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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (“Tax Reform Act”). The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a transition tax on deemed repatriated earnings of foreign subsidiaries. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Reform Act, the Company revalued its ending U.S. net deferred tax liabilities at December 31, 2017 and recognized a provisional $16.2 million tax benefit in the Company’s consolidated statement of operations for the year ended December 31, 2017. The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. The Tax Reform Act provided for a one-time transition tax on post-1986 undistributed foreign subsidiary earnings and profits (“E&P”). The Company recognized a provisional $3.7 million of income tax expense as a result of the transition tax and related repatriation in the Company’s consolidated statement of operations for the year ended December 31, 2017. While the Tax Reform Act provides for a territorial tax system, beginning in 2018, it includes two new U.S. tax base erosion provisions, the global intangible low-taxed income (“GILTI”) provisions and the base-erosion and anti-abuse tax (“BEAT”) provisions. The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company expects that it will be subject to incremental U.S. tax on GILTI income beginning in 2018, due to expense allocations required by the U.S. foreign tax credit rules. The Company has elected to account for GILTI tax in the period in which it is incurred, and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for the year ended December 31, 2017. The BEAT provisions in the Tax Reform Act eliminates the deduction of certain base-erosion payments made to related foreign corporations, and impose a minimum tax if greater than regular tax. The Company does not expect it will be subject to this tax. On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. The Company has recognized the provisional tax impacts related to the one-time transition tax, withholding tax and the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the year ended December 31, 2017. As there is some uncertainty around the grandfathering provisions related to performance-based executive compensation, we have not included a provisional amount for deferred tax assets related to performance-based executive compensation as we believe that all of our plans are grandfathered. Our preliminary estimate of the one-time transition tax and the re-measurement of our deferred tax assets and liabilities is subject to the finalization of management’s analysis related to certain matters, such as developing interpretations of the provisions of the 2017 Tax Reform Act, changes to certain estimates and amounts related to the earnings and profits of certain subsidiaries and the filing of our tax returns, U.S. Treasury regulations, administrative interpretations or court decisions interpreting the 2017 Tax Reform Act may require further adjustments and changes in our estimates. The final determination of the one-time transition tax and the re-measurement of our deferred assets and liabilities will be completed as additional information becomes available, but no later than one year from the enactment of the 2017 Tax Reform Act. The components of income (loss) before taxes from continuing operations consisted of the following for the years ended December 31 (in thousands):
| 2017 |  | 2016 |  | 2015
Domestic | $ | 78,468 |  |  | $ | 37,316 |  |  | $ | 40,176 |
Foreign | (560 | ) |  | 12,667 |  |  | (3,076 | )
Income before taxes from continuing operations | $ | 77,908 |  |  | $ | 49,983 |  |  | $ | 37,100 |
The provision for (benefit of) income taxes from continuing operations for the years ended December 31 consisted of the following (in thousands):
| 2017 |  | 2016 |  | 2015
Current: |  |  |  |  |
U.S. Federal | $ | 16,882 |  |  | $ | 14,703 |  |  | $ | 12,294 |
State | 2,479 |  |  | 2,987 |  |  | 2,010 |
Foreign | 2,687 |  |  | 3,467 |  |  | 1,371 |
Total current | 22,048 |  |  | 21,157 |  |  | 15,675 |
Deferred: |  |  |  |  |
U.S. Federal | (7,466 | ) |  | (5,404 | ) |  | (178 | )
State | 1,246 |  |  | 1,595 |  |  | 273 |
Foreign | (885 | ) |  | (1,084 | ) |  | (2,146 | )
Total deferred | (7,105 | ) |  | (4,893 | ) |  | (2,051 | )
Provision for income taxes | $ | 14,943 |  |  | $ | 16,264 |  |  | $ | 13,624 |
The benefit of income taxes from discontinued operations for the years ended December 31 consisted of the following (in thousands):
| 2017 |  | 2016 |  | 2015
Current: |  |  |  |  |
U.S. Federal | $ | 219 |  |  | $ | 24 |  |  | $ | 15 |
State | 20 |  |  | 2 |  |  | 1 |
Foreign | — |  |  | — |  |  | — |
Benefit of income taxes | $ | 239 |  |  | $ | 26 |  |  | $ | 16 |
The provision for income taxes from continuing operations differs from the federal statutory rate of 35% for the years ended December 31 due to the following (in thousands):
| 2017 |  | 2016 |  | 2015
Statutory rate | $ | 27,268 |  |  | 35.0 | % |  | $ | 17,494 |  |  | 35.0 | % |  | $ | 12,985 |  |  | 35.0 | %
State taxes, less federal effect | 2,442 |  |  | 3.1 | % |  | 3,033 |  |  | 6.1 | % |  | 1,845 |  |  | 5.0 | %
Tax effect of Tax Reform Act | (12,535 | ) |  | (16.1 | )% |  | — |  |  | — | % |  | — |  |  | — | %
Domestic manufacturer's deduction | (1,578 | ) |  | (2.0 | )% |  | (1,363 | ) |  | (2.7 | )% |  | (795 | ) |  | (2.1 | )%
Excess tax benefit on stock based compensation | (1,415 | ) |  | (1.8 | )% |  | — |  |  | — | % |  | — |  |  | — | %
Federal tax credits | (373 | ) |  | (0.5 | )% |  | (439 | ) |  | (0.9 | )% |  | (242 | ) |  | (0.7 | )%
Uncertain tax positions | (148 | ) |  | (0.2 | )% |  | (154 | ) |  | (0.3 | )% |  | (344 | ) |  | (0.9 | )%
Change in valuation allowance | 660 |  |  | 0.8 | % |  | 685 |  |  | 1.4 | % |  | 284 |  |  | 0.7 | %
Non-deductible expenses | 499 |  |  | 0.7 | % |  | 556 |  |  | 1.1 | % |  | 2 |  |  | — | %
Foreign rate differential | 2 |  |  | — | % |  | (677 | ) |  | (1.4 | )% |  | (6 | ) |  | — | %
Intangible asset impairment | — |  |  | — | % |  | 341 |  |  | 0.7 | % |  | — |  |  | — | %
Worthless stock deduction | — |  |  | — | % |  | (868 | ) |  | (1.7 | )% |  | — |  |  | — | %
Intercompany debt discharge | — |  |  | — | % |  | (2,389 | ) |  | (4.8 | )% |  | — |  |  | — | %
Other | 121 |  |  | 0.2 | % |  | 45 |  |  | — | % |  | (105 | ) |  | (0.3 | )%
| $ | 14,943 |  |  | 19.2 | % |  | $ | 16,264 |  |  | 32.5 | % |  | $ | 13,624 |  |  | 36.7 | %
Deferred tax liabilities (assets) at December 31 consist of the following (in thousands):
| 2017 |  | 2016
Depreciation | $ | 9,563 |  |  | $ | 17,367 |
Goodwill | 32,662 |  |  | 43,562 |
Intangible assets | 10,928 |  |  | 14,731 |
Foreign withholding tax | 1,014 |  |  | — |
Other | 652 |  |  | 892 |
Gross deferred tax liabilities | 54,819 |  |  | 76,552 |
Equity compensation | (12,577 | ) |  | (21,439 | )
Other | (13,247 | ) |  | (18,473 | )
Gross deferred tax assets | (25,824 | ) |  | (39,912 | )
Valuation allowances | 2,242 |  |  | 1,362 |
Deferred tax assets, net of valuation allowances | (23,582 | ) |  | (38,550 | )
Net deferred tax liabilities | $ | 31,237 |  |  | $ | 38,002 |
At December 31, 2017, the Company had net operating loss carry forwards for federal, state, and foreign income tax purposes totaling $22.5 million. The federal and state net operating loss carry forwards will expire between 2018 and 2037. The foreign net operating loss carry forwards have an indefinite carry forward period, except for Japan that expires between 2023 and 2026. The Company recognized $3.5 million of deferred tax assets, net of the federal tax benefit, related to these net operating losses prior to any valuation allowances. Deferred taxes include net deferred tax assets relating to certain state and foreign tax jurisdictions. A reduction of the carrying amount of deferred tax assets by a valuation allowance is required if it is more likely than not that such assets will not be realized. The following sets forth a reconciliation of the beginning and ending amount of the Company’s valuation allowance (in thousands):
| 2017 |  | 2016 |  | 2015
Balance as of January 1 | $ | 1,362 |  |  | $ | 766 |  |  | $ | 400 |
Cost charged to the tax provision | 1,505 |  |  | 983 |  |  | 286 |
Reductions | (820 | ) |  | (338 | ) |  | (78 | )
Currency translation | 195 |  |  | (49 | ) |  | — |
Balance as of December 31 | $ | 2,242 |  |  | $ | 1,362 |  |  | $ | 766 |
The Company made net payments for income taxes for the following amounts for the years ended December 31 (in thousands):
| 2017 |  | 2016 |  | 2015
Payments made for income taxes, net | $ | 26,186 |  |  | $ | 17,700 |  |  | $ | 11,879 |
At December 31, 2017, the Company had $27.2 million of undistributed earnings of foreign subsidiaries. The Company expects to execute a one-time repatriation of $24.4 million in cash to the U.S., net of withholding tax. The funds will be used for general corporate purposes. The Company continues to maintain its assertion that all remaining foreign earnings will be indefinitely reinvested. Any excess earnings could be used to grow the Company's foreign operations through launches of new capital projects or additional acquisitions. Determination of the amount of unrecognized deferred U.S. income tax liability related to our remaining unremitted foreign earnings is not practicable due to the complexities associated with its hypothetical calculation. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
| 2017 |  | 2016 |  | 2015
Balance as of January 1 | $ | 3,466 |  |  | $ | 3,876 |  |  | $ | 1,414 |
Additions for tax positions of the current year | 99 |  |  | 33 |  |  | 148 |
Additions for tax positions of prior years | — |  |  | — |  |  | 2,955 |
Reductions for tax positions of prior years for: |  |  |  |  |
Settlements and changes in judgment | (422 | ) |  | (256 | ) |  | (331 | )
Lapses of applicable statute of limitations | — |  |  | — |  |  | (310 | )
Divestitures and foreign currency translation | 393 |  |  | (187 | ) |  | — |
Balance as of December 31 | $ | 3,536 |  |  | $ | 3,466 |  |  | $ | 3,876 |
In 2017 and 2016, the unrecognized tax benefits of $0.3 million and $0.6 million, respectively, would affect the effective tax rate, if recognized as of December 31, 2017 and 2016. $3.2 million and $2.8 million of unrecognized tax benefits related to the acquisition of RBI on June 9, 2015, if recognized would be offset by an equal indemnification asset at December 31, 2017 and 2016. The Company classifies accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company and its U.S. subsidiaries file a U.S. federal consolidated income tax return. Foreign and U.S. state jurisdictions have statute of limitations generally ranging from four to ten years. Currently, the Company is under examination in Germany for 2009 through 2012. The Company's U.S. federal consolidated income tax return remains subject to examination for 2015, 2016 and 2017. Interest (net of federal tax benefit) and penalties recognized during the years ended December 31 were (in thousands):
| 2017 |  | 2016 |  | 2015
Interest and penalties recognized as income | $ | 130 |  |  | $ | 122 |  |  | $ | 87 |

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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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