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INCOME TAXES | 12 Months Ended
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Dec. 31, 2016
INCOME TAXES |
INCOME TAXES | NOTE E – INCOME TAXES Significant components of the provision or benefit for income taxes for the years ended December 31 were as follows:
|  | 2016 |  | 2015 |  | 2014 |
|  | (in thousands) |
Current provision (benefit): |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (604) |  | $ | 9,156 |  | $ | 18,063 |
State |  |  | (335) |  |  | 165 |  |  | 23 |
Foreign |  |  | 1,052 |  |  | 2,124 |  |  | 1,657 |
|  |  | 113 |  |  | 11,445 |  |  | 19,743 |
Deferred provision (benefit): |  |  |  |  |  |  |  |  |  |
Federal |  |  | 8,161 |  |  | 12,914 |  |  | 1,575 |
State |  |  | 1,354 |  |  | 3,589 |  |  | 3,366 |
Foreign |  |  | 7 |  |  | (68) |  |  | (249) |
|  |  | 9,522 |  |  | 16,435 |  |  | 4,692 |
Total provision for income taxes |  | $ | 9,635 |  | $ | 27,880 |  | $ | 24,435 |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Components of the deferred tax provision or benefit for the years ended December 31 were as follows:
|  | 2016 |  | 2015 |  | 2014 |
|  | (in thousands) |
Amortization, depreciation, and basis differences for property, plant and equipment and other long-lived assets |  | $ | 12,182 |  | $ | 21,098 |  | $ | 3,579 |
Amortization of intangibles |  |  | (3,623) |  |  | (3,184) |  |  | (2,934) |
Changes in reserves for workers’ compensation, third-party casualty, and cargo claims |  |  | 362 |  |  | (674) |  |  | (1,970) |
Revenue recognition |  |  | 1,862 |  |  | 7 |  |  | 361 |
Allowance for doubtful accounts |  |  | (295) |  |  | 307 |  |  | (501) |
Foreign tax credit carryforward utilized |  |  | — |  |  | 434 |  |  | 665 |
Nonunion pension and other retirement plans |  |  | 3,861 |  |  | (234) |  |  | (1,595) |
Deferred compensation plans |  |  | 203 |  |  | 541 |  |  | 350 |
Federal net operating loss carryforwards utilized |  |  | 161 |  |  | 70 |  |  | 4,472 |
State net operating loss carryforwards utilized (generated) |  |  | (304) |  |  | 623 |  |  | 2,812 |
State depreciation adjustments |  |  | (758) |  |  | (657) |  |  | (539) |
Share-based compensation |  |  | (681) |  |  | (621) |  |  | 959 |
Valuation allowance increase (decrease) |  |  | (61) |  |  | 22 |  |  | (696) |
Leases |  |  | (1) |  |  | (969) |  |  | 237 |
Other accrued expenses |  |  | (4,108) |  |  | 1,256 |  |  | (362) |
Other |  |  | 722 |  |  | (1,584) |  |  | (146) |
Deferred tax provision |  | $ | 9,522 |  | $ | 16,435 |  | $ | 4,692 |
Significant components of the deferred tax assets and liabilities at December 31 were as follows:
|  | 2016 |  | 2015 |
|  | (in thousands) |
Deferred tax assets: |  |  |  |  |  |  |
Accrued expenses |  | $ | 53,366 |  | $ | 50,351 |
Pension liabilities |  |  | 4,869 |  |  | 10,797 |
Postretirement liabilities other than pensions |  |  | 9,903 |  |  | 9,552 |
Share-based compensation |  |  | 6,961 |  |  | 6,926 |
Federal and state net operating loss carryovers |  |  | 2,229 |  |  | 2,185 |
Other |  |  | 1,856 |  |  | 2,032 |
Total deferred tax assets |  |  | 79,184 |  |  | 81,843 |
Valuation allowance |  |  | (293) |  |  | (354) |
Total deferred tax assets, net of valuation allowance |  |  | 78,891 |  |  | 81,489 |
Deferred tax liabilities: |  |  |  |  |  |  |
Amortization, depreciation, and basis differences for property, plant and equipment, and other long-lived assets |  |  | 95,248 |  |  | 84,150 |
Intangibles |  |  | 24,715 |  |  | 28,272 |
Revenue recognition |  |  | 5,679 |  |  | 4,176 |
Prepaid expenses |  |  | 5,109 |  |  | 4,503 |
Total deferred tax liabilities |  |  | 130,751 |  |  | 121,101 |
Net deferred tax liabilities |  | $ | (51,860) |  | $ | (39,612) |
Reconciliation between the effective income tax rate, as computed on income before income taxes, and the statutory federal income tax rate for the years ended December 31 is presented in the following table:
|  | 2016 |  | 2015 |  | 2014 |
|  | (in thousands) |
Income tax provision at the statutory federal rate |  | $ | 9,901 |  | $ | 25,457 |  | $ | 24,714 |
Federal income tax effects of: |  |  |  |  |  |  |  |  |  |
State income taxes |  |  | (357) |  |  | (1,314) |  |  | (1,186) |
Nondeductible expenses |  |  | 1,653 |  |  | 1,426 |  |  | 1,239 |
Life insurance proceeds and changes in cash surrender value |  |  | (1,001) |  |  | (110) |  |  | (1,329) |
Dividends received deduction |  |  | (11) |  |  | (3) |  |  | (6) |
Alternative fuel credit |  |  | (1,180) |  |  | (1,141) |  |  | (1,148) |
Increase (decrease) in valuation allowances |  |  | (61) |  |  | 22 |  |  | (696) |
Other(1) |  |  | (1,387) |  |  | (2,267) |  |  | (1,950) |
Federal income tax provision |  |  | 7,557 |  |  | 22,070 |  |  | 19,638 |
State income tax provision |  |  | 1,019 |  |  | 3,754 |  |  | 3,389 |
Foreign income tax provision |  |  | 1,059 |  |  | 2,056 |  |  | 1,408 |
Total provision for income taxes |  | $ | 9,635 |  | $ | 27,880 |  | $ | 24,435 |
Effective tax rate |  |  | 34.1 | % |  | 38.3 | % |  | 34.6 | %
| (1) |  | Includes foreign income tax provision, as presented in this table.
Income taxes paid, excluding income tax refunds, totaled $24.3 million, $39.0 million, and $40.4 million in 2016, 2015, and 2014, respectively. Income tax refunds totaled $32.5 million, $21.3 million, and $11.9 million in 2016, 2015, and 2014, respectively. The tax benefit for exercised options and the tax benefit of dividends on share‑based payment awards, which were reflected in paid‑in capital, were less than $0.1 million for 2016 and 2015 and $0.1 million for 2014. The Company had state net operating loss carryforwards of $29.7 million and state contribution carryforwards of $1.1 million at December 31, 2016. These state net operating loss and contribution carryforwards expire in 5 to 20 years, with the majority of state expirations in 15 or 20 years. As of December 31, 2016 and 2015, the Company had a valuation allowance of $0.3 million related to foreign net operating loss carryforwards, due to the uncertainty of realization. A valuation allowance of $0.7 million relating to foreign tax credit carryforwards was reversed during 2014. Due to increased profitability of the foreign entities and actual and forecasted U.S. income, management concluded that realization of foreign tax credits was more likely than not. Consolidated federal income tax returns filed for tax years through 2012 are closed by the applicable statute of limitations. During 2014, the U.S. Internal Revenue Service (the “IRS”) completed an examination of the tax returns for 2010, 2011, and 2012, resulting in an adjustment of less than $0.1 million. The Company is not under examination by any foreign or state taxing authorities at December 31, 2016. For periods subsequent to the June 15, 2012 acquisition date, Panther has been included in consolidated federal income tax returns filed by the Company and in consolidated or combined state income tax returns in states permitting or requiring consolidated or combined income tax returns for affiliated groups such as the Company and its subsidiaries. For periods prior to the acquisition date, Panther and its subsidiaries filed a consolidated federal income tax return on a stand‑alone basis. The 2009 federal tax return of Panther was examined by the IRS and a report of no change was issued in 2013. Panther’s federal tax returns for years through 2012 are now closed by the statute of limitations. At December 31, 2016, Panther had federal net operating loss carryforwards of approximately $1.7 million from periods ending on or prior to June 15, 2012. State net operating loss carryforwards for the same periods are approximately $6.3 million. Federal net operating loss carryforwards will expire if not used within 15 years. State carryforward periods for Panther vary from 5 to 20 years. For federal tax purposes and for most states, the use of such carryforwards is limited by Section 382 of the Internal Revenue Code (“IRC”). The limitation applies by restricting the amount of net operating loss carryforwards that may be used in individual tax years subsequent to the acquisition date. However, it is not expected that the Section 382 limitation will result in the expiration of net operating loss carryforwards prior to their availability under Section 382. The Company established a reserve for uncertain tax positions of $0.3 million at December 31, 2013, and increased the reserve to $0.7 million at December 31, 2014 as a result of additional credits taken on filed tax returns. The reserve relates to certain credits claimed on amended federal returns for 2009 and 2010 and utilized on the 2013 federal return. No regulations have been issued by the IRS related to the credit and, other than limited guidance issued to another taxpayer whose underlying facts differ from those of the Company, there is no other guidance or case law applicable to the credit, and the Company has no other information on how the IRS may interpret the related statute, the manner of calculation, and how the credit applies in the Company’s circumstances. As a result, the Company does not believe the credit meets the standard for recognition at December 31, 2016 under the applicable accounting standards, and has not adjusted the balance of the reserve from $0.7 million. The statute of limitations for the federal return on which these credits were claimed will expire in the fourth quarter of 2017. The Company established a reserve for uncertain tax positions of less than $0.1 million at December 31, 2016 as a result of research and development credits claimed on the 2015 federal return, due to uncertainty of how the IRS will interpret regulations finalized in the fourth quarter of 2016 that relate to these credits. For 2016 and 2015, interest of less than $0.1 million was paid, and for 2014, no interest was paid, related to federal and state income taxes. Accrued interest on the foreign income tax obligations of less than $0.1 million remained at December 31, 2016. Any interest or penalties related to income taxes are charged to operating expenses.

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