Income Taxes
The income tax (benefit) provision consists of:
|
| | | | | | | | | | | |
In thousands | Fiscal Year
2017 | | Fiscal Year
2016 | | Fiscal Year
2015 |
Current income tax: | | | | | |
Federal | $ | 5 |
| | $ | 51 |
| | $ | 38 |
|
State | 1,082 |
| | 1,302 |
| | 202 |
|
Deferred income tax: | | | | | |
Federal | (40,044 | ) | | 10,058 |
| | 1,360 |
|
State | 310 |
| | 1,123 |
| | 168 |
|
Income tax (benefit) provision | $ | (38,647 | ) | | $ | 12,534 |
| | $ | 1,768 |
|
Our income tax (benefit) provision differs from the amounts computed by multiplying earnings before income taxes by the statutory federal income tax rate as shown in the following table:
|
| | | | | | | | | | | |
In thousands | Fiscal Year
2017 | | Fiscal Year
2016 | | Fiscal Year
2015 |
Federal income tax provision at statutory rate of 35% | $ | 2,511 |
| | $ | 9,552 |
| | $ | 1,885 |
|
State income tax provision, net of federal income tax | 273 |
| | 1,058 |
| | 211 |
|
Increase (decrease) in deferred tax asset valuation allowance | 769 |
| | 979 |
| | (497 | ) |
Benefit of tax legislation | (42,965 | ) | | — |
| | — |
|
Other, net | 765 |
| | 945 |
| | 169 |
|
Net income tax (benefit) provision | $ | (38,647 | ) | | $ | 12,534 |
| | $ | 1,768 |
|
Effective income tax rate | (538.8 | )% | | 45.9 | % | | 32.8 | % |
The Tax Legislation signed into law on December 22, 2017 makes broad and complex changes to the U.S. tax code including, but not limited to: (1) reducing the U.S. federal rate from 35% to 21%, effective January 1, 2018; (2) eliminating the corporate alternative minimum tax (“AMT”) and changing how the credits can be realized; (3) creating new limitations on deductions for interest expense; (4) changing rules related to limitations of net operating loss (“NOL”) carryforwards, and (5) enhancing and extending through 2026 the option to claim accelerated depreciation deductions on qualified property.
The effects of new legislation are required to be recognized upon enactment. Accordingly, recognition of the tax effects of the legislation is required in the annual period that includes December 22, 2017. The Company recorded a tax benefit of $43.0 million due to a re-measurement of deferred tax assets and liabilities in fiscal year 2017.
Pursuant to the guidance within SAB 118, as of December 30, 2017, the Company recognized the provisional effects of the enactment of the Tax Legislation for which measurement could be reasonably estimated. Although we continue to analyze certain aspects of the new legislation and refine our assessment, the ultimate impact of the legislation may differ from these estimates due to our continued analysis or further regulatory guidance that may be issued as a result of the legislation. Adjustments to the provisional amounts recorded by the Company as of December 30, 2017 that are identified within a subsequent measurement period of up to one year from the enactment date will be included as an adjustment to tax expense from continuing operations in the period the amounts are determined.
The sources of the differences between the financial accounting and tax bases of our assets and liabilities that give rise to the deferred tax assets and deferred tax liabilities and the tax effects of each are as follows:
|
| | | | | | | |
In thousands | As of
December 30, 2017 | | As of
December 31, 2016 |
Deferred tax assets: | | | |
NOL carry-forwards | $ | 6,278 |
| | $ | 3,195 |
|
AMT payment and employment credits | 3,741 |
| | 2,721 |
|
Deferred revenue | 7,643 |
| | 10,751 |
|
Accrued expenses and reserves | 12,934 |
| | 15,193 |
|
Loss on equity and cost method investments | 1,175 |
| | 1,000 |
|
Stock option compensation | 6,606 |
| | 6,489 |
|
Unrealized losses on hedging instruments | 4,130 |
| | 9,180 |
|
Other | 4,222 |
| | 5,171 |
|
Subtotal | 46,729 |
| | 53,700 |
|
Valuation allowances | 1,296 |
| | 1,131 |
|
Total net deferred tax assets | 45,433 |
| | 52,569 |
|
Deferred tax liabilities: | | | |
Depreciation of property and equipment | (38,355 | ) | | (41,872 | ) |
Amortization of intangible assets | (78,329 | ) | | (120,346 | ) |
Other | (2,397 | ) | | (1,629 | ) |
Total deferred tax liabilities | (119,081 | ) | | (163,847 | ) |
Net deferred tax liabilities | $ | (73,648 | ) | | $ | (111,278 | ) |
As of fiscal year end 2017, we had available U.S. federal NOL carry-forwards aggregating to $26.1 million that can be utilized to reduce future federal income taxes. If not utilized, $5.1 million, $3.3 million and $17.7 million of these carry-forward losses expire at the end of fiscal year 2020, fiscal year 2033 and fiscal year 2037, respectively. In addition, we have NOL carry-forwards in varying amounts and with varying expiration dates in various states in which we operate. We believe it is more-likely-than-not that we will realize a tax benefit for these NOL’s in the future.
As of fiscal year end 2017, we also have non-expiring federal and state AMT carry-forward credits and employment credits totaling $3.7 million available to offset certain future taxes.
We have a $0.9 million deferred income tax asset for non-deductible losses that are associated with our equity method non-consolidated affiliate and a $0.3 million deferred income tax asset for capital losses associated with the impairment of a cost method investment. We do not expect to generate significant capital gains from these investments, or other sources, in the near future. Therefore, we believe it is more-likely-than-not that we will not realize a tax benefit for these deferred income tax assets, and accordingly we have established a full valuation allowance for those amounts.
As a result of our utilization of NOL carry-forwards to reduce or eliminate subsequent years’ tax obligations, our federal and a substantial number of our state income tax returns for fiscal years 2001 through 2016 remain open for examination by the tax authorities. We had no uncertain tax positions or unrecognized tax benefits as of fiscal year 2017 and fiscal year 2016.