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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Taxes [Abstract] |
Income Taxes | 12. Income Taxes ﻿ Tax Cuts and Jobs Act of 2017 ﻿ On December 22, 2017, the United States enacted tax reform legislation known as the H.R. 1, commonly referred to as the “Tax Cuts and Jobs Act” (the “Tax Act”), resulting in significant modifications to existing law. We have elected to follow the guidance in SEC Staff Accounting Bulletin 118 (“SAB 118”), which provides additional clarification regarding the application of ASC Topic 740 in situations where we do not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act for the reporting period in which the Tax Act was enacted. SAB 118 provides for a measurement period beginning in the reporting period that includes the Tax Act’s enactment date and ending when we have obtained, prepared, and analyzed the information needed in order to complete the accounting requirements but in no circumstances should the measurement period extend beyond one year from the enactment date. We have estimated the accounting for the effects of the Tax Act to be included in our 2017 Consolidated Balance Sheets and Statements of Operations and Comprehensive Income, and, as a result, our financial statements for the year ended December 31, 2017 reflect these effects of the Tax Act as provisional based on a reasonable estimate of the income tax effects. We have recorded a one-time estimated deemed repatriation transition tax resulting in a nominal tax impact to us, based on the interplay of the transition tax and the foreign tax credit. The provisional amount is based on information currently available, including information from our recent acquisition of JOTEC. We continue to gather and analyze information, including historical adjustments to earnings and profits of foreign subsidiaries, in order to complete the accounting for the effects of the estimated transition tax. As a result of the Tax Act, we have also recorded a nominal tax benefit related to the remeasurement of domestic deferred tax assets and liabilities from 35% to 21%. We continue to analyze other impacts of the Tax Act, but the effects based on current information do not have a material impact on the financial statements for the year ended December 31, 2017. We intend to complete the necessary analysis within the measurement period. We expect the impact of the Tax Act may have a material impact on our effective income tax rate in future periods. ﻿ We have provisionally elected to account for the global intangible low-taxed income (“GILTI”) tax in the period in which it is incurred, and therefore, have not provided any provisional deferred tax impacts of GILTI in its consolidated financial statements for the year ended December 31, 2017. ﻿ Income Tax Expense ﻿ Income before income taxes consists of the following (in thousands): ﻿
﻿ |  |  |  |  |  |  |  |
﻿ | 2017 |  | 2016 |  | 2015
﻿Domestic | $ | 5,086 |  | $ | 17,874 |  | $ | 5,701
﻿Foreign |  | (1,525) |  |  | 538 |  |  | 167
﻿Income before income taxes | $ | 3,561 |  | $ | 18,412 |  | $ | 5,868
﻿ Income tax expense consists of the following (in thousands): ﻿
﻿ |  |  |  |  |  |  |  |
﻿ | 2017 |  | 2016 |  | 2015
﻿Current: |  |  |  |  |  |  |  |
﻿Federal | $ | 521 |  | $ | 3,948 |  | $ | 231
﻿State |  | 110 |  |  | 626 |  |  | 142
﻿Foreign |  | 460 |  |  | 353 |  |  | 160
﻿ |  | 1,091 |  |  | 4,927 |  |  | 533
﻿Deferred: |  |  |  |  |  |  |  |
﻿Federal |  | (714) |  |  | 2,836 |  |  | 1,011
﻿State |  | 70 |  |  | (9) |  |  | 319
﻿Foreign |  | (590) |  |  | (120) |  |  | --
﻿ |  | (1,234) |  |  | 2,707 |  |  | 1,330
﻿Income tax (benefit) expense | $ | (143) |  | $ | 7,634 |  | $ | 1,863
﻿ Our income tax (benefit) expense in 2017, 2016, and 2015 included our federal, state, and foreign tax obligations. Our effective income tax rate was approximately -4%, 41%, and 32% for the years ended December 31, 2017, 2016, and 2015, respectively. Our income tax rate for the twelve months ended December 31, 2017 was favorably affected by excess tax benefits on stock compensation and the research and development tax credit, offset by nondeductible transaction costs related to the JOTEC acquisition and nondeductible meals and entertainment expenses. The Company’s income tax rate for the twelve months ended December 31, 2016 was unfavorably impacted by the tax treatment of certain expenses related to the On-X acquisition, which had a larger impact on the tax rate in the first quarter of 2016, and by book/tax basis differences related to the HeRO Sale. Our income tax rate for the twelve months ended December 31, 2015 was favorably affected by the reversal of $869,000 in uncertain tax positions, primarily related to research and development tax credits for which the statute of limitations has expired, partially offset by the expiration of certain state net operating losses and other permanent differences. ﻿ The income tax expense amounts differ from the amounts computed by applying the U.S. federal statutory income tax rate of 34% for the year ended December 31, 2017, 35% for the year ended December 31, 2016, and 34% for the year ended December 31, 2015 to pretax income as a result of the following (in thousands): ﻿
﻿ |  |  |  |  |  |  |  |
﻿ | 2017 |  | 2016 |  | 2015
﻿Tax expense at statutory rate | $ | 1,211 |  | $ | 6,444 |  | $ | 1,995
﻿Increase (reduction) in income taxes resulting from: |  |  |  |  |  |  |  |
﻿Nondeductible transaction costs |  | 1,676 |  |  | 908 |  |  | --
﻿State income taxes, net of federal benefit |  | 212 |  |  | 531 |  |  | 499
﻿Nondeductible loss on unit disposals |  | -- |  |  | 455 |  |  | --
﻿Nondeductible entertainment expenses |  | 258 |  |  | 221 |  |  | 184
﻿Foreign income taxes |  | 364 |  |  | 130 |  |  | 118
﻿Limitation of future deductibility of stock awards |  | 145 |  |  | -- |  |  | --
﻿Provision to return adjustments |  | 96 |  |  | 29 |  |  | 122
﻿State valuation allowance adjustment |  | 54 |  |  | (84) |  |  | (19)
﻿ Impact of Tax Cuts and Jobs Act |  | (255) |  |  | -- |  |  | --
﻿Equity compensation |  | (2,664) |  |  | 135 |  |  | 144
﻿Net change in uncertain tax positions |  | (67) |  |  | (153) |  |  | (869)
﻿Federal tax rate differential |  | (100) |  |  | -- |  |  | --
﻿Foreign tax credit |  | (133) |  |  | (178) |  |  | (92)
﻿Unrealized income on investments |  | (163) |  |  | (111) |  |  | 63
﻿Domestic production activities deduction |  | (174) |  |  | (456) |  |  | (87)
﻿Research and development credit |  | (525) |  |  | (296) |  |  | (281)
﻿Other |  | (78) |  |  | 59 |  |  | 86
﻿Total income tax (benefit) expense | $ | (143) |  | $ | 7,634 |  | $ | 1,863
﻿ Deferred Taxes ﻿ We generate deferred tax assets primarily as a result of write-downs of inventory and deferred preservation costs; accruals for product and tissue processing liability claims; asset impairments; stock compensation, and net operating losses. We acquired significant deferred tax assets, primarily net operating losses, from our acquisitions of JOTEC in 2017, On-X in 2016, Hemosphere in 2012, and Cardiogenesis in 2011. We recorded significant deferred tax liabilities in 2017 and 2016 related to the intangible assets acquired in the JOTEC and On-X acquisitions, respectively. ﻿ The tax effects of temporary differences which give rise to deferred tax assets and liabilities at December 31 are as follows (in thousands): ﻿
﻿ |  |  |  |  |
﻿ | 2017 |  | 2016
﻿Deferred tax assets: |  |  |  |  |
﻿Allowance for bad debts | $ | 101 |  | $ | 208
﻿Inventory and deferred preservation costs write-downs |  | 570 |  |  | 708
﻿Investment in equity securities |  | 36 |  |  | 58
﻿Property |  | -- |  |  | 1,780
﻿Intangible assets |  | 1,306 |  |  | 2,034
﻿Accrued expenses |  | 4,719 |  |  | 4,215
﻿Loss carryforwards |  | 8,369 |  |  | 8,760
﻿Credit carryforwards |  | 771 |  |  | 1,001
﻿Stock compensation |  | 2,213 |  |  | 3,678
﻿Transaction costs |  | -- |  |  | 122
﻿Deferred compensation |  | 1,010 |  |  | 973
﻿UNICAP |  | 390 |  |  | 371
﻿Tax benefit of tax reserves |  | 229 |  |  | 333
﻿Other |  | 402 |  |  | 409
﻿Less valuation allowance |  | (2,469) |  |  | (2,157)
﻿Total deferred tax assets |  | 17,647 |  |  | 22,493
﻿ |  |  |  |  |
﻿ | 2017 |  | 2016
﻿Deferred tax liabilities: |  |  |  |  |
﻿Prepaid items |  | (285) |  |  | (436)
﻿Intangible assets |  | (43,647) |  |  | (21,665)
﻿Property |  | (1,632) |  |  | --
﻿Other |  | (904) |  |  | (399)
﻿Total deferred tax liabilities |  | (46,468) |  |  | (22,500)
﻿ |  |  |  |  |
﻿Total net deferred tax liabilities | $ | (28,821) |  | $ | (7)
﻿ As of December 31, 2017 we maintained a total of $2.5 million in valuation allowances against deferred tax assets, related primarily to state net operating loss carryforwards, and a net deferred tax liability of $28.8 million. As of December 31, 2016 we maintained a total of $2.2 million in valuation allowances against deferred tax assets, related to state net operating loss carryforwards, and a net deferred tax liability of $7,000. ﻿ As of December 31, 2017 we had approximately $3.4 million tax-effected federal net operating loss carryforwards related to the acquisitions of Cardiogenesis and Hemosphere that will begin to expire in 2018, $2.8 million of tax-effected state net operating loss carryforwards, that will begin to expire in 2022, $2.2 million of foreign net operating loss carryforwards related to the acquisition of JOTEC that do not expire, $490,000 in research and development tax credit carryforwards that begin to expire in 2022, and $164,000 in credits from the state of Texas that will fully expire by 2027. ﻿ Uncertain Tax Positions ﻿ A reconciliation of the beginning and ending balances of our uncertain tax position liability, excluding interest and penalties, is as follows (in thousands): ﻿
﻿ |  |  |  |  |  |  |  |
﻿ | 2017 |  | 2016 |  | 2015
﻿Beginning balance | $ | 3,390 |  | $ | 969 |  | $ | 1,437
﻿Increases related to current year tax positions |  | 143 |  |  | 86 |  |  | 103
﻿Increases related to prior year tax positions |  | 1,155 |  |  | 2,668 |  |  | 403
﻿Decreases related to prior year tax positions |  | (106) |  |  | (40) |  |  | (70)
﻿Decreases related to settlements |  | -- |  |  | (66) |  |  | --
﻿Decreases due to the lapsing of statutes of limitations |  | (254) |  |  | (227) |  |  | (904)
﻿Ending balance | $ | 4,328 |  | $ | 3,390 |  | $ | 969
﻿ A reconciliation of the beginning and ending balances of our liability for interest and penalties on uncertain tax positions is as follows (in thousands): ﻿
﻿ |  |  |  |  |  |  |  |
﻿ | 2017 |  | 2016 |  | 2015
﻿Beginning balance | $ | 208 |  | $ | 210 |  | $ | 366
﻿Accrual of interest and penalties |  | 169 |  |  | 92 |  |  | 50
﻿Decreases related to prior year tax positions |  | (62) |  |  | (94) |  |  | (206)
﻿Ending balance | $ | 315 |  | $ | 208 |  | $ | 210
﻿ As of December 31, 2017 our uncertain tax liability, including interest and penalties, of $4.6 million, was recorded as a reduction to deferred tax assets of $146,000, and a non-current liability of $4.5 million on our Consolidated Balance Sheets. The uncertain tax position increase related to prior year tax positions is primarily due to our preliminary analysis of positions taken by JOTEC on tax returns in prior years. As of December 31, 2016 our total uncertain tax liability, including interest and penalties of $3.6 million, was recorded as a reduction to deferred tax assets of $234,000, and a non-current liability of $3.4 million on our Consolidated Balance Sheets, all of which, except for the portion related to interest and penalties, is expected to impact our tax rate when recognized. ﻿ We believe it is reasonably possible that approximately $817,000 of our uncertain tax liability will be recognized in 2018 due to settlement with various taxing authorities and the lapsing of various federal and state statutes of limitations, of this amount approximately $433,000 would affect the tax rate. Other ﻿ Our tax years 2014 through 2016 generally remain open to examination by the major taxing jurisdictions to which we are subject. However, certain returns from years prior to 2014, in which net operating losses and tax credits have arisen, are still open for examination by the tax authorities.

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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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