INCOME TAXES
U.S. and foreign components of income before income taxes were as follows (in thousands):
|
| | | | | | | | | | | | |
| | Successor |
| | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | July 17, 2014 to December 31, 2014 |
U.S. | | $ | 32,810 |
| | $ | 24,206 |
| | $ | 8,224 |
|
Foreign | | 9,843 |
| | — |
| | — |
|
Income before income taxes | | $ | 42,653 |
| | $ | 24,206 |
| | $ | 8,224 |
|
The components of the provision for income taxes attributable to continuing operations were as follows (in thousands):
|
| | | | | | | | | | | | |
| | Successor |
| | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | July 17, 2014 to December 31, 2014 |
Income tax provision (benefit): | | | | | | |
Current: | | | | | | |
Federal | | $ | 11,354 |
| | $ | 4,914 |
| | $ | 5,224 |
|
State | | 2,345 |
| | 1,166 |
| | 1,388 |
|
International | | — |
| | — |
| | — |
|
Total current | | 13,699 |
| | 6,080 |
| | 6,612 |
|
Deferred: | | | | | | |
Federal | | 1,732 |
| | 6,769 |
| | (2,478 | ) |
State | | 276 |
| | 1,472 |
| | (648 | ) |
International | | (347 | ) | | — |
| | — |
|
Total deferred | | 1,661 |
| | 8,241 |
| | (3,126 | ) |
Total provision | | $ | 15,360 |
| | $ | 14,321 |
| | $ | 3,486 |
|
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 taxes are as follows:
|
| | | | | | | | |
| | Successor |
| | December 31, 2016 | | December 31, 2015 |
Deferred tax assets: | | | | |
Allowance for promotional activity | | $ | 1,160 |
| | $ | 898 |
|
Accrued expenses and other | | 718 |
| | 292 |
|
Inventories | | 787 |
| | 968 |
|
Unrealized losses | | 4,663 |
| | — |
|
Acquisition costs | | — |
| | 141 |
|
Contingent compensation | | 398 |
| | 1,391 |
|
Net operating losses | | 1,290 |
| | — |
|
Stock compensation | | 777 |
| | 29 |
|
Total deferred tax assets | | 9,793 |
| | 3,719 |
|
| | | | |
Deferred tax liabilities: | | | | |
Deferred financing costs | | (1 | ) | | (12 | ) |
Unrealized gains | | (96 | ) | | — |
|
Fixed Assets | | (1,380 | ) | | (559 | ) |
Intangible Assets | | (63,206 | ) | | (8,263 | ) |
Total deferred tax liabilities | | (64,683 | ) | | (8,834 | ) |
Net deferred tax (liabilities) | | $ | (54,890 | ) | | $ | (5,115 | ) |
The Company’s provision for income taxes attributable to continuing operations differs from the expected tax benefit amount computed by applying the statutory federal income tax rate of 35% to income before taxes for the periods presented below primarily as a result of the following:
|
| | | | | | | | | |
| | Successor |
| | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | July 17, 2014 to December 31, 2014 |
Income tax at U.S. statutory rate | | 35.0 | % | | 35.0 | % | | 35.0 | % |
Effect of: | | | | | | |
State taxes, net of federal benefit | | 4.0 | % | | 7.1 | % | | 5.8 | % |
Stock compensation expense | | 2.2 | % | | 4.6 | % | | — | % |
Transaction-related expenses | | 4.8 | % | | 13.0 | % | | — | % |
Remeasurement (gain) loss | | (5.6 | )% | | — | % | | — | % |
Other permanent items | | (0.5 | )% | | (0.5 | )% | | 1.6 | % |
Effect of foreign operations | | (3.9 | )% | | — | % | | — | % |
Income tax provision effective rate | | 36.0 | % | | 59.2 | % | | 42.4 | % |
At December 31, 2016, we had U.S. federal and state net operating losses of $0.3 million from the acquisition of the Tyrrells Group's U.S. subsidiary, which are limited due to IRC Section 382 limitations. These losses are available to offset future U.S. federal and state taxable income and to expire at various times from 2021 to 2035.
At December 31, 2016, we had foreign net operating loss carryforwards of $4.2 million, which are available to offset future foreign taxable income, and do not expire.
In the U.S., tax returns for 2014 and 2015 remain open and subject to examination. In the U.K., tax years ending in 2014 and later remain open and subject to examination. In Australia, tax years ending in 2013 and later remain open and subject to examination. In Germany, tax years ending in 2014 and later remain open and subject to examination.
It is the Company’s intention to indefinitely reinvest all foreign earnings outside the United States, therefore no provision for U.S. federal or state income taxes on those earnings has been recorded. The amount of unrecognized deferred tax liability related to the unremitted earnings is not material.
The Company does not have any uncertain tax positions as of December 31, 2016. The Company's policy is to accrue interest and penalties related to uncertain tax positions as a component of income tax expense. For the periods presented, the Company did not recognize any interest or penalties.