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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Taxes [Abstract] |
Income Taxes | 10. Income Taxes ﻿ Income Tax Expense ﻿ (Loss) i ncome before income taxes consists of the following (in thousands): ﻿
﻿ |  |  |  |  |  |  |  |
﻿ | 2018 |  | 2017 |  | 2016
﻿Domestic | $ | 4,560 |  | $ | 5,086 |  | $ | 17,874
﻿Foreign |  | (10,951) |  |  | (1,525) |  |  | 538
﻿(Loss) income before income taxes | $ | (6,391) |  | $ | 3,561 |  | $ | 18,412
﻿ Income tax expense consists of the following (in thousands): ﻿
﻿ |  |  |  |  |  |  |  |
﻿ | 2018 |  | 2017 |  | 2016
﻿Current: |  |  |  |  |  |  |  |
﻿Federal | $ | 402 |  | $ | 521 |  | $ | 3,948
﻿State |  | 246 |  |  | 110 |  |  | 626
﻿Foreign |  | 2,009 |  |  | 460 |  |  | 353
﻿ |  | 2,657 |  |  | 1,091 |  |  | 4,927
﻿Deferred: |  |  |  |  |  |  |  |
﻿Federal |  | (2,188) |  |  | (714) |  |  | 2,836
﻿State |  | (154) |  |  | 70 |  |  | (9)
﻿Foreign |  | (3,866) |  |  | (590) |  |  | (120)
﻿ |  | (6,208) |  |  | (1,234) |  |  | 2,707
﻿Income tax (benefit) expense | $ | (3,551) |  | $ | (143) |  | $ | 7,634
﻿ Our income tax (benefit) expense in 2018, 2017, and 2016 included our federal, state, and foreign tax obligations. Our effective income tax rate was a tax benefit of 56% for the year ended December 31, 2018, a tax benefit of 4% for the year ended December 31, 2017, and a tax expense of 41% for the year ended December 31, 2016. Our income tax rate for the year ended December 31, 2018 was affected by excess tax benefits on stock compensation, the research and development tax credit and non-includable income related to the On-X settlement which increased our benefit. These tax benefits were offset by changes in valuation allowances on future tax benefits, and nondeductible entertainment expenses. Our income tax rate for the year 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. Our income tax rate for the year 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 S ale. ﻿ The income tax (benefit) expense amounts differ from the amounts computed by applying the U.S. federal statutory income tax rate of 21% for the year ended December 31, 2018, 34% for the year ended December 31, 2017, and 35% for the year ended December 31, 2016 to pretax income as a result of the following (in thousands): ﻿
﻿ |  |  |  |  |  |  |  |
﻿ | 2018 |  | 2017 |  | 2016
﻿Tax (benefit) expense at statutory rate | $ | (1,340) |  | $ | 1,211 |  | $ | 6,444
﻿Increase (reduction) in income taxes resulting from: |  |  |  |  |  |  |  |
﻿Valuation allowance change |  | 719 |  |  | 54 |  |  | (84)
﻿Nondeductible entertainment expenses |  | 206 |  |  | 258 |  |  | 221
﻿Nondeductible executive compensation |  | 320 |  |  | 145 |  |  | --
﻿Equity compensation |  | (2,081) |  |  | (2,664) |  |  | 135
﻿Research and development credit |  | (557) |  |  | (525) |  |  | (296)
﻿Unrealized income on investments |  | (337) |  |  | (163) |  |  | (111)
﻿Foreign income taxes |  | (250) |  |  | 364 |  |  | 130
﻿ Impact of Tax Cuts and Jobs Act |  | (238) |  |  | (255) |  |  | --
﻿Net change in uncertain tax positions |  | (154) |  |  | (67) |  |  | (153)
﻿State income taxes, net of federal benefit |  | (8) |  |  | 212 |  |  | 531
﻿Nondeductible transaction costs |  | -- |  |  | 1,676 |  |  | 908
﻿Nondeductible loss on unit disposals |  | -- |  |  | -- |  |  | 455
﻿Federal tax rate differential |  | -- |  |  | (100) |  |  | --
﻿Foreign tax credit |  | -- |  |  | (133) |  |  | (178)
﻿Domestic production activities deduction |  | -- |  |  | (174) |  |  | (456)
﻿Other |  | 169 |  |  | 18 |  |  | 88
﻿Total income tax (benefit) expense | $ | (3,551) |  | $ | (143) |  | $ | 7,634
﻿ 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. For 2017, we 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. We 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 and 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. At December 31, 2018 after further analyses of the Tax Act, notices, and regulations issued and proposed by the U.S. Department of the Treasury and the Internal Revenue Service, we have now completed our accounting for all of the enactment-date income tax effects of the Tax Act. As further discussed below, during 2018, certain immaterial adjustments to the provisional amounts recorded at December 31, 2017 are included as a component of income tax expense. ﻿ As of December 31, 2017 we remeasured certain deferred tax assets and liabilities based on the rates at which they were expected to reverse in the future (which was generally from 35% to 21%), which resulted in a nominal provisional amount for 2017. Upon further analysis of certain aspects of the Tax Act and refinement of our calculations during the year ended December 31, 2018, we made immaterial adjustments to our provisional estimate, which are included as a component of income tax expense from continuing operations. ﻿ We 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 deferred tax impacts of GILTI in its consolidated financial statements for the years ended December 31, 2018 and 2017. For the year ending December 31, 2018 our GILTI inclusion was nominal. ﻿ The Tax Act also created a new provision, foreign derived intangible income (“FDII”), whereby certain sales made from the U.S. to overseas markets is taxed at a lower U.S. rate. We are favorably impacted by the new FDII provision and as of December 31, 2018 our FDII deduction was $1.1 million. ﻿ We are also affected by the new interest deductibility rule under the Tax Act. This rule disallows interest expense to the extent it exceeds 30% of a djusted t axable i ncome. For the year ending December 31, 2018 our interest deduction was limited to $4.9 million. The excess interest not deducted in 2018 of $21.1 million can be carried forward indefinitely for use in future years. ﻿ ﻿ Deferred Taxes ﻿ We generate deferred tax assets primarily as a result of net operating losses; excess interest carryforward; accrued compensation; asset impairments; stock compensation, and capital leases. We acquired significant deferred tax assets, primarily net operating losses, from our acquisitions of JOTEC and On-X in 2017 and 2016, respectively. 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): ﻿
﻿ |  |  |  |  |
﻿ | 2018 |  | 2017
﻿Deferred tax assets: |  |  |  |  |
﻿Loss carryforwards | $ | 8,266 |  | $ | 8,369
﻿Excess interest carryforward |  | 4,786 |  |  | --
﻿Accrued expenses |  | 2,723 |  |  | 4,719
﻿Stock compensation |  | 2,138 |  |  | 2,213
﻿Capital Leases |  | 1,824 |  |  | --
﻿Intangible assets |  | 1,316 |  |  | 1,306
﻿Credit carryforwards |  | 939 |  |  | 771
﻿Deferred compensation |  | 778 |  |  | 1,010
﻿UNICAP |  | 404 |  |  | 390
﻿Inventory and deferred preservation costs write-downs |  | 289 |  |  | 570
﻿Tax benefit of tax reserves |  | 217 |  |  | 229
﻿Other |  | 310 |  |  | 539
﻿Less valuation allowance |  | (3,372) |  |  | (2,469)
﻿Total deferred tax assets |  | 20,618 |  |  | 17,647
﻿ |  |  |  |  |
﻿ | 2018 |  | 2017
﻿Deferred tax liabilities: |  |  |  |  |
﻿Intangible assets |  | (39,730) |  |  | (43,647)
﻿Debt costs |  | (2,331) |  |  | --
﻿Property |  | (1,060) |  |  | (1,632)
﻿Prepaid items |  | (477) |  |  | (285)
﻿Other |  | (176) |  |  | (904)
﻿Total deferred tax liabilities |  | (43,774) |  |  | (46,468)
﻿ |  |  |  |  |
﻿Total net deferred tax liabilities | $ | (23,156) |  | $ | (28,821)
﻿ As of December 31, 2018 we maintained a total of $3.4 million in valuation allowances against deferred tax assets, related primarily to state net operating loss carryforwards, and a net deferred tax liability of $23.2 million. As of December 31, 2017 we maintained a total of $2.5 million in valuation allowances against deferred tax assets, related to state net operating loss carryforwards, and a net deferred tax liability of $28.8 million. ﻿ As of December 31, 2018 we had approximately $3.1 million tax-effected federal net operating loss carryforwards related to the acquisitions of Cardiogenesis and Hemosphere that began to expire in 2018, $3.0 million of tax-effected state net operating loss carryforwards, that will begin to expire in 2022, $2.3 million of foreign net operating loss carryforwards, of which $8 32,000 expires in 2025, and the balance has no expiration, $648,000 in research and development tax credit carryforwards that begin to expire in 2022, and $164,000 in credits from the state of Texas that expire in 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): ﻿
﻿ |  |  |  |  |  |  |  |
﻿ | 2018 |  | 2017 |  | 2016
﻿Beginning balance | $ | 4,328 |  | $ | 3,390 |  | $ | 969
﻿Increases related to current year tax positions |  | 368 |  |  | 143 |  |  | 86
﻿Increases related to prior year tax positions |  | 249 |  |  | 1,155 |  |  | 2,668
﻿Decreases related to prior year tax positions |  | -- |  |  | (106) |  |  | (40)
﻿Decreases related to settlements |  | (605) |  |  | -- |  |  | (66)
﻿Decreases due to the lapsing of statutes of limitations |  | (467) |  |  | (254) |  |  | (227)
﻿Increases (decreases) for foreign exchange differences |  | 16 |  |  | -- |  |  | --
﻿Ending balance | $ | 3,889 |  | $ | 4,328 |  | $ | 3,390
﻿ A reconciliation of the beginning and ending balances of our liability for interest and penalties on uncertain tax positions is as follows (in thousands): ﻿
﻿ |  |  |  |  |  |  |  |
﻿ | 2018 |  | 2017 |  | 2016
﻿Beginning balance | $ | 315 |  | $ | 208 |  | $ | 210
﻿Accrual of interest and penalties |  | 161 |  |  | 169 |  |  | 92
﻿Decreases related to prior year tax positions |  | (74) |  |  | (62) |  |  | (94)
﻿Ending balance | $ | 402 |  | $ | 315 |  | $ | 208
﻿ As of December 31, 2018 our uncertain tax liability, including interest and penalties, of $4.3 million, was recorded as a reduction to deferred tax assets of $286,000, and a non-current liability of $4.0 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. The uncertain tax position decrease related to prior year tax positions is primarily due to settlements with the taxing authorities and the lapse of the statute of limitations in various jurisdictions. As of December 31, 2017 our total 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. ﻿ We believe it is reasonably possible that approximately $1.2 million of our uncertain tax liability will be recognized in 2019 due to the lapsing of various federal and state and foreign statutes of limitations, of which substantially all would affect the tax rate. Other ﻿ Our tax years 2015 through 2017 generally remain open to examination by the major taxing jurisdictions to which we are subject. However, certain returns from years prior to 2015, 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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