XML 34 R18.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Note 13 - Taxes on Income | 12 Months Ended
--- | ---
Dec. 31, 2017
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | NOTE 13 – TAXES ON INCOME On December 22, 2017, the Tax Cuts and Jobs Act (the “ Tax Act”) was enacted into law. Among the significant changes resulting from the law, the Tax Act reduces the U.S. federal income tax rate from 35% to 21% effective for the year beginning January 1, 2018 and creates a modified territorial tax system with a one -time mandatory “transition tax” on previously unrepatriated foreign earnings. It also applies restrictions on the deductibility of interest expense, allows for immediate capital expensing of certain qualified property, eliminates the domestic manufacturing deduction, applies a broader application of compensation limitations and creates a new minimum tax on earnings of foreign subsidiaries. The Company is continuing to evaluate the Tax Act and its requirements, as well as its application to its business and its impact on the effective tax rate. In accordance with GAAP as determined by ASC 740, “ Income Taxes,” the Company is required to record the effects of tax law changes in the period enacted. On December 22, 2017, the SEC staff issued guidance to companies 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 Act. As further discussed below, the Company ’s results for the year ended December 31, 2017 contain provisional estimates of the impact of the Tax Act. These amounts are considered provisional because they use reasonable estimates of which tax returns have not been filed and because estimated amounts may be impacted by future regulatory and accounting guidance if and when issued. The Company will adjust these provisional amounts as further information becomes available and as we refine our calculations. As permitted by recent guidance issued by the SEC, these adjustments will occur during a reasonable “measurement period” not to exceed twelve months from the date of enactment. The two material items that impacted the Company in 2017 were the U.S. statutory rate reduction and the one -time transition tax. Impacts of Deemed Repatriation: The Tax Act imposed a one -time transition tax on unrepatriated post- 1986 accumulated earnings and profits of certain foreign subsidiaries (“E&P”). The Company has recorded a provisional tax expense of $11.7 million related to the one -time transition tax. To calculate this tax, the Company must determine the cumulative amount of E&P, as well as the amount of foreign taxes paid on such earnings, among other components of the calculation. The Company computed the amount based on information available to us; however, the Company's calculation of this amount might change with further analysis and further guidance from the U.S. federal and state tax authorities about the application of these new rules. Additionally, the Company may revise this balance during the one -year remeasurement period as a result of amending certain U.S. federal income tax returns; however, the outcome of this is currently unknown, and the Company has made its best estimate of expected, future tax liability as of December 31, 2017. The Company will continue to evaluate the impact of the tax law change as it relates to the accounting for the outside basis difference of its foreign entities. The Company will elect to pay the liability for the deemed repatriation of foreign earnings in installments, as specified by the Tax Act. Remeasurement of Deferred Tax Assets and Liabilities: The Tax Act reduces the U.S. statutory rate from 35% to 21% for years after 2017. Accordingly, U.S. GAAP requires companies to remeasure their deferred tax assets and liabilities as of the date of enactment, with resulting tax effects accounted for in the reporting period of enactment. The Company has recorded a provisional tax expense of $3.5 million related to the remeasurement of its net deferred tax asset. The Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. However, we are still analyzing certain aspects of the Tax Act and refining our calculations, which could potentially affect the measurement of these balances or give rise to new deferred tax amounts. While the Tax Act provides for a modified 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 does not expect that the GILTI income inclusion will result in significant U.S. tax beginning in 2018. The BEAT provisions in the Tax 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 that the BEAT provision will result in significant U.S. tax beginning in 2018. In addition, the Company intends to account for the 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. Provisions for federal, foreign and state income taxes in the consolidated statements of operations consisted of the following components:
|  | FISCAL YEAR |
|  | 2017 |  |  | 2016 |  |  | 2015 |
|  | (in thousands) |
Current expense/(benefit): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 10,245 |  |  | $ | 6,886 |  |  | $ | 1,524 |
Foreign |  |  | 11,923 |  |  |  | 12,934 |  |  |  | 9,279 |
State |  |  | 1,414 |  |  |  | 1,633 |  |  |  | 1,403 |
Current expense |  |  | 23,582 |  |  |  | 21,453 |  |  |  | 12,206 |
Deferred expense/(benefit): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 20,467 |  |  |  | 6,186 |  |  |  | 19,971 |
Foreign |  |  | 1,214 |  |  |  | (1,937 | ) |  |  | 3,795 |
State |  |  | 2,030 |  |  |  | (728 | ) |  |  | (2,624 | )
Deferred expense |  |  | 23,711 |  |  |  | 3,521 |  |  |  | 21,142 |
Total income tax expense |  | $ | 47,293 |  |  | $ | 24,974 |  |  | $ | 33,348 |
Income before taxes on income consisted of the following:
|  | FISCAL YEAR |
|  | 2017 |  |  | 2016 |  |  | 2015 |
|  | (in thousands) |
U.S. operations |  | $ | 53,407 |  |  | $ | 38,357 |  |  | $ | 58,318 |
Foreign operations |  |  | 47,132 |  |  |  | 40,779 |  |  |  | 47,448 |
Income before taxes |  | $ | 100,539 |  |  | $ | 79,136 |  |  | $ | 105,766 |
Deferred income taxes for the years ended December 31, 2017, and January 1, 2017, 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. The Company expects to utilize in its 2017 U.S. federal tax return the remaining portion of its federal net operating loss carryforwards which are all from share-based payment awards of $23.2 million and has recorded a related tax benefit of $8.1 million to retained earnings in accordance with applicable accounting standards. Also, the Company utilized $9.0 million of its federal net operating loss carryforwards in its 2016 U.S. federal tax return which were all from share-based payment awards and recorded a related tax benefit of $3. 2 million to additional paid-in capital in accordance with applicable accounting standards. This amount decreased by $3.1 million compared to the amount recorded in 2016 due to less taxable income realized in its 2016 U.S. federal tax return that was filed in 2017. The Company expects to utilize in its 2017 foreign tax returns the remaining portion of its foreign net operating loss carryforwards of $3.8 million. The Company had approximately $108.6 million in state net operating loss carryforwards relating to continuing operations with expiration dates through 2035. The Company has provided a valuation allowance against $18.5 million of such losses, which the Company does not expect to utilize. During 2017, the Company recorded a tax benefit of $1.3 million to retained earnings related to $21.4 million of the state net operating losses carryforwards that were from share-based payment awards, in accordance with applicable accounting standards. In addition, the Company has approximately $57.3 million in state net operating loss carryforwards relating to discontinued operations against which a full valuation allowance has been provided. The sources of the temporary differences and their effect on the net deferred tax asset are as follows:
|  | 2017 |  |  | 2016 |
|  | ASSETS |  |  | LIABILITIES |  |  | ASSETS |  |  | LIABILITIES |
|  | (in thousands) |
Basis differences of property and equipment |  | $ | 0 |  |  | $ | 13,281 |  |  | $ | 0 |  |  | $ | 14,419 |
Basis difference of intangible assets |  |  | 0 |  |  |  | 1,157 |  |  |  | 978 |  |  |  | 0 |
Foreign currency |  |  | 0 |  |  |  | 2,597 |  |  |  | 0 |  |  |  | 3,216 |
Net operating loss carryforwards |  |  | 2,468 |  |  |  | 0 |  |  |  | 3,627 |  |  |  | 0 |
Valuation allowances on net operating loss carryforwards |  |  | (1,186 | ) |  |  | 0 |  |  |  | (2,500 | ) |  |  | 0 |
Federal tax credits |  |  | 3,227 |  |  |  | 0 |  |  |  | 5,711 |  |  |  | 0 |
Deferred compensation |  |  | 20,220 |  |  |  | 0 |  |  |  | 26,546 |  |  |  | 0 |
Basis difference of inventory |  |  | 634 |  |  |  | 0 |  |  |  | 4,009 |  |  |  | 0 |
Basis difference of prepaids, accruals and reserves |  |  | 1,777 |  |  |  | 0 |  |  |  | 6,273 |  |  |  | 0 |
Pensions |  |  | 2,408 |  |  |  | 0 |  |  |  | 3,435 |  |  |  | 0 |
Foreign withholding taxes on unremitted earnings |  |  | 0 |  |  |  | 909 |  |  |  | 0 |  |  |  | 223 |
Undistributed earnings from foreign subsidiaries not deemed to be indefinitely reinvested |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 1,481 |
Basis difference of other assets and liabilities |  |  | 0 |  |  |  | 536 |  |  |  | 0 |  |  |  | 351 |
|  | $ | 29,548 |  |  | $ | 18,480 |  |  | $ | 48,079 |  |  | $ | 19,690 |
Deferred tax assets and liabilities are included in the accompanying balance sheets as follows:
|  | FISCAL YEAR |
|  | 2017 |  |  | 2016 |
|  | (in thousands) |
Deferred tax asset (non-current asset) |  | $ | 18,003 |  |  | $ | 33,117 |
Deferred income taxes (non-current liabilities) |  |  | (6,935 | ) |  |  | (4,728 | )
Total net deferred taxes |  | $ | 11,068 |  |  | $ | 28,389 |
M anagement believes, based on the Company’s history of taxable income and expectations for the future, that it is more likely than not that future taxable income will be sufficient to fully utilize the federal deferred tax assets at December 31, 2017. As of December 31, 2017, and January 1, 2017, non-current deferred tax assets were reduced by approximately $3.3 million and $5.0 million, respectively, of unrecognized tax benefits. The Company ’s effective tax rate was 47.0%, 31.6% and 31.5% for fiscal years 2017, 2016 and 2015, respectively. The following summary reconciles income taxes at the U.S. federal statutory rate of 35% to the Company’s actual income tax expense:
|  | FISCAL YEAR |
|  | 2017 |  |  | 2016 |  |  | 2015 |
|  | (in thousands) |
Income taxes at U.S. federal statutory rate |  | $ | 35,189 |  |  | $ | 27,698 |  |  | $ | 37,018 |
Increase (decrease) in taxes resulting from: |  |  |  |  |  |  |  |  |  |  |  |
State income taxes, net of federal tax effect |  |  | 2,677 |  |  |  | 1,861 |  |  |  | 3,003 |
Non-deductible business expenses |  |  | 695 |  |  |  | 538 |  |  |  | 614 |
Non-deductible employee compensation |  |  | 80 |  |  |  | 361 |  |  |  | 168 |
Tax effects of Company owned life insurance |  |  | (1,295 | ) |  |  | (199 | ) |  |  | 128 |
Tax effects of Tax Act: |  |  |  |  |  |  |  |  |  |  |  |
One-time transition tax on foreign earnings |  |  | 11,707 |  |  |  | 0 |  |  |  | 0 |
Remeasurement of net Deferred Tax Asset |  |  | 3,467 |  |  |  | 0 |  |  |  | 0 |
Tax effects of undistributed earnings from foreign subsidiaries not deemed to be indefinitely reinvested |  |  | 523 |  |  |  | 463 |  |  |  | 458 |
Foreign and U.S. tax effects attributable to foreign operations |  |  | (4,537 | ) |  |  | (3,963 | ) |  |  | (3,347 | )
Valuation allowance effect – State NOL |  |  | (858 | ) |  |  | (1,272 | ) |  |  | (3,797 | )
Federal tax credits |  |  | (442 | ) |  |  | (494 | ) |  |  | (352 | )
Other |  |  | 87 |  |  |  | (19 | ) |  |  | (545 | )
Income tax expense |  | $ | 47,293 |  |  | $ | 24,974 |  |  | $ | 33,348 |
The Company previously considered the earnings in its non-U.S. subsidiaries, excluding subsidiaries within Canada, to be indefinitely reinvested and, accordingly, recorded no deferred income taxes. Prior to the transition tax, the Company had approximately $350 million of foreign undistributed earnings which was the largest component of the Company’s overall outside basis difference in its foreign subsidiaries. While the transition tax eliminated this portion of the overall outside basis difference in its foreign subsidiaries, an actual repatriation from its non-U.S. subsidiaries could still be subject to additional foreign withholding and U.S. state taxes. The Company has analyzed its global working capital and cash requirements and the potential tax liabilities attributable to a repatriation, and has determined that it will be repatriating approximately $37 million which was previously deemed indefinitely reinvested. The Company was able to make a reasonable estimate of the tax effects of such repatriation and has recorded a provisional estimate for foreign withholding and U.S. state taxes of $0.6 million. The Company currently does not intend to repatriate approximately $307 million taxed under the Tax Act and has not recorded any deferred taxes relating to such amounts. The Company considers this portion of its undistributed foreign earnings to be indefinitely reinvested outside of the U.S. and determination of any deferred taxes on this amount is not practicable. The Company ’s undistributed earnings from foreign subsidiaries within Canada are not deemed to be indefinitely reinvested. At December 31, 2017, the Company’s Canadian subsidiaries had approximately $6 million of undistributed earnings from which approximately $2 million in deferred income taxes and approximately $0.3 million in foreign withholding taxes had been provided. As these earnings are taxed under the transition tax, the Company reversed the $2 million deferred income tax provision. However, the Company retained the $0.3 million provision for withholding taxes as it expects to incur these taxes upon repatriation. The Company ’s federal income tax returns are subject to examination for the years 2003 to the present. The Company files returns in numerous state and local jurisdictions and in general it is subject to examination by the state tax authorities for the years 2012 to the present. The Company files returns in numerous foreign jurisdictions and in general it is subject to examination by the foreign tax authorities for the years 2006 to the present. As of December 3 1, 2017, and January 1, 2017, the Company had $29.2 million and $27.9 million, respectively, of unrecognized tax benefits. If the $29.2 million of unrecognized tax benefits as of December 31, 2017 are recognized, there would be a favorable impact on the Company’s effective tax rate in future periods. If the unrecognized tax benefits are not favorably settled, $25.9 million of the total amount of unrecognized tax benefits would require the use of cash in future periods. The Company recognizes accrued interest and income tax penalties related to unrecognized tax benefits as a component of income tax expense. As of December 31, 2017, the Company had accrued interest and penalties of $1.6 million, which is included in the total unrecognized tax benefit noted above. Management believes changes to our unrecognized tax benefits that are reasonably possible in the next 12 months will not have a significant impact on our financial position or results of operations. The timing of the ultimate resolution of the Company’s tax matters and the payment and receipt of related cash is dependent on a number of factors, many of which are outside the Company’s control. A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits is as follows :
|  | FISCAL YEAR |
|  | 2017 |  |  | 2016 |  |  | 2015 |
|  | (in thousands) |
Balance at beginning of year |  | $ | 27,888 |  |  | $ | 28,271 |  |  | $ | 27,301 |
Increases related to tax positions taken during the current year |  |  | 627 |  |  |  | 690 |  |  |  | 641 |
Increases related to tax positions taken during the prior years |  |  | 709 |  |  |  | 148 |  |  |  | 1,230 |
Decreases related to tax positions taken during the prior years |  |  | 0 |  |  |  | (695 | ) |  |  | (194 | )
Decreases related to settlements with taxing authorities |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Decreases related to lapse of applicable statute of limitations |  |  | (462 | ) |  |  | (403 | ) |  |  | (367 | )
Changes due to foreign currency translation |  |  | 459 |  |  |  | (123 | ) |  |  | ( 340 | )
Balance at end of year |  | $ | 29,221 |  |  | $ | 27,888 |  |  | $ | 28,271 |

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration