The 2017 Act includes two new U.S. tax base erosion provisions, the global intangible low-taxed income (“GILTI”) provisions and the base-erosion and anti-abuse tax (“BEAT”) provisions.
The 2017 Act provided for a one-time deemed mandatory repatriation of post-1986 undistributed foreign subsidiary earnings and profits (“E&P”) through the year ended December 31, 2017. The Company had an estimated $15.1 million of undistributed foreign E&P subject to the deemed mandatory repatriation. Such amounts are provisional and the Company expects to complete its analysis during the second half of 2018.
The Company also continues to analyze the GILTI and BEAT provisions of the 2017 Tax Act. The Company expects to complete its analysis of these provisions in the second half of 2018.
On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Act. The Company has recognized provisional tax impacts related to the one-time mandatory repatriation of post-1986 E&P and the revaluation of deferred tax assets and liabilities. The provisional amounts have included in its consolidated financial statements for the year ended December 31, 2017. The ultimate impact may differ from these provisional amounts due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the 2017 Act.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):
|
|
|
Year Ended December 31, |
|
|||||||||
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Balance, beginning of year |
|
$ |
14,528 |
|
|
$ |
14,901 |
|
|
$ |
13,905 |
|
|
Additions based on tax positions related to current year |
|
|
2,162 |
|
|
|
1,328 |
|
|
|
922 |
|
|
Additions for tax positions related to prior years |
|
|
1,124 |
|
|
|
191 |
|
|
|
194 |
|
|
Reduction due to lapse of statute of limitations |
|
|
(436 |
) |
|
|
(1,283 |
) |
|
|
(120 |
) |
|
Reductions related to Tax Cuts and Jobs Act |
|
|
(560 |
) |
|
|
— |
|
|
|
— |
|
|
Reductions for settlements of tax positions |
|
|
— |
|
|
|
(609 |
) |
|
|
— |
|
|
Balance, end of year |
|
$ |
16,818 |
|
|
$ |
14,528 |
|
|
$ |
14,901 |
|
To the extent all or a portion of our gross unrecognized tax benefits are recognized in the future, no U.S. federal tax benefit for related state income tax deductions would result due to the existence of a U.S. federal valuation allowance. We anticipate that approximately $1.1 million of uncertain tax positions, each of which are individually immaterial, will decrease in the next twelve months due to the expiration of the statutes of limitations. We have various unrecognized tax benefits totaling approximately $6.0 million, which, if recognized, would impact our effective tax rate in future periods. We recognized interest and penalties of $0.4 million, $0.1 million, and $0.4 million in the years ended December 31, 2017, 2016 and 2015, respectively, which was included as a component of income tax benefit in our Consolidated Statements of Operations. As of December 31, 2017 and 2016, we have $3.2 million and $2.8 million, respectively, accrued for interest and penalties.