1 4.	INCOME TAXES:

The components of income tax expense for continuing operations are as follows:

	Year Ended December 31,
	2015			2014			2013
	(in thousands)
Current:
Federal	$	(5,076	)	$	4,336		$	9,097
State		26			334			690
Total current tax expense (benefit)		(5,050	)		4,670			9,787
Deferred:
Federal		(8,855	)		305			2,631
State		1,954			(324	)		(60	)
Total deferred tax expense (benefit)		(6,901	)		(19	)		2,571
	$	(11,951	)	$	4,651		$	12,358

The difference between the Company’s effective income tax rates and the statutory United States federal income tax rate of 35% is explained as follows:

	Year Ended December 31,
	2015			2014			2013
	(in thousands)
Provision (benefit) at statutory rate of 35%	$	(14,470	)	$	(532	)	$	11,921
State provision (benefit), net of federal tax effect		(866	)		(96	)		370
Federal and state tax credits		(6,684	)		(91	)		(525	)
Disallowed domestic manufacturing deduction		630			-			(641	)
Change in valuation allowance		5,210			9			954
Uncertain tax positions		2,082			5			(7	)
Goodwill impairment (nondeductible)		1,849			5,623			-
Nondeductible expenses		91			207			345
Nontaxable adjustment to contingent consideration		103			(611	)		-
Other		104			137			(59	)
	$	(11,951	)	$	4,651		$	12,358
Effective tax rate		(28.9)	%		305.6	%		36.3	%

The Company completed a research and development (R&D) tax credit study for 2014 in the third quarter of 2015, resulting in a significantly higher credit than previously estimated; therefore, a discrete benefit of $2.5 million was recorded in the third quarter of 2015. In 2015, the Company also recorded a $5.2 million valuation allowance on a portion of its deferred tax assets, primarily related to federal and state tax credits and state net operating loss carryforwards.

The tax effect of temporary differences that give rise to significant portions of deferred tax assets and liabilities is presented below:

	December 31,
	2015			2014
	(in thousands)
Deferred tax assets:
Costs and estimated earnings in excess of billings on uncompleted contracts, net	$	2,888		$	2,186
Accrued employee benefits		5,946			5,324
Inventories		2,618			1,937
Trade receivable, net		266			372
Net operating loss carryforwards		7,843			582
Tax credit carryforwards		4,791			996
Other assets		2,737			6,067
Other		520			1,441
		27,609			18,905
Valuation allowance		(7,057	)		(1,858	)
		20,552			17,047
Deferred tax liabilities:
Property and equipment		(24,229	)		(23,903	)
Intangible assets		(980	)		(1,150	)
Prepaid expenses		(467	)		(522	)
		(25,676	)		(25,575	)

Net deferred tax liabilities	$	(5,124	)	$	(8,528	)

In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, taxable income in carryback periods and tax planning strategies in making this assessment. Because the Company has a recent history of generating cumulative losses, management did not consider projections of future taxable income as persuasive evidence for the recoverability of its deferred tax assets. The Company believes it is more likely than not it will realize the benefits of its deductible differences as of December 31, 2015, net of any valuation allowance.

As of December 31, 2015, the Company had approximately $19 million of federal net operating loss carryforwards, which expire in 2035, and $3.1 million of federal tax credit carryforwards, which expire on various dates between 2023 and 2035. As of December 31, 2015, the Company also had approximately $34 million of state net operating loss carryforwards, which expire on various dates between 2019 and 2035, and state tax credit carryforwards of $2.8 million, which begin to expire in 2016.

The Company considers the earnings of its Mexican subsidiary to be indefinitely reinvested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs. Should the Company decide to repatriate the foreign earnings, the income tax provision would be adjusted in the period it is determined that the earnings will no longer be indefinitely reinvested outside the United States, and a deferred tax liability of approximately $0.8 million related to the United States federal and state income taxes and foreign withholding taxes on approximately $2.3 million of undistributed foreign earnings would be recorded.

The Company files income tax returns in the United States Federal jurisdiction, in a limited number of foreign jurisdictions, and in many state jurisdictions. Internal Revenue Service examinations have been completed for years prior to 2011.

With few exceptions, the Company is no longer subject to United States Federal or state income tax examinations for years before 2011. The Company is currently under Colorado income tax audit for the years 2009 to 2013. It is reasonably possible that the Company will close the audit within the next 12-month period. Such resolution is not anticipated to have a significant impact on our results of operations. There are no other income tax audits in progress.

A summary of the changes in the unrecognized tax benefits during the years ended December 31, 2015, 2014 and 2013 is presented below (in thousands):

	2015			2014			2013
Unrecognized tax benefits, beginning of year	$	2,313		$	6,207		$	5,245
Decreases for settlements		-			(3,265	)		-
Decreases for lapse in statute of limitations		(1,199	)		(115	)		-
Decreases for positions taken in current year		-			(615	)		-
Increases for positions taken in prior years		3,716			101			646
Decreases for positions taken in prior years		-			-			(696	)
Increases for positions taken in the current year		44			-			1,012
Unrecognized tax benefits, end of year	$	4,874		$	2,313		$	6,207

The Company does not believe it is reasonably possible that the total amounts of unrecognized tax benefits will change in the following twelve months; however, actual results could differ from those currently expected. Of the balance of unrecognized tax benefits, $4.5 million, which includes interest, would affect the Company’s effective tax rate if recognized at some point in the future.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2015 and 2014, the Company had approximately $0.1 million of accrued interest related to uncertain tax positions. Total interest for uncertain tax positions decreased by approximately $0.1 million in 2015 and 2014, and increased by approximately $0.1 million in 2013.