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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes |
18. | Income Taxes
The current income tax provision represents the estimated amount of income taxes paid or payable for the year, as well as changes in estimates from prior years. The deferred income tax provision represents the change in deferred tax liabilities and assets. The following table presents the significant components of the provision for income taxes:
|  | Fiscal Year |
(in thousands) |  | 2017 |  |  | 2016 |  |  | 2015 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 12,978 |  |  | $ | (6,920 | ) |  | $ | 20,107 |
State |  |  | 5,292 |  |  |  | 27 |  |  |  | 3,563 |
Total current provision (benefit) |  | $ | 18,270 |  |  | $ | (6,893 | ) |  | $ | 23,670 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (54,232 | ) |  | $ | 39,644 |  |  | $ | 10,638 |
State |  |  | (3,879 | ) |  |  | 3,298 |  |  |  | (230 | )
Total deferred provision (benefit) |  | $ | (58,111 | ) |  | $ | 42,942 |  |  | $ | 10,408 |
Income tax expense (benefit) |  | $ | (39,841 | ) |  | $ | 36,049 |  |  | $ | 34,078 |
The Company’s effective income tax rate, as calculated by dividing income tax expense (benefit) by income before income taxes, was (63.2)% for 2017, 38.9% for 2016 and 34.4% for 2015. The following table provides a reconciliation of income tax expense (benefit) at the statutory federal rate to actual income tax expense (benefit).
|  | Fiscal Year |
|  | 2017 |  |  | 2016 |  |  | 2015 |
(in thousands) |  | Income tax expense |  |  | % pre-tax income |  |  | Income tax expense |  |  | % pre-tax income |  |  | Income tax expense |  |  | % pre-tax income |
Statutory expense |  | $ | 22,052 |  |  |  | 35.0 | % |  | $ | 32,449 |  |  |  | 35.0 | % |  | $ | 34,692 |  |  |  | 35.0 | %
Adjustment for federal tax legislation |  |  | (69,014 | ) |  |  | (109.5 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Meals and entertainment |  |  | 2,771 |  |  |  | 4.4 |  |  |  | 1,879 |  |  |  | 2.0 |  |  |  | 1,666 |  |  |  | 1.7 |
Valuation allowance change |  |  | 2,718 |  |  |  | 4.3 |  |  |  | (689 | ) |  |  | (0.7 | ) |  |  | (1,332 | ) |  |  | (1.3 | )
State income taxes, net of federal benefit |  |  | 2,029 |  |  |  | 3.2 |  |  |  | 3,243 |  |  |  | 3.5 |  |  |  | 3,496 |  |  |  | 3.5 |
Noncontrolling interest – Piedmont |  |  | (1,692 | ) |  |  | (2.7 | ) |  |  | (2,406 | ) |  |  | (2.6 | ) |  |  | (2,261 | ) |  |  | (2.3 | )
Adjustment for uncertain tax positions |  |  | (521 | ) |  |  | (0.8 | ) |  |  | (43 | ) |  |  | - |  |  |  | 51 |  |  |  | 0.1 |
Adjustment for state tax legislation |  |  | - |  |  |  | - |  |  |  | (625 | ) |  |  | (0.7 | ) |  |  | (1,145 | ) |  |  | (1.2 | )
Manufacturing deduction benefit |  |  | - |  |  |  | - |  |  |  | (56 | ) |  |  | (0.1 | ) |  |  | (1,330 | ) |  |  | (1.3 | )
Bargain purchase gain |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (704 | ) |  |  | (0.7 | )
Other, net |  |  | 1,816 |  |  |  | 2.9 |  |  |  | 2,297 |  |  |  | 2.5 |  |  |  | 945 |  |  |  | 0.9 |
Income tax expense (benefit) |  | $ | (39,841 | ) |  | (63.2)% |  |  | $ | 36,049 |  |  |  | 38.9 | % |  | $ | 34,078 |  |  |  | 34.4 | %
The Company’s effective tax rate, as calculated by dividing income tax expense (benefit) by income before income taxes minus net income attributable to noncontrolling interest, was (70.3)% for 2017, 41.8% for 2016 and 36.6% for 2015. On December 22, 2017, the Tax Act was signed into law and significantly reformed the Internal Revenue Code of 1986, as amended. The Tax Act will significantly impact the Company by reducing the federal corporate tax rate from 35% to 21%, effective January 1, 2018, and by allowing expensing of certain capital expenditures. However, the Tax Act limits the deductibility of meals, entertainment expenses and certain executive compensation, imposes limitations on the deductibility of interest expense and eliminates the domestic production activities deduction. As of December 31, 2017, the Company completed its estimate for the tax effects of the enactment of the Tax Act, and as a result, the Company revalued and reduced its net deferred tax liability to the newly enacted corporate tax rate of 21%. The Company recognized an estimated benefit of $69.0 million, primarily as a result of revaluing its net deferred tax liability. This benefit was partially offset by a $2.4 million increase to the valuation allowance as a result of the deductibility of certain deferred compensation based on the current interpretation of the Tax Act. The net benefit of $66.6 million was recorded to income tax expense (benefit) in the 2017 consolidated financial statements. Shortly after the Tax Act was enacted, the Securities and Exchange Commission issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) to address the application of GAAP and direct taxpayers to consider the impact of the Act as “provisional” when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for the change in tax law. In accordance with SAB 118, the Company has recognized the provisional tax impacts, outlined above, related to the re-measurement of its net deferred tax liability. The ultimate impact may differ from the provisional amounts, possibly materially, due to, among other things, the significant complexity of the Tax Act, anticipated additional regulatory guidance or related interpretations that may be issued by the Internal Revenue Service (the “IRS”), changes in accounting standards, legislative actions, future actions by states within the U.S. and changes in estimate, analysis, interpretations and assumptions the Company has made. The amounts recorded to gain (loss) on exchange transactions, gain on sale of business and bargain purchase gain, net of tax on the consolidated statements of operations did not have a significant impact on the effective income tax rate for any periods presented. The Company records liabilities for uncertain tax positions related to certain income tax positions. These liabilities reflect the Company’s best estimate of the ultimate income tax liability based on currently known facts and information. Material changes in facts or information, as well as the expiration of statute and/or settlements with individual tax jurisdictions, may result in material adjustments to these estimates in the future. The Company recognizes potential interest and penalties related to uncertain tax positions in income tax expense (benefit). During 2017, 2016 and 2015, the interest and penalties related to uncertain tax positions recognized in income tax expense (benefit) were not material. In addition, the amount of interest and penalties accrued at December 31, 2017 and January 1, 2017 were not material. The Company had uncertain tax positions, including accrued interest of $2.4 million on December 31, 2017 and $2.9 million on January 1, 2017, all of which would affect the Company’s effective tax rate if recognized. While it is expected the amount of uncertain tax positions may change in the next 12 months, the Company does not expect such change would have a significant impact on the consolidated financial statements. The Company reduced its liability for uncertain tax positions in 2017, 2016 and 2015, primarily as a result of the expiration of applicable statutes of limitation. These reductions resulted in corresponding decreases to income tax expense (benefit). A reconciliation of uncertain tax positions, excluding accrued interest, is as follows:
|  | Fiscal Year |
(in thousands) |  | 2017 |  |  | 2016 |  |  | 2015 |
Gross uncertain tax positions at the beginning of the year |  | $ | 2,679 |  |  | $ | 2,633 |  |  | $ | 2,620 |
Increase as a result of tax positions taken in the current period |  |  | 966 |  |  |  | 687 |  |  |  | 547 |
Reduction as a result of the expiration of the applicable statute of limitations |  |  | (1,359 | ) |  |  | (641 | ) |  |  | (534 | )
Gross uncertain tax positions at the end of the year |  | $ | 2,286 |  |  | $ | 2,679 |  |  | $ | 2,633 |
Deferred income taxes are recorded based upon temporary differences between the financial statement and tax bases of assets and liabilities and available net operating loss and tax credit carryforwards. Temporary differences and carryforwards that comprised deferred income tax assets and liabilities were as follows:
(in thousands) |  | December 31, 2017 |  |  | January 1, 2017 |
Acquisition related contingent consideration |  | $ | 94,055 |  |  | $ | 97,573 |
Deferred compensation |  |  | 27,097 |  |  |  | 44,185 |
Deferred revenue |  |  | 18,704 |  |  |  | - |
Postretirement benefits |  |  | 16,443 |  |  |  | 32,656 |
Accrued liabilities |  |  | 15,523 |  |  |  | 21,666 |
Pension (nonunion) |  |  | 8,303 |  |  |  | 17,381 |
Transactional costs |  |  | 5,733 |  |  |  | 7,155 |
Capital lease agreements |  |  | 3,377 |  |  |  | 5,817 |
Charitable contribution carryover |  |  | 3,770 |  |  |  | 4,409 |
Pension (union) |  |  | 1,922 |  |  |  | 3,162 |
Net operating loss carryforwards |  |  | 1,923 |  |  |  | 2,148 |
Other |  |  | 1,669 |  |  |  | 111 |
Deferred income tax assets |  | $ | 198,519 |  |  | $ | 236,263 |
Less: Valuation allowance for deferred tax assets |  |  | 4,337 |  |  |  | 1,618 |
Net deferred income tax asset |  | $ | 194,182 |  |  | $ | 234,645 |
Intangible assets |  | $ | (154,425 | ) |  | $ | (204,661 | )
Depreciation |  |  | (105,685 | ) |  |  | (134,872 | )
Investment in Piedmont |  |  | (25,895 | ) |  |  | (45,128 | )
Inventory |  |  | (9,781 | ) |  |  | (13,814 | )
Prepaid expenses |  |  | (8,399 | ) |  |  | (6,300 | )
Patronage dividend |  |  | (2,361 | ) |  |  | (4,724 | )
Deferred income tax liabilities |  | $ | (306,546 | ) |  | $ | (409,499 | )
Net deferred income tax liability |  | $ | (112,364 | ) |  | $ | (174,854 | )
The Company’s deferred income tax assets and liabilities are subject to adjustment in future periods based on the Company’s ongoing evaluations of such deferred assets and liabilities and new information available to the Company. Valuation allowances are recognized on deferred tax assets if the Company believes it is more likely than not that some or all of the deferred tax assets will not be realized. The Company believes the majority of the deferred tax assets will be realized due to the reversal of certain significant temporary differences and anticipated future taxable income from operations. The valuation allowance of $4.3 million on December 31, 2017 and $1.6 million on January 1, 2017 was established primarily for certain loss carryforwards and deferred compensation. The increase in the valuation allowance as of December 31, 2017, was a result of the Company’s assessment of its ability to use certain loss carryforwards and the deductibility of certain deferred compensation as a result of the current interpretation of the Tax Act. The reduction in the valuation allowance as of January 1, 2017, was a result of the Company’s assessment of its ability to use certain loss carryforwards. As of December 31, 2017, the Company had $38.8 million of state net operating losses available to reduce future income taxes, which would expire in varying amounts through 2036. The Company utilized all of its federal net operating losses during 2017. Prior tax years beginning in year 2002 remain open to examination by the IRS, and various tax years beginning in year 1998 remain open to examination by certain state tax jurisdictions due to loss carryforwards.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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