XML 43 R24.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Income taxes | 12 Months Ended
--- | ---
Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income taxes |
17. | Income taxes
Income (loss) from continuing operations before provision for income taxes consisted of the following:
|  | Year Ended December 31, |
(U.S. Dollars, in thousands) |  | 2017 |  |  | 2016 |  |  | 2015 |
U.S. |  | $ | 27,774 |  |  | $ | 23,006 |  |  | $ | 15,480 |
Non-U.S. |  |  | 8,617 |  |  |  | (3,982 | ) |  |  | (6,973 | )
Income before income taxes |  | $ | 36,391 |  |  | $ | 19,024 |  |  | $ | 8,507 |
The provision for income taxes on continuing operations consists of the following:
|  | Year Ended December 31, |
(U.S. Dollars, in thousands) |  | 2017 |  |  | 2016 |  |  | 2015 |
U.S. |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 3,620 |  |  | $ | 558 |  |  | $ | 6,792 |
Deferred |  |  | 20,222 |  |  |  | 9,296 |  |  |  | (1,146 | )
|  |  | 23,842 |  |  |  | 9,854 |  |  |  | 5,646 |
Non-U.S. |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 4,062 |  |  |  | 4,509 |  |  |  | 3,661 |
Deferred |  |  | 1,196 |  |  |  | 1,164 |  |  |  | 1,542 |
|  |  | 5,258 |  |  |  | 5,673 |  |  |  | 5,203 |
Income tax expense |  | $ | 29,100 |  |  | $ | 15,527 |  |  | $ | 10,849 |
The rate reconciliation for continuing operations presented below is based on the U.S. federal income tax rate, rather than the Company’s country of domicile tax rate. The Company believes, given the large proportion of taxable income earned in the United States, such disclosure is more meaningful.
|  | 2017 |  |  | 2016 |  |  | 2015 |
(U.S. Dollars, in thousands, except percentages) |  | Amount |  |  | Percent |  |  | Amount |  |  | Percent |  |  | Amount |  |  | Percent |
Statutory U.S. federal income tax rate |  | $ | 12,737 |  |  |  | 35.0 | % |  | $ | 6,658 |  |  |  | 35.0 | % |  | $ | 2,978 |  |  |  | 35.0 | %
State taxes, net of U.S. federal benefit |  |  | 1,598 |  |  |  | 4.4 |  |  |  | 395 |  |  |  | 2.1 |  |  |  | 521 |  |  |  | 6.1 |
Foreign rate differential, including withholding taxes |  |  | (3,849 | ) |  |  | (10.6 | ) |  |  | (805 | ) |  |  | (4.2 | ) |  |  | (1,934 | ) |  |  | (22.7 | )
Charges related to U.S. Government resolutions |  |  | — |  |  |  | — |  |  |  | 2,050 |  |  |  | 10.8 |  |  |  | — |  |  |  | — |
Valuation allowances, net |  |  | 3,548 |  |  |  | 9.7 |  |  |  | 6,149 |  |  |  | 32.3 |  |  |  | 10,952 |  |  |  | 128.7 |
Change in estimate on compensation expenses |  |  | — |  |  |  | — |  |  |  | (2,151 | ) |  |  | (11.3 | ) |  |  | — |  |  |  | — |
Italian subsidiary intangible asset |  |  | (381 | ) |  |  | (1.0 | ) |  |  | (1,477 | ) |  |  | (7.8 | ) |  |  | (2,076 | ) |  |  | (24.4 | )
Change of intention for foreign earnings |  |  | — |  |  |  | — |  |  |  | 1,300 |  |  |  | 6.8 |  |  |  | — |  |  |  | — |
Domestic manufacturing deduction |  |  | (818 | ) |  |  | (2.2 | ) |  |  | — |  |  |  | — |  |  |  | (469 | ) |  |  | (5.5 | )
Unrecognized tax benefits, net of settlements |  |  | 6,002 |  |  |  | 16.5 |  |  |  | 3,049 |  |  |  | 16.0 |  |  |  | 406 |  |  |  | 4.8 |
Impact of the Tax Act |  |  | 8,347 |  |  |  | 22.9 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Other, net |  |  | 1,916 |  |  |  | 5.3 |  |  |  | 359 |  |  |  | 1.9 |  |  |  | 471 |  |  |  | 5.5 |
Income tax expense/effective rate |  | $ | 29,100 |  |  |  | 80.0 | % |  | $ | 15,527 |  |  |  | 81.6 | % |  | $ | 10,849 |  |  |  | 127.5 | %
On December 22, 2017, the Tax Act was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a U.S. corporate rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. The Company has calculated its best estimate of the impact of the Tax Act in the 2017 income tax provision in accordance with its understanding of the Tax Act and guidance available as of the date of this filing. As a result, the Company recorded $8.3 million of additional income tax expense in the fourth quarter of 2017, the period in which the legislation was enacted. The provisional amount related to the remeasurement of certain deferred tax assets and liabilities, based on the rates at which they are expected to reverse in the future was $8.6 million. The provisional amount related to the one-time transition tax on the mandatory deemed repatriation of foreign earnings was zero. The Company also recorded a benefit of $0.3 million related to an income tax liability recorded in 2016 related to repatriation of earnings from our subsidiary in Puerto Rico. On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued 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. In accordance with SAB 118, we have determine that the $8.6 million of the deferred tax expense recorded in connection with the remeasurement of certain deferred tax assets and liabilities and the zero transition tax on the mandatory deemed repatriation of foreign earnings was a provisional amount and a reasonable estimate at December 31, 2017. Additional work is necessary for a more detailed analysis of the Company’s deferred tax assets and liabilities and its historical foreign earnings as well as potential correlative adjustments. Any subsequent adjustment to those amounts will be recorded to current tax expense in the quarter of 2018 when the analysis is complete. During 2016, the Company revised its estimate relating to the deductibility of certain compensation expenses. This change in estimate reduced income tax expense and increased net income from continuing operations by $2.4 million and increased earnings per share by $0.13 for the year ended December 31, 2016. The Company’s deferred tax assets and liabilities are as follows:
|  | December 31, |
(U.S. Dollars, in thousands) |  | 2017 |  |  | 2016 |
Intangible assets and goodwill |  | $ | 2,271 |  |  | $ | 2,628 |
Inventories and related reserves |  |  | 11,298 |  |  |  | 17,665 |
Deferred revenue and cost of goods sold |  |  | 6,816 |  |  |  | 11,263 |
Other accruals and reserves |  |  | 2,336 |  |  |  | 4,066 |
Accrued compensation |  |  | 4,054 |  |  |  | 6,747 |
Allowance for doubtful accounts |  |  | 2,617 |  |  |  | 2,898 |
Accrued interest |  |  | — |  |  |  | 4,621 |
Net operating loss carryforwards |  |  | 42,675 |  |  |  | 37,930 |
Other, net |  |  | 2,369 |  |  |  | 3,032 |
|  |  | 74,436 |  |  |  | 90,850 |
Valuation allowance |  |  | (46,271 | ) |  |  | (41,701 | )
Deferred tax asset |  | $ | 28,165 |  |  | $ | 49,149 |
Withholding taxes |  |  | (381 | ) |  |  | (648 | )
Property, plant and equipment |  |  | (4,469 | ) |  |  | (1,176 | )
Deferred tax liability |  |  | (4,850 | ) |  |  | (1,824 | )
Net deferred tax assets |  | $ | 23,315 |  |  | $ | 47,325 |
The Company accounts for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and income tax basis of assets and liabilities, and for operating losses and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the years in which those items are expected to be realized. Tax law and rate changes are recorded in the period such changes are enacted. The Company establishes a valuation allowance when it is more likely than not that certain deferred tax assets will not be realized in the foreseeable future. The valuation allowance is primarily attributable to net operating loss carryforwards and temporary differences in certain foreign jurisdictions. The net increase in the valuation allowance of $4.6 million during the year principally relates to the increase of valuation allowances on net operating loss carryforwards in foreign jurisdictions. The Company has state net operating loss carryforwards of approximately $11.6 million that will begin to expire in 2018. Additionally, the Company has net operating loss carryforwards in various foreign jurisdictions of approximately $167.3 million that begin to expire in 2018, the majority of which relate to the Company’s Netherlands operations. During 2016, the Company changed its intention related to unremitted foreign earnings in its Puerto Rico subsidiary and certain United Kingdom subsidiaries. As a result of the change in intention, the Company recorded $ 1.3 million of income tax expense for the remitted and unremitted earnings in each of these subsidiaries. During the first quarter of 2017, the Company changed its intention related to unremitted foreign earnings in its Seychelles subsidiary. The tax impact was minimal. The Company’s current intention is to indefinitely reinvest substantially all of its other unremitted foreign earnings (residing outside Curaçao). As an entity incorporated in Curaçao, “foreign earnings” refer to both U.S. and non-U.S. earnings. Furthermore, only income sourced in the U.S. is subject to U.S. income tax. Unremitted foreign earnings decreased from $372.5 million at December 31, 2016 to $335.7 million at December 31, 2017. Determining the additional income tax that may be payable if such earnings are repatriated is not practicable. The Company records a benefit for uncertain tax positions when the weight of available evidence indicates that it is more likely than not, based on an evaluation of the technical merits, that the tax position will be sustained on audit. The tax benefit is measured as the largest amount that is more than 50% likely to be realized upon settlement. The Company re-evaluates income tax positions periodically to consider changes in facts or circumstances such as changes in or interpretations of tax law, effectively settled issues under audit, and new audit activity. The Company includes interest and any applicable penalties related to income tax issues as part of income tax expense in its consolidated financial statements. The Company’s unrecognized tax benefit was $22.5 million and $18.4 million for the years ended December 31, 2017 and 2016, respectively. The Company recorded interest and penalties on unrecognized tax benefits of $2.3 million, $2.1 million, and $0.2 million for the years ended December 31, 2017, 2016, and 2015, respectively, and had approximately $5.3 million and $3.0 million accrued for payment of interest and penalties as of December 31, 2017 and 2016, respectively. The entire amount of unrecognized tax benefits, including interest, would favorably impact the Company’s effective tax rate if recognized. The Company believes it is reasonably possible that, in the next 12 months, the amount of unrecognized tax benefits related to the resolution of federal, state and foreign matters could be reduced by $2.4 million to $3.6 million as audits close and statutes expire. A reconciliation of the gross unrecognized tax benefits (excluding interest and penalties) for the years ended December 31, 2017, 2016, and 2015 follows:
(U.S. Dollars, in thousands) |  | 2017 |  |  | 2016 |  |  | 2015 |
Balance as of January 1, |  | $ | 18,384 |  |  | $ | 15,763 |  |  | $ | 15,597 |
Additions for current year tax positions |  |  | 787 |  |  |  | 77 |  |  |  | 332 |
Increases (decreases) for prior year tax positions |  |  | 3,361 |  |  |  | 2,551 |  |  |  | (86 | )
Settlements of prior year tax positions |  |  | — |  |  |  | — |  |  |  | — |
Expiration of statutes |  |  | (10 | ) |  |  | (7 | ) |  |  | (80 | )
Balance as of December 31, |  | $ | 22,522 |  |  | $ | 18,384 |  |  | $ | 15,763 |
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and in certain state and foreign jurisdictions, including Italy and the United Kingdom. The statute of limitations with respect to federal and state tax filings is closed for years prior to 2012. The statute of limitations with respect to the major foreign tax filing jurisdictions is closed for years prior to 2012. During the third quarter of 2015, the Internal Revenue Service commenced an examination of the Company’s federal income tax return for 2012. The Company reasonably expects to conclude this examination in the first half of 2018 with no material impact on the financial statements. In October 2016, the Company was notified of an examination of its federal income tax return for 2013 and in December 2017, the examination for 2013 was concluded with no change. In November 2017, the Company was notified of an examination of its federal income tax return for 2015. The Company cannot reasonably determine if this examination, or any state and local tax examinations, will have a material impact on its financial statements and cannot predict the timing regarding resolution of these tax examinations.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
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 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration