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INCOME TAXES | 12 Months Ended
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Dec. 31, 2019
INCOME TAXES |
INCOME TAXES | ​ NOTE E – INCOME TAXES ​ On December 22, 2017, H.R. 1/Public Law 115-97 which includes tax legislation titled Tax Cuts and Jobs Act (the “Tax Reform Act”) was signed into law. Effective January 1, 2018, the Tax Reform Act reduced the U.S. federal corporate tax rate from 35% to 21%. As a result of the Tax Reform Act, the Company recorded a provisional reduction of net deferred income tax liabilities of $24.5 million at December 31, 2017, pursuant to the provisions of ASC Topic 740, Income Taxes, which requires the impact of tax law changes to be recognized in the period in which the legislation is enacted. An additional reduction of net deferred income tax liabilities of $3.8 million was recognized in 2018 related to the reversal of temporary differences through the Company’s fiscal tax year end of February 28, 2018. As of December 31, 2018, the accounting for the income tax effect of the Tax Reform Act was complete, and all amounts recorded were considered final. ​ In addition to the effect on net deferred tax liabilities, the Company recorded a reduction in current income tax expense of $0.1 million and $1.3 million at December 31, 2018 and 2017, respectively, as a result of the Tax Reform Act, to reflect the Company’s application of a blended rate due to the use of a fiscal year rather than a calendar year for U.S. income tax filing. Due to the fact that the Company’s fiscal tax year included the effective date of the rate change under the Tax Reform Act, taxes are required to be calculated by applying a blended rate to the taxable income for the current taxable year ending February 28, 2018. The blended rate is calculated based on the ratio of days in the fiscal year prior to and after the effective date of the rate change. In computing total tax expense for the twelve months ended December 31, 2017, a 35% federal statutory rate was applied to the two months ended February 28, 2017, and a blended rate of 32.74% was applied to the ten months ended December 31, 2017. In computing total tax expense for the twelve months ended December 31, 2018, a federal blended rate of 32.74% was applied to the two months ended February 28, 2018, and a 21% federal statutory rate was applied to the ten months ended December 31, 2018. ​ The Tax Reform Act made many other changes in the tax law applicable to corporations, including the one-time transition tax on earnings of foreign subsidiaries, the tax on global intangible low-taxed income, and the tax on base erosion payments. At December 31, 2019, the Company has determined these provisions of the Tax Reform Act will not have a significant impact on the Company’s consolidated financial statements. ​ Additional tax law changes occurred in December 2019 which had an impact on the 2019 tax provision. The nature and effect of these 2019 changes are described in the reconciliation of the effective tax rate and the statutory tax rate below. ​ Significant components of the provision or benefit for income taxes for the years ended December 31 were as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2019 |  | 2018(1) |  | 2017(1) |
​ | ​ | (in thousands, except percentages) |
Current provision (benefit): |  | ​ |  |  | ​ |  |  | ​ |  | ​
Federal | ​ | $ | 2,202 | ​ | $ | 9,750 | ​ | $ | (1,969) | ​
State | ​ |  | 1,813 | ​ |  | 3,264 | ​ |  | 3,701 | ​
Foreign | ​ |  | 2,060 | ​ |  | 2,238 | ​ |  | 331 | ​
​ | ​ |  | 6,075 | ​ |  | 15,252 | ​ |  | 2,063 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deferred provision (benefit): | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Federal | ​ |  | 4,196 | ​ |  | 1,157 | ​ |  | (9,312) | ​
State | ​ |  | 1,221 | ​ |  | 737 | ​ |  | (867) | ​
Foreign | ​ |  | (6) | ​ |  | (22) | ​ |  | (34) | ​
​ | ​ |  | 5,411 | ​ |  | 1,872 | ​ |  | (10,213) | ​
Total provision (benefit) for income taxes | ​ | $ | 11,486 | ​ | $ | 17,124 | ​ | $ | (8,150) | ​
(1) | For 2018 and 2017, the income tax provision (benefit) reflects the impact of the Tax Reform Act, as previously disclosed in this Note. Deferred income tax liabilities were reduced by $3.8 million and $24.5 million for 2018 and 2017, respectively, as a result of the decrease in the U.S. corporate statutory tax rate from 35% to 21% effective January 1, 2018. Current tax expense was reduced by $0.1 million and $1.3 million for 2018 and 2017, respectively, as a result of the tax law change and the Company’s application of a blended rate due to the use of a fiscal year other than the calendar year for U.S. income tax filing purposes.
​ 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: ​ ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2019(1) | ​ | 2018(1)(2) | ​ | 2017(1)(2) |
​ | ​ | (in thousands) |
Amortization, depreciation, and basis differences for property, plant and equipment and other long-lived assets |  | $ | 16,255 |  | $ | 23,153 |  | $ | 21,876 | ​
Amortization of intangibles and impairment | ​ |  | (6,933) | ​ |  | (763) | ​ |  | (1,030) | ​
Changes in reserves for workers’ compensation, third-party casualty, and cargo claims | ​ |  | (1,880) | ​ |  | 469 | ​ |  | (812) | ​
Revenue recognition | ​ |  | (1,437) | ​ |  | (2,524) | ​ |  | 332 | ​
Allowance for doubtful accounts | ​ |  | 541 | ​ |  | (115) | ​ |  | (719) | ​
Nonunion pension and other retirement plans | ​ |  | 564 | ​ |  | (2,810) | ​ |  | (1,977) | ​
Multiemployer pension fund withdrawal(3) | ​ | ​ | 150 | ​ | ​ | (5,818) | ​ | ​ | — | ​
Federal and state net operating loss carryforwards utilized | ​ |  | 59 | ​ |  | 746 | ​ |  | 257 | ​
State depreciation adjustments | ​ |  | (1,302) | ​ |  | (1,761) | ​ |  | (1,244) | ​
Share-based compensation | ​ |  | (709) | ​ |  | (529) | ​ |  | 352 | ​
Valuation allowance increase (decrease) | ​ |  | 383 | ​ |  | (744) | ​ |  | 401 | ​
Other accrued expenses | ​ |  | (699) | ​ |  | (4,881) | ​ |  | (852) | ​
Impact of the Tax Reform Act(2) | ​ | ​ | — | ​ | ​ | (3,772) | ​ | ​ | (24,542) | ​
Prepaid expenses(4) | ​ | ​ | 1,782 | ​ | ​ | 1,313 | ​ | ​ | (1,331) | ​
Operating lease right-of-use assets/liabilities – net(5) | ​ | ​ | (1,049) | ​ | ​ | — | ​ | ​ | — | ​
Other(4) | ​ |  | (314) | ​ |  | (92) | ​ |  | (924) | ​
Deferred tax provision (benefit) | ​ | $ | 5,411 | ​ | $ | 1,872 | ​ | $ | (10,213) | ​
(1) | The components of the deferred tax provision above reflect the statutory U.S. income tax rate in effect for the applicable year, which is 35% for 2017, a blended rate for 2018 (as previously discussed within this Note), and 21% for 2019.
(2) | For 2018 and 2017, the effect of the change in the U.S. corporate tax rate from 35% to 21% in accordance with the Tax Reform Act is reflected as a separate component of the deferred tax provision.
(3) | ABF Freight recorded a multiemployer pension fund withdrawal liability in 2018 resulting from the transition agreement it entered into with the New England Teamsters and Trucking Industry Pension Fund (see Note I).
(4) | Prepaid expenses are presented as a separate component of the deferred tax provision (benefit). Certain reclassifications have been made to the prior period components to conform to the current year presentation.
(5) | Net change in operating lease right-of-use deferred tax assets and liabilities recorded due to the adoption of ASC Topic 842 in 2019.
​ Significant components of the deferred tax assets and liabilities at December 31 were as follows: ​ ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2019 | ​ | 2018 |
​ | ​ | (in thousands) |
Deferred tax assets: |  | ​ |  |  | ​ |  | ​
Accrued expenses | ​ | $ | 41,757 | ​ | $ | 39,885 | ​
Operating lease liabilities(1) | ​ | ​ | 19,726 | ​ | ​ | — | ​
Pension liabilities(2) | ​ |  | — | ​ |  | 1,721 | ​
Supplemental pension liabilities(2) | ​ | ​ | 1,091 | ​ | ​ | 1,033 | ​
Multiemployer pension fund withdrawal(3) | ​ | ​ | 5,546 | ​ | ​ | 5,710 | ​
Postretirement liabilities other than pensions | ​ |  | 5,359 | ​ |  | 7,660 | ​
Share-based compensation | ​ |  | 5,605 | ​ |  | 4,893 | ​
Federal and state net operating loss carryovers | ​ |  | 1,093 | ​ |  | 1,152 | ​
Other | ​ |  | 1,538 | ​ |  | 1,355 | ​
Total deferred tax assets | ​ |  | 81,715 | ​ |  | 63,409 | ​
Valuation allowance | ​ |  | (668) | ​ |  | (53) | ​
Total deferred tax assets, net of valuation allowance | ​ |  | 81,047 | ​ |  | 63,356 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deferred tax liabilities: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Amortization, depreciation, and basis differences for property, plant and equipment, and other long-lived assets | ​ |  | 107,835 | ​ |  | 93,525 | ​
Operating lease right-of-use assets(1) | ​ | ​ | 18,703 | ​ | ​ | — | ​
Intangibles | ​ |  | 7,373 | ​ |  | 14,066 | ​
Revenue recognition | ​ |  | 669 | ​ |  | 1,513 | ​
Prepaid expenses | ​ |  | 4,952 | ​ |  | 3,225 | ​
Total deferred tax liabilities | ​ |  | 139,532 | ​ |  | 112,329 | ​
Net deferred tax liabilities | ​ | $ | (58,485) | ​ | $ | (48,973) | ​
(1) | Operating lease right-of-use assets and liabilities were recorded in 2019 due to the adoption of ASC Topic 842.
(2) | Supplemental pension liabilities are presented as a separate component of deferred tax assets. Certain reclassifications have been made to the prior period components to conform to the current year presentation.
(3) | ABF Freight recorded a multiemployer pension fund withdrawal liability in 2018 resulting from the transition agreement it entered into with the New England Teamsters and Trucking Industry Pension Fund (see Note I).
​ 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: ​ ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2019(1) | ​ | 2018(1) | ​ | 2017(2) |
​ | ​ | (in thousands, except percentages) |
Income tax provision at the statutory federal rate |  | $ | 10,809 |  | $ | 17,721 |  | $ | 18,052 | ​
Federal income tax effects of: | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
State income taxes | ​ |  | (637) | ​ |  | (840) | ​ |  | (992) | ​
Nondeductible expenses(3) | ​ |  | 1,344 | ​ |  | 1,682 | ​ |  | 1,551 | ​
Life insurance proceeds and changes in cash surrender value | ​ |  | (775) | ​ |  | 7 | ​ |  | (927) | ​
Alternative fuel credit | ​ |  | (2,340) | ​ |  | (1,203) | ​ |  | — | ​
Net increase (decrease) in valuation allowances | ​ |  | 382 | ​ |  | (891) | ​ |  | 401 | ​
Net increase (decrease) in uncertain tax positions | ​ | ​ | (20) | ​ | ​ | 933 | ​ | ​ | (720) | ​
Settlement of share-based compensation | ​ | ​ | 388 | ​ | ​ | (649) | ​ | ​ | (1,129) | ​
Impact of the Tax Reform Act on current tax(2) | ​ | ​ | — | ​ | ​ | (52) | ​ | ​ | (1,288) | ​
Impact of the Tax Reform Act on deferred tax(2) | ​ | ​ | — | ​ | ​ | (3,772) | ​ | ​ | (24,542) | ​
Nonunion pension termination expense | ​ | ​ | 1,040 | ​ | ​ | — | ​ | ​ | — | ​
Foreign tax credits generated(3) | ​ | ​ | (2,054) | ​ | ​ | (2,216) | ​ | ​ | (297) | ​
Federal research and development tax credits | ​ | ​ | (1,354) | ​ | ​ | — | ​ | ​ | — | ​
Other(3) | ​ |  | (385) | ​ |  | 187 | ​ |  | (1,390) | ​
Federal income tax provision (benefit) | ​ |  | 6,398 | ​ |  | 10,907 | ​ |  | (11,281) | ​
State income tax provision | ​ |  | 3,034 | ​ |  | 4,001 | ​ |  | 2,834 | ​
Foreign income tax provision | ​ |  | 2,054 | ​ |  | 2,216 | ​ |  | 297 | ​
Total provision (benefit) for income taxes | ​ | $ | 11,486 | ​ | $ | 17,124 | ​ | $ | (8,150) | ​
Effective tax (benefit) rate | ​ |  | 22.3 | % |  | 20.3 | % |  | (15.8) | %
(1) | Amounts in this reconciliation reflect the statutory U.S. income tax rate in effect for the applicable year after the enactment of the Tax Reform Act, which is 21%. The effect of applying a blended rate of 32.74% for the two months ended February 28, 2018, in accordance with the Tax Reform Act, is reflected in separate components of the reconciliation.
(2) | Amounts in this reconciliation reflect the statutory U.S. income tax rate in effect for the applicable year prior to the enactment of the Tax Reform Act, which is 35%. For 2017, the effect of the change in the U.S. corporate tax rate to 21% in accordance with the Tax Reform Act is reflected in separate components of the reconciliation.
(3) | Foreign tax credits generated are presented as a separate component of the federal income tax provision (benefit). Certain reclassifications, including the separate presentation of foreign tax credits, have been made to the prior period components to conform to the current year presentation.
​ Income taxes paid, excluding income tax refunds, totaled $28.1 million, $21.8 million, and $22.7 million in 2019, 2018, and 2017, respectively. Income tax refunds totaled $13.1 million, $18.5 million, and $18.5 million in 2019, 2018, and 2017, respectively. ​ Under ASC Topic 718, Compensation – Stock Compensation, the Company may experience volatility in its income tax provision as a result of recording all excess tax benefits and tax deficiencies in the income statement upon settlement of awards, which occurs primarily during the second quarter of each year except for 2018 when it predominantly occurred in the fourth quarter. The tax rate for 2019 reflects a 0.9% expense, and the 2018 and 2017 rate reflects a benefit of 0.8% and 2.2%, respectively. The tax benefit of dividends on share-based payment awards was less than $0.1 million each for 2019, 2018, and 2017. ​ The Company had state net operating loss carryforwards of $11.7 million and state contribution carryforwards of $0.5 million at December 31, 2019. At December 31, 2018, the Company had a valuation allowance of $0.1 million related to state contribution carryforwards. Due to the utilization of a significant portion of the carryforward in 2019 the valuation allowance was reversed in 2019. At December 31, 2017, the Company established a valuation allowance of $0.7 million related to certain state net operating loss carryforwards set to expire in 5 years. Due to tax-planning strategies a significant portion of the state net operating loss carryforwards were utilized. The valuation allowance of $0.7 million was reversed in 2018. As the Canadian tax rate is now higher than the U.S. tax rate, it is unlikely that foreign tax credit carryforwards will be useable. Thus, the foreign tax credit carryover of $0.7 million at December 31, 2019 is fully reserved by a valuation allowance of $0.7 million. ​ The Company acquired Panther on June 15, 2012. At December 31, 2019, Panther had federal net operating loss carryforwards of approximately $1.2 million from periods ending on or prior to June 15, 2012. Federal net operating loss carryforwards will expire if not used within 12 years. For federal tax purposes, the use of such carryforwards is limited by Section 382 of the Internal Revenue Code (“IRC”). 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. ​ Consolidated federal income tax returns filed for tax years through 2015 are closed by the applicable statute of limitations. The Company is under examination by one state taxing authority at December 31, 2019. The Company is not under examination by foreign taxing authorities at December 31, 2019. ​ At December 31, 2019, 2018, and 2017, the Company had reserves for uncertain tax positions of $0.9 million, $1.0 million, and less than $0.1 million, respectively. A $0.7 million reserve for uncertain tax positions as of December 31, 2017 was related to certain credits taken on amended federal returns. The statute of limitations for the federal return on which these credits were claimed expired in the fourth quarter of 2017, and the reserve was removed at December 31, 2017. The Company also had a reserve for uncertain tax positions of less than $0.1 million at December 31, 2017, and maintained the reserve at December 31, 2018, related to credits taken on a federal return. The statute of limitations for the federal return on which these credits were claimed expired in the fourth quarter of 2019, and the reserve was removed at December 31, 2019. A reserve for uncertain tax positions of $0.9 million was established at December 31, 2018 as a result of certain credits taken on amended federal returns. The statute of limitations for the federal return on which these credits were claimed expires in the first quarter of 2020. ​ For 2019, 2018 and 2017, interest of less than $0.1 million was paid related to foreign and state income taxes. Accrued interest on the foreign income tax obligations of less than $0.1 million remained at December 31, 2019. Any interest or penalties related to income taxes are charged to operating expenses.

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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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