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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 U.S. Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted. The 2017 Tax Act is comprehensive tax reform legislation that contains significant changes to corporate taxation, including a permanent reduction of the corporate income tax rate from 35% to 21%, a mandatory one-time tax on un-repatriated accumulated earnings of foreign subsidiaries, a partial limitation on the deductibility of business interest expense, and 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). We recognized the income tax effects of the 2017 Tax Act in accordance with Staff Accounting Bulletin No. 118 (“SAB 118”), which provides SEC staff guidance for the application of ASC Topic 740, Income Taxes, to the 2017 Tax Act. SAB 118 allows for a measurement period of up to one year after the enactment date to finalize the recording of the related tax impacts. Our 2017 financial results reflect the provisional income tax effects of the 2017 Tax Act for which the accounting under ASC Topic 740 is incomplete but a reasonable estimate could be determined. We did not identify any items for which the income tax effects of the 2017 Tax Act could not be reasonably estimated as of December 31, 2017. Due to the changes to U.S. tax laws as a result of the 2017 Tax Act, we recorded a provisional $51.6 million net income tax benefit during the fourth quarter of 2017 for the estimated tax impacts. This amount is comprised of the following: Reduction of the U.S. Corporate Income Tax Rate We measure deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to reverse. Accordingly, our deferred tax assets and liabilities were re-measured to reflect the reduction in the U.S. corporate income tax rate from 35% to 21%, resulting in a provisional $59.7 million deferred income tax benefit recorded during the fourth quarter of 2017 and a corresponding decrease in net deferred tax liabilities as of December 31, 2017. Transition Tax on Foreign Earnings The one-time transition tax is based on our total post-1986 foreign earnings and profits (“E&P”) deemed repatriated to the U.S. to the extent the E&P has not already been subject to U.S. taxation. We recorded a provisional deferred income tax expense of $8.1 million during the fourth quarter of 2017 related to the one-time transition tax on certain foreign earnings. This resulted in a corresponding provisional decrease in deferred tax assets of $8.1 million due to the utilization of U.S. net operating losses against the deemed mandatory repatriation income inclusion. We believe the provisional amounts recorded during the fourth quarter of 2017 represent a reasonable estimate of the accounting implications of this U.S. tax reform. Our ultimate determination of the tax impacts may differ from the provisional amounts recorded during the fourth quarter of 2017 due to regulatory guidance expected to be issued in the future, tax law technical corrections, and possible changes in the our interpretations, assumptions, and actions taken as a result of tax legislation refinement and clarification. In addition, we are still analyzing certain aspects of the 2017 Tax Act and refining our calculations for historical foreign E&P, which could potentially affect the measurement of these provisional balances. We will continue to evaluate the 2017 Tax Act, and any adjustment to these provisional amounts will be reported in the reporting period in which any such adjustments are determined, which will be no later than the fourth quarter of 2018. We and our subsidiaries file a consolidated U.S. federal income tax return. We believe that our recorded deferred tax assets and liabilities are reasonable. However, tax laws and regulations are subject to interpretation and the outcomes of tax disputes are inherently uncertain, and therefore our assessments can involve a series of complex judgments about future events and rely heavily on estimates and assumptions. Components of income tax provision (benefit) reflected in the consolidated statements of operations consist of the following (in thousands):
| Year Ended December 31,
| 2017 |  | 2016 |  | 2015
Current | $ | 4,161 |  |  | $ | (27,319 | ) |  | $ | 1,832 |
Deferred | (54,585 | ) |  | 14,849 |  |  | (103,022 | )
| $ | (50,424 | ) |  | $ | (12,470 | ) |  | $ | (101,190 | )
Domestic | $ | (53,044 | ) |  | $ | (9,631 | ) |  | $ | (102,978 | )
Foreign | 2,620 |  |  | (2,839 | ) |  | 1,788 |
| $ | (50,424 | ) |  | $ | (12,470 | ) |  | $ | (101,190 | )
Components of income (loss) before income taxes are as follows (in thousands):
| Year Ended December 31,
| 2017 |  | 2016 |  | 2015
Domestic | $ | (221 | ) |  | $ | (61,484 | ) |  | $ | (485,760 | )
Foreign | (20,151 | ) |  | (32,431 | ) |  | 7,590 |
| $ | (20,372 | ) |  | $ | (93,915 | ) |  | $ | (478,170 | )
Income taxes are provided based on the U.S. statutory rate of 35% and at the local statutory rate for each foreign jurisdiction adjusted for items that are allowed as deductions for federal and foreign income tax reporting purposes, but not for book purposes. The primary differences between the U.S. statutory rate and our effective rate are as follows:
| Year Ended December 31,
| 2017 |  | 2016 |  | 2015
Statutory rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Foreign provision | (6.2 | ) |  | (5.1 | ) |  | (13.7 | )
Change in U.S. statutory rate (1) | 293.1 |  |  | — |  |  | — |
Mandatory U.S. repatriation (1) | (39.7 | ) |  | — |  |  | — |
Change in tax position (2) | (31.1 | ) |  | — |  |  | — |
Goodwill impairment | — |  |  | (16.8 | ) |  | — |
Other | (3.6 | ) |  | 0.2 |  |  | (0.1 | )
Effective rate | 247.5 | % |  | 13.3 | % |  | 21.2 | %
(1) | As a result of the U.S. tax law changes, we recorded a net deferred tax benefit of $51.6 million during the fourth quarter of 2017. This amount consists of two components: (i) a $59.7 million deferred tax benefit resulting from the remeasurement of our net deferred tax liabilities in the U.S. based on the new lower corporate income tax rate, and (ii) an $8.1 million deferred tax charge relating to the one-time mandatory tax on previously deferred earnings of certain non-U.S. subsidiaries that are owned either wholly or partially by one of our U.S. subsidiaries.
(2) | We consider all available evidence, both positive and negative, when determining whether a valuation allowance is required against deferred tax assets. Due to weaker near term outlook and financial results primarily associated with our Robotics segment, we currently do not anticipate generating sufficient foreign source income to fully utilize our foreign tax credits prior to their expiration. We have concluded that it is more likely than not previously recorded deferred tax assets attributable to foreign tax credits will not be realized. As a result of this change in tax position, we recorded a tax charge of $6.3 million in June 2017, which is comprised of a $2.8 million valuation allowance attributable to a foreign tax credit carryforward from 2015 and a $3.5 million charge attributable to the decision to deduct foreign taxes related to 2016 and 2017.
Deferred income taxes result from the effect of transactions that are recognized in different periods for financial and tax reporting purposes. The nature of these differences and the income tax effect of each are as follows (in thousands):
| December 31,
| 2017 |  | 2016
Deferred tax liabilities: |  |  |
Depreciation | $ | 135,824 |  |  | $ | 192,777 |
Original issuance discount on 2022 Notes and 2032 Notes | 7,727 |  |  | 11,802 |
Prepaid and other | 437 |  |  | 1,448 |
Total deferred tax liabilities | $ | 143,988 |  |  | $ | 206,027 |
Deferred tax assets: |  |  |
Net operating losses | $ | (33,480 | ) |  | $ | (20,910 | )
Reserves, accrued liabilities and other | (19,496 | ) |  | (38,131 | )
Total deferred tax assets | (52,976 | ) |  | (59,041 | )
Valuation allowance | 12,337 |  |  | 3,771 |
Net deferred tax liabilities | $ | 103,349 |  |  | $ | 150,757 |
Deferred income tax is presented as: |  |  |
Current deferred tax assets | $ | — |  |  | $ | (16,594 | )
Non-current deferred tax liabilities | 103,349 |  |  | 167,351 |
Net deferred tax liabilities | $ | 103,349 |  |  | $ | 150,757 |
At December 31, 2017, our U.S. net operating losses available for carryforward totaled $115.8 million, and our U.K. net operating losses of our well intervention company available for carryforward totaled $3.9 million. The U.S. net operating loss carryforwards will begin to expire in 2035 if unused. Realization is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. Although realization is not assured, management believes it is more likely than not that all of these tax attributes will be utilized. The amount of the deferred tax asset considered realizable, however, could be reduced if estimates of future taxable income during the carryforward period are reduced. At December 31, 2017, we had a $3.0 million valuation allowance recorded against our U.S. deferred tax assets for foreign tax credits. Management believes it is more likely than not that we will not be able to utilize the foreign tax credits prior to expiration. At December 31, 2017, we had a $9.4 million valuation allowance related to certain non-U.S. deferred tax assets, primarily net operating losses generated in Brazil and from our oil and gas operations in the U.K., as management believes it is more likely than not that we will not be able to utilize the tax benefit. Additional valuation allowances may be made in the future if in management’s opinion it is more likely than not that the tax benefit will not be utilized. At December 31, 2017, we had accumulated undistributed earnings generated by our non-U.S. subsidiaries without operations in the U.S. of approximately $48 million, all of which was subject to the one-time transition tax on foreign earnings required by the 2017 Tax Act or has otherwise been previously taxed. We intend to indefinitely reinvest these earnings, as well as future earnings from our non-U.S. subsidiaries without operations in the U.S., to fund our international operations and foreign credit facility. In addition, we expect future U.S. cash generation will be sufficient to meet future U.S. cash needs. As discussed above, changes in the our interpretations, assumptions, and actions may result from further analysis and legislative clarifications to the 2017 Tax Act that occur during 2018. We account for tax-related interest in interest expense and tax penalties in selling, general and administrative expenses. No significant penalties or interest expense were accrued on our uncertain tax positions. We had unrecognized tax benefits of $0.3 million related to uncertain tax positions as of December 31, 2017 and 2016, which if recognized would affect the annual effective tax rate. We had no uncertain tax positions as of December 31, 2015. A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2017 and 2016 is as follows (in thousands):
| 2017 |  | 2016 |  | 2015
Balance at January 1, | $ | 343 |  |  | $ | — |  |  | $ | — |
Additions for tax positions of prior years | — |  |  | 343 |  |  | — |
Reductions for tax positions of prior years | (25 | ) |  | — |  |  | — |
Balance at December 31, | $ | 318 |  |  | $ | 343 |  |  | $ | — |
We file tax returns in the U.S. and in various state, local and non-U.S. jurisdictions. We anticipate that any potential adjustments to our state, local and non-U.S. jurisdiction tax returns by taxing authorities would not have a material impact on our financial position. In 2016, we received $28.4 million in U.S. and foreign income tax refunds for losses that were carried back to prior years. The tax periods from 2013 through 2017 remain open to review and examination by the Internal Revenue Service. In non-U.S. jurisdictions, the open tax periods include 2009 through 2017.

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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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