|
(8) |
Income Taxes |
A summary of income (loss) related to U.S. and non-U.S. operations are as follows (in thousands):
|
|
|
Year Ended December 31, |
|
|||||||||
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Domestic |
|
$ |
28,360 |
|
|
$ |
40,172 |
|
|
$ |
62,781 |
|
|
Foreign |
|
|
(11,219 |
) |
|
|
(767 |
) |
|
|
2,224 |
|
|
Total pre-tax income |
|
$ |
17,141 |
|
|
$ |
39,405 |
|
|
$ |
65,005 |
|
The provision (benefit) for income taxes attributable to income from continuing operations for the years ended December 31 consists of the following (in thousands):
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal |
|
$ |
5,394 |
|
|
$ |
7,432 |
|
|
$ |
19,544 |
|
|
State |
|
|
2,227 |
|
|
|
748 |
|
|
|
4,469 |
|
|
Foreign |
|
|
688 |
|
|
|
284 |
|
|
|
449 |
|
|
|
|
|
8,309 |
|
|
|
8,464 |
|
|
|
24,462 |
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal |
|
|
(14,264 |
) |
|
|
6,521 |
|
|
|
1,183 |
|
|
State |
|
|
(1,113 |
) |
|
|
140 |
|
|
|
(730 |
) |
|
Foreign |
|
|
(3,944 |
) |
|
|
36 |
|
|
|
89 |
|
|
|
|
|
(19,321 |
) |
|
|
6,697 |
|
|
|
542 |
|
|
Total |
|
$ |
(11,012 |
) |
|
$ |
15,161 |
|
|
$ |
25,004 |
|
On December 22, 2017, the Tax Cuts and Jobs Act was signed into law, significantly changing the U.S. tax code by providing for, among other things, lower corporate income tax rates and requiring companies to pay a one-time transition tax on deemed repatriated earnings of foreign subsidiaries. Effective January 1, 2018, the Tax Cuts and Jobs Act permanently reduced the U.S. corporate income tax rate from 35% to 21%. In accordance with U.S. GAAP, the reduction in the enacted rate caused the Company to revalue its ending net deferred tax assets and liabilities and caused the Company to record a provisional tax benefit of $18.2 million in its consolidated financial statements for the year ended December 31, 2017. With respect to the transition tax on deemed repatriated foreign earnings, the Company determined that, based upon information currently available, the transition tax did not have a material impact on its results of operations, financial position or cash flows.
|
(8) |
Income Taxes—continued |
On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”). SAB 118 provides guidance on the accounting for the tax effect of the Tax Cuts and Jobs Act in situations when a company does not have all necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act. SAB 118 allows for a measurement period not to exceed one year from the enactment of the Tax Cuts and Jobs Act for companies to complete their analysis. The Company recognized the provisional impact related to the revaluation of deferred tax assets and liabilities in its December 31, 2017 consolidated financial statements and determined that there was no material impact from the transition tax; however, the ultimate impact may differ materially due to additional analysis, changes in interpretations and assumptions, or additional regulatory guidance that may be issued.
Deferred income tax assets and liabilities at December 31 consist of the following (in thousands):
|
|
|
2017 |
|
|
2016 |
|
||
|
Domestic deferred tax assets: |
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
323 |
|
|
$ |
633 |
|
|
Other assets |
|
|
2,694 |
|
|
|
2,792 |
|
|
Accrued expenses |
|
|
6,622 |
|
|
|
5,384 |
|
|
Total domestic deferred tax assets |
|
$ |
9,639 |
|
|
$ |
8,809 |
|
|
Domestic deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
Prepaid expenses |
|
$ |
1,002 |
|
|
$ |
144 |
|
|
Marketable securities |
|
|
1,153 |
|
|
|
1,613 |
|
|
Intangible assets |
|
|
7,894 |
|
|
|
13,341 |
|
|
Property and equipment |
|
|
31,951 |
|
|
|
41,530 |
|
|
Total domestic deferred tax liabilities |
|
$ |
42,000 |
|
|
$ |
56,628 |
|
|
Net domestic deferred tax liabilities |
|
$ |
32,361 |
|
|
$ |
47,819 |
|
|
Foreign deferred tax assets |
|
|
|
|
|
|
|
|
|
Net operating losses |
|
$ |
3,636 |
|
|
$ |
407 |
|
|
Other assets |
|
|
928 |
|
|
|
164 |
|
|
Valuation allowance - foreign |
|
|
(410 |
) |
|
|
(407 |
) |
|
Total foreign deferred tax asset |
|
$ |
4,154 |
|
|
$ |
164 |
|
|
Net deferred tax liability |
|
$ |
28,207 |
|
|
$ |
47,655 |
|
|
|
|
|
|
|
|
|
|
|
In assessing whether deferred tax assets may be realized in the future, management considers whether it is more likely than not that some portion of such tax assets will not be realized. The deferred tax assets and liabilities were reviewed separately by jurisdictions when measuring the need for valuation allowances. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income (both ordinary income and taxable capital gains) during the periods in which those temporary differences reverse. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Valuation allowances are established when necessary to reduce deferred tax assets when it is more likely than not that a portion or all of the deferred tax assets will not be realized. Based upon the level of historical taxable income, reversal of existing taxable temporary differences, projections for future taxable income over the periods in which the domestic deferred tax assets are expected to reverse, and our ability to generate future capital gains, management believes it is more likely than not that we will realize the benefits of these deductible differences. Thus, no valuation allowance has been established for the domestic deferred tax assets. We had foreign net operating loss carryforward associated with our Mexican subsidiary with a tax effect of $3.2 million as of December 31, 2017. The net operating loss carryforward will expire in 2027. Although realization is not assured, the Company has concluded that it is more likely than not that the deferred tax asset will be fully realized and as such no valuation allowance has been provided. At December 31, 2017, we had foreign net operating loss carryforward associated with our German subsidiary with a tax effect of $0.4 million. Based on the anticipated earnings projections, management has recorded a full valuation allowance for the deferred tax assets associated with this entity.
|
(8) |
Income Taxes—continued |
Income tax expense attributable to income from continuing operations differs from the statutory rates as follows:
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Federal statutory rate |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
Change in tax law |
|
|
-106 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
Non-deductible expense |
|
|
2 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
State, net of federal benefit |
|
|
4 |
% |
|
|
2 |
% |
|
|
4 |
% |
|
Foreign |
|
|
1 |
% |
|
|
1 |
% |
|
|
-1 |
% |
|
Effective tax rate |
|
|
-64 |
% |
|
|
38 |
% |
|
|
38 |
% |
As of December 31, 2017, the total amount of unrecognized tax benefit representing uncertainty in certain tax positions was $0.4 million. These uncertain tax positions are based on recognition thresholds and measurement attributes for the financial statement recognition and measurements of a tax position taken or expected to be taken in a tax return. Any prospective adjustments to our accrual for uncertain tax positions will be recorded as an increase or decrease to the provision for income taxes and would impact our effective tax rate. At December 31, 2017, there are no positions for which it is reasonably possible that the total amounts of unrecognized tax benefits would significantly increase or decrease within 12 months. As of December 31, 2017, the amount of accrued interest and penalties was $0.1 million and $0.1 million, respectively.
The changes in our gross unrecognized tax benefits during the years ended December 31 are as follows (in thousands):
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Unrecognized tax benefit – beginning of year |
|
$ |
416 |
|
|
$ |
333 |
|
|
$ |
414 |
|
|
Increases related to prior year tax positions |
|
|
22 |
|
|
|
24 |
|
|
|
42 |
|
|
Increases related to current year tax positions |
|
|
9 |
|
|
|
95 |
|
|
|
6 |
|
|
Decreases related to prior year tax positions |
|
|
(80 |
) |
|
|
(36 |
) |
|
|
(129 |
) |
|
Unrecognized tax benefit – end of year |
|
$ |
367 |
|
|
$ |
416 |
|
|
$ |
333 |
|