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INCOME TAXES | 12 Months Ended
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Dec. 31, 2017
INCOME TAXES [Abstract] |
INCOME TAXES | NOTE 10 - INCOME TAXES The components of income before income taxes were as follows (in thousands):
|  | Years Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Domestic |  | $ | 13,183 |  |  | $ | 11,079 |  |  | $ | (42,179 | )
Foreign |  |  | 3,709 |  |  |  | (1,405 | ) |  |  | 3,259 |
Total income before taxes |  | $ | 16,892 |  |  | $ | 9,674 |  |  | $ | (38,920 | )
The provision for income taxes consisted of the following (in thousands):
|  | Years Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Current - |  |  |  |  |  |  |  |  |
Federal |  | $ | 1,400 |  |  | $ | (902 | ) |  | $ | 5,182 |
State |  |  | 698 |  |  |  | 136 |  |  |  | 1,499 |
Foreign |  |  | 2,092 |  |  |  | 602 |  |  |  | 2,493 |
|  |  | 4,190 |  |  |  | (164 | ) |  |  | 9,174 |
Deferred - |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 686 |  |  |  | 4,174 |  |  |  | (7,090 | )
State |  |  | (464 | ) |  |  | 120 |  |  |  | - |
Foreign |  |  | (4,049 | ) |  |  | (1,607 | ) |  |  | (1,934 | )
|  |  | (3,827 | ) |  |  | 2,687 |  |  |  | (9,024 | )
|  | $ | 363 |  |  | $ | 2,523 |  |  | $ | 150 |
The difference between income taxes computed at the federal statutory income tax rate (35%) and the provision for income taxes is as follows (in thousands):
|  | Years Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Income taxes computed at federal statutory rate |  | $ | 5,912 |  |  | $ | 3,386 |  |  | $ | (13,622 | )
State income taxes, net of federal benefit |  |  | 152 |  |  |  | 166 |  |  |  | 974 |
Non-tax deductible impairment expense computed at federal statutory rate |  |  | - |  |  |  | - |  |  |  | 15,765 |
Foreign adjustment |  |  | 255 |  |  |  | 140 |  |  |  | 689 |
Meals and entertainment |  |  | 422 |  |  |  | 361 |  |  |  | 620 |
Gain on sale of Vertex |  |  | - |  |  |  | (1,971 | ) |  |  | - |
Domestic Production Activity Deduction |  |  | (98 | ) |  |  | - |  |  |  | (1,143 | )
Research and development tax credit |  |  | (641 | ) |  |  | (886 | ) |  |  | (1,730 | )
Foreign tax credit |  |  | - |  |  |  | (383 | ) |  |  | (921 | )
Valuation Allowance |  |  | (791 | ) |  |  | - |  |  |  | - |
Tax Reform Deferred Tax Remeasurement |  |  | (1,294 | ) |  |  | - |  |  |  | - |
Canadian Acquisition Deferred Tax Liability True Up |  |  | (2,180 | ) |  |  | - |  |  |  | - |
Foreign rate difference |  |  | (297 | ) |  |  | 112 |  |  |  | (261 | )
Other |  |  | (1,077 | ) |  |  | 1,598 |  |  |  | (221 | )
|  | $ | 363 |  |  | $ | 2,523 |  |  | $ | 150 |
Deferred tax liabilities and assets were comprised of the following (in thousands):
|  | December 31, |
|  | 2017 |  |  | 2016 |
Deferred tax assets: |  |  |  |  |  |
Goodwill |  | $ | 2,668 |  |  | $ | 4,029 |
Allowance for doubtful accounts |  |  | 1,707 |  |  |  | 2,469 |
Inventories |  |  | 2,365 |  |  |  | 3,944 |
Accruals |  |  | (61 | ) |  |  | 97 |
Research and development credit carryforward |  |  | 1,115 |  |  |  | 886 |
Foreign Tax Credit Carryforward |  |  | 64 |  |  |  | 64 |
Charitable Contribution Carryforward |  |  | 559 |  |  |  | 138 |
Net operating loss carryforward |  |  | 136 |  |  |  | 760 |
Capital loss carryforward |  |  | 12,225 |  |  |  | 18,903 |
Deferred Compensation |  |  | 475 |  |  |  | 1,881 |
Other Accruals |  |  | 266 |  |  |  | - |
Other |  |  | 65 |  |  |  | 107 |
Total deferred tax assets |  |  | 21,584 |  |  |  | 33,278 |
Less valuation allowance |  |  | (12,220 | ) |  |  | (19,633 | )
Total deferred tax asset, net of valuation Deferred tax liabilities : |  |  | 9,364 |  |  |  | 13,645 |
Intangibles |  |  | (8,695 | ) |  |  | (10,042 | )
Property and equipment |  |  | (6,860 | ) |  |  | (12,762 | )
Unremitted foreign earnings |  |  | (354 | ) |  |  | (354 | )
Cumulative translation adjustment |  |  | (67 | ) |  |  | - |
Other |  |  | (457 | ) |  |  | - |
Net deferred tax liability |  | $ | (7,069 | ) |  | $ | (9,513 | )
At December 31, 2017, the Company had $51.4 million of capital loss carryforward, which will expire in 2021. The Company has recorded a valuation allowance for nearly all of this carryforward amount. The valuation allowance represents a provision for uncertainty as to the realization of the tax benefits of these carryforwards and the deferred tax assets that may not be realized. On December 22, 2017, the Tax Cuts and Jobs Act (“The Act”) was enacted into law. The majority of the provisions signed into law in 2017 do not take effect until January 1, 2018. The Act is a comprehensive tax reform legislation that contains significant changes to corporate taxation. Provisions on the enacted law include a permanent reduction of the corporate income tax rate from 35% to 21%, imposing a mandatory one-time tax on un-repatriated accumulated earnings of foreign subsidiaries, a partial limitation on the deductibility of business interest expense, a limitation on net operating losses to 80% of taxable income each year, a shift of the U.S. taxation of multinational corporations from a tax on worldwide income to a partial territorial system (along with rules that create a new U.S. minimum tax on earnings of foreign subsidiaries), and other related provisions to maintain the U.S. tax base. In accordance with SAB 118 issued by the Securities and Exchange Commission on December 22, 2017, companies are allowed a one year measurement period to complete the accounting related to The Act. Specifically, SAB 118 permits companies to record a provisional amount which can be remeasured during the measurement period due to obtaining, preparing, or analyzing additional information about facts and circumstances that existed as of the enacted date. As a result, we remeasured our net deferred income tax liabilities by a provisional $1.3 million benefit and a corresponding provisional decrease in the net deferred tax liability as of December 31, 2017. We are still in the process of analyzing The Act's impact as permitted under SAB 118. The largest impact to the Company being the remeasurement of deferred taxes due to the U.S. statutory tax rate change. The mandatory repatriation and resulting toll charge on accumulated foreign earnings and profits has limited impact on the Company as unremitted earnings from non-US jurisdictions is minimal. The Company is provisional in its approach and assertion that there is no financial statement impact as of December 31, 2017. Deferred tax liabilities related to intangibles for customer relationships acquired in Canada during 2012 and 2013 were reduced by $2.2 million during the fourth quarter of 2017 to correct the tax rate used to establish the deferred tax liabilities at the dates of acquisition. The Company evaluated the misstatement of each period since these acquisitions were completed and concluded the effects were immaterial. Total deferred tax assets at December 31, 2016 were reduced by an $8.6 million charge recorded during the fourth quarter of 2016 to correct errors of $1.3 million, $2.7 million and $4.6 million which were recorded during 2013, 2014 and 2015, respectively, due to the Company improperly recognizing a deferred tax asset related to cumulative translation adjustment losses. The Company evaluated the misstatement of each period and concluded the effects were immaterial. Therefore, the Company decided to correct the accumulated $8.6 million error in the fourth quarter of 2016. We assessed the materiality of this misstatement and concluded the misstatement was not material to the results of operations or financial condition for the years ended December 31, 2017, 2016 and 2015.

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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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