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Income Taxes | 12 Months Ended
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May 31, 2016
Income Tax Disclosure [Abstract] |
INCOME TAXES | -INCOME TAXES The components of income (loss) before income tax provision for the years ended May 31 are as follows:
| 2016 |  | 2015 |  | 2014
| (in thousands)
(Loss) income before tax provision: |  |  |  |  |
US | $ | (4,444 | ) |  | $ | (8,965 | ) |  | $ | 4,645 |
Non-US | 1,191 |  |  | 834 |  |  | 541 |
| $ | (3,253 | ) |  | $ | (8,131 | ) |  | $ | 5,186 |
Income tax (benefit) provision analyzed by category and by statement of operations classification for the years ended May 31 is summarized as follows:
| 2016 |  | 2015 |  | 2014
| (in thousands)
Current |  |  |  |  |
Federal | $ | 34 |  |  | $ | (242 | ) |  | $ | (133 | )
State and local | 103 |  |  | 205 |  |  | 99 |
Non U.S. | 217 |  |  | 417 |  |  | 157 |
| 354 |  |  | 380 |  |  | 123 |
Deferred | 39,983 |  |  | (5,123 | ) |  | 2,716 |
Income tax (benefit) provision | $ | 40,337 |  |  | $ | (4,743 | ) |  | $ | 2,839 |
The significant components of deferred income tax (benefit) expense from operations for the years ended May 31 consist of the following:
| 2016 |  | 2015 |  | 2014
| (in thousands)
Net effect of temporary differences | $ | 133 |  |  | $ | (1,916 | ) |  | $ | 1,543 |
Adjustments for beginning-of-the-year valuation allowance balance for changes in circumstances | 40,418 |  |  | — |  |  | — |
Impact of NYS tax reform legislation | — |  |  | — |  |  | 1,173 |
Net operating loss carryforward | (568 | ) |  | (3,207 | ) |  | — |
| $ | 39,983 |  |  | $ | (5,123 | ) |  | $ | 2,716 |
Temporary differences that give rise to deferred tax assets and liabilities are summarized as follows:
| May 31, 2016 |  | May 31, 2015
| (in thousands)
Deferred tax assets |  |  |
Net operating loss carryforward | $ | 52,593 |  |  | $ | 52,025 |
Stock-based compensation | 4,135 |  |  | 4,468 |
Federal and state R&D tax credit carryforward | 2,145 |  |  | 1,646 |
Inventories | 4,535 |  |  | 2,808 |
Expenses incurred not currently deductible | 3,018 |  |  | 2,107 |
Accrued liabilities | 339 |  |  | 114 |
Gross deferred tax asset | 66,765 |  |  | 63,168 |
Deferred tax liabilities |  |  |
Excess tax over book depreciation and amortization | 46,240 |  |  | 42,988 |
| 46,240 |  |  | 42,988 |
Valuation Allowance | (42,209 | ) |  | (1,791 | )
Net deferred tax asset (liability) | $ | (21,684 | ) |  | $ | 18,389 |
Our Federal net operating loss carryforwards as of May 31, 2016 after considering IRC Section 382 limitations are $151.7 million. The expiration of the Federal net operating loss carryforwards are as follows: $29.8 million between 2017 and 2023 and $121.9 million between 2027 and 2036. Our state net operating loss carryforwards as of May 31, 2016 after considering remaining IRC Section 382 limitations are $30.8 million which expire in various years from 2016 to 2036. As a result of certain realization requirements of ASC 718, the table of deferred tax assets and liabilities shown above does not include certain deferred tax assets as of May 31, 2016 and 2015 that arose directly from tax deductions related to equity compensation greater than compensation recognized for financial reporting. Equity will be increased by $0.4 million if and when such excess tax benefits are ultimately realized. At May 31, 2016, we had a net deferred income tax liability of $21.7 million, after recording a valuation allowance of $42.2 million. The valuation allowance increased by $40.4 million in 2016. While the net deferred tax asset at May 31, 2016 before the valuation allowance was $19.9 million, the Company was required to record a valuation allowance of $40.4 million due to deferred tax liabilities related to intangibles of $20.5 million that have an indefinite reversal period and can not be used to support the deferred tax asset. A valuation allowance is provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company’s analysis of the need for a valuation allowance considered that the Company has incurred a cumulative loss in the U.S. over the three year period ending May 31, 2016. A majority of the cumulative loss has been caused by the charges associated with the product recall and discontinuance and the impairment of fixed and intangible assets recorded in the quarter end February 28, 2015, From the time when the Company initially incurred a three year cumulative loss in the quarter ended February 28, 2015, and in each subsequent quarter through the quarter ended February 28, 2016, the Company could still demonstrate a recent history of core earnings , and had anticipated a return to profitability for the full fiscal year 2016. However, in the quarter ended May 31, 2016 the Company did not return to profitability for the full fiscal year and could no longer demonstrate a recent history of core earnings. Consequently after careful consideration and weighing of all the available positive and negative evidence, the weight given to the three year cumulative loss and lack of a recent history of core earnings was difficult to overcome and a full valuation allowance related to the U.S. deferred tax assets was established. Management will continue to reevaluate the positive and negative evidence at each reporting period and if future results as projected in the U.S. and our tax planning strategies are favorable, the valuation allowance may be removed, which could have a favorable material impact on our results of operations in the period in which it is recorded. Our consolidated income tax provision has differed from the amount that would be provided by applying the U.S. Federal statutory income tax rate to our income before income taxes for the following reasons:
| 2016 |  | 2015 |  | 2014
| (in thousands)
Income tax (benefit) provision at statutory tax rate of 35% | $ | (1,139 | ) |  | $ | (2,845 | ) |  | $ | 1,814 |
Effect of graduated tax rates | 33 |  |  | 81 |  |  | (51 | )
State income taxes, net of Federal tax benefit | (215 | ) |  | (21 | ) |  | 111 |
Impact of Non US operations | (162 | ) |  | 133 |  |  | (27 | )
Research and development tax credit | (499 | ) |  | (604 | ) |  | (236 | )
Meals and entertainment | 329 |  |  | — |  |  | — |
Nondeductible interest on contingent payments | 262 |  |  | 265 |  |  | 540 |
Nontaxable gain on revaluation of contingent consideration liability | (170 | ) |  | (3,102 | ) |  | (1,734 | )
Tax law changes | — |  |  | (454 | ) |  | 1,173 |
Adjustment to beginning of year valuation allowance | 40,685 |  |  | — |  |  | — |
Effect of elimination of stock compensation APIC pool | 739 |  |  | 1,253 |  |  | 440 |
Nondeductible stock-based compensation | — |  |  | — |  |  | 176 |
Other nondeductible expenses | 207 |  |  | 498 |  |  | 384 |
Over (under) accrual of prior year Federal and state taxes | 356 |  |  | 38 |  |  | 249 |
Other | (89 | ) |  | 15 |  |  | — |
Income tax (benefit) expense | $ | 40,337 |  |  | $ | (4,743 | ) |  | $ | 2,839 |
The following table provides a reconciliation of the beginning and ending amount of unrecognized tax benefits, all of which, if recognized, would impact the effective tax rate.
| 2016 |  | 2015 |  | 2014
| (in thousands)
Unrecognized tax benefits balance at June 1 | $ | — |  |  | $ | — |  |  | $ | — |
Increase in gross amounts of tax positions related to prior years | 899 |  |  | — |  |  | — |
Decrease in gross amounts of tax positions related to prior years | — |  |  | — |  |  | — |
Increase in gross amounts of tax positions related to current year | — |  |  | — |  |  | — |
Decrease due to settlements with tax authorities | — |  |  | — |  |  | — |
Decrease due to lapse in statute of limitations | — |  |  | — |  |  | — |
Unrecognized tax benefits balance at May 31 | $ | 899 |  |  | $ | — |  |  | $ | — |
The table above includes unrecognized tax benefits associated with the calculation of limitations placed on the utilization of tax attributes related to an acquired company. If recognized, $0.1 million of the balance of unrecognized tax benefits as of May 31, 2016 would affect the effective tax rate and the balance of $0.8 million would result in adjustments to other tax accounts. We recognize interest and penalties related to unrecognized tax benefits within its global operations as a component of income tax expense. There are no accrued interest and penalties recognized in the consolidated balance sheet as of May 31, 2016 and May 31, 2015. We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business we are subject to examination by taxing authorities throughout the world. Fiscal years 2012 through 2016 remain open to examination by the various tax authorities. New York State is currently auditing AngioDynamic's franchise tax filings for 2011 through 2013. We do not anticipate any adjustments will result in a material adverse effect on our financial condition, results of operations or cash flows. We do not anticipate that the amount of unrecognized tax benefits will significantly change in the next twelve months. The accumulated undistributed earnings of the Company’s foreign operations were approximately $4.6 million, and are intended to remain indefinitely invested in foreign operations. Accordingly, no taxes have been provided on these earnings at May 31, 2016. If these earnings were distributed, the Company would be subject to both foreign withholding taxes and U.S. income taxes that may not be fully offset by foreign tax credits. A reasonable estimate of the deferred tax liability on these earnings is not practicable at this time.

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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 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
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