XML 31 R17.htm IDEA: XBRL DOCUMENT

Note 11 - Income Taxes

12 Months Ended

Dec. 31, 2015

Note 11 - Income Taxes

Note 11 - Income Taxes

Note 11 - Income Taxes

Our income tax provision consists of:

		Years Ended December 31,
		2015				2014
Current:
Federal		$	4			$	—
State			15				12
Foreign			111				65
			130				77
Deferred:
Federal			169				220
State			—				—
Foreign			11				(29	)
			180				191
Total income tax provision		$	310			$	268

The income tax provision (benefit) related to discontinued operations was immaterial in 2014.

The deferred tax provision in both 2015 and 2014 is principally a result of the increase in the net deferred tax liability related to deferred tax liabilities generated from goodwill and certain intangible assets that cannot be predicted to reverse for book purposes during our loss carryforward periods. In 2015, the deferred provision was reduced by a deferred tax benefit amounting to $51 relating to our $150 impairment of a trademark.

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. Significant components of our deferred tax liabilities and assets are as follows:

		Years Ended December 31,
		2015				2014
Deferred tax liabilities:
Property, plant and equipment		$	—			$	—
Intangible assets			4,631				4,462
Total deferred tax liabilities			4,631				4,462

Deferred tax assets:
Property, plant and equipment			288				88
Net operating loss carryforwards			27,283				20,164
Tax credit carryforwards			1,596				1,455
Intangible assets			3,391				3,841
Accrued expenses, reserves and other			2,127				2,509
Total deferred tax assets			34,685				28,057
Valuation allowance for deferred tax assets			(34,593	)			(27,951	)
Net deferred tax assets			92				106

Net deferred tax liabilities		$	4,539			$	4,356

Net deferred tax liabilities is comprised of the following balance sheet amounts:

		Years Ended December 31,
		2015				2014

Current deferred tax assets		$	92			$	106
Non-current deferred tax liabilities			(4,631	)			(4,462	)
		$	(4,539	)		$	(4,356	)

The valuation allowance for deferred tax assets increased $6,642 and $659 in the years ended December 31, 2015 and 2014, respectively. The 2015 increase in the valuation allowance included an increase of $7,296 relating to the release of our unrecognized tax benefit during 2015 (see below). Excluding the effect of the release of the unrecognized tax benefit during 2015, the valuation allowance would have decreased by $654.

In 2015 and 2014, in the U.S. and the U.K., we continue to report a valuation allowance for our deferred tax assets that cannot be offset by reversing temporary differences. We continue to conclude that, based on historical factors, it is more likely than not that we will not fully utilize our U.S. and U.K. NOLs that have accumulated over time. The recognition of a valuation allowance on our deferred tax assets results from our evaluation of all available evidence, both positive and negative. The assessment of the realizability of the NOLs is based on a number of factors including, our history of net operating losses, the volatility of our earnings, our historical operating volatility, our historical inability to accurately forecast earnings for future periods and the continued uncertainty of the general business climate as of the end of 2015. We believe that these historical factors represent negative evidence sufficient to conclude that we should record a full valuation allowance against our deferred tax assets. In both 2015 and 2014, we have not recorded a valuation allowance against our foreign deferred tax assets as we believe that it is more likely than not that they will be realized. We continually assess the carrying value of this asset based on relevant accounting standards.

As of December 31, 2015, we have foreign and domestic NOLs and credit carryforwards totaling approximately $86,800 and $1,600, respectively, available to reduce future taxable income. Included in our NOL carryforward are foreign loss carryforwards of approximately $12,400 which can be carried forward indefinitely. The domestic NOL carryforward of $74,400 expires beginning in 2019, through 2034. The domestic NOL carryforward includes approximately $3,000 for which a benefit will be recorded in capital in excess of par value when realized.

For financial reporting purposes, income (loss) from continuing operations before income taxes is as follows:

		Years Ended December 31,
		2015				2014
United States		$	2,582			$	(1,808	)
Foreign			568				6
		$	3,150			$	(1,802	)

There are no undistributed earnings of our foreign subsidiaries, at December 31, 2015 or 2014.

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to income (loss) from continuing operations before income taxes as follows:

		Years Ended December 31,
		2015				2014

Statutory income tax rate			34.0	%			34.0	%
(Increase) decrease in tax provision resulting from:
Equity compensation			2.2				(12.9	)
Income tax credits			(4.5	)			4.2
Foreign tax rates			(2.2	)			(1.9	)
Release of unrecognized tax benefits			(231.6	)			—
Valuation allowance			210.9				(36.6	)
Other			1.0				(1.7	)
Effective income tax rate			9.8	%			(14.9	%)

Accounting for Uncertainty in Income Taxes

Our unrecognized tax benefits related to uncertain tax positions at December 31, 2014 related to Federal and various state jurisdictions. The recorded the release of uncertain tax positions in 2015 relating to the conclusion of a federal tax examination, resulting in a $21.4 million increase in the amount of our reported domestic NOL carryforward. The following table summarizes the activity related to our unrecognized tax benefits:

		Years Ended December 31,
		2015				2014
Balance – beginning of year		$	7,296			$	7,296
Increases related to current year tax positions			—				—
Increases related to prior year tax positions			—				—
Decreases related to prior year tax positions			—				—
Expiration of statute of limitations for assessment of taxes			—				—
Settlements of examinations			(7,296	)			—
Balance – end of year		$	—			$	7,296

The total unrecognized tax benefit balances at December 31, 2014 was comprised of tax benefits that, if recognized, would result in a deferred tax asset and a corresponding increase in our valuation allowance. As a result, because the benefit would be offset by an increase in the valuation allowance, there would be no net effect on our effective tax rate or income tax provision. We recorded the release of this unrecognized tax benefit amount during 2015 upon the conclusion of a of a federal tax examination, resulting in a $21.4 million increase in the amount of our reported domestic NOL carryforward.

We are not required to accrue interest and penalties as the unrecognized tax benefits have been recorded as a decrease in our NOL. Interest and penalties would begin to accrue in the period in which the NOLs related to the uncertain tax positions are utilized. We do not expect our unrecognized tax benefits to change significantly over the next twelve months.

As a result of our operations, we file income tax returns in various jurisdictions including U.S. federal, U.S. state and foreign jurisdictions. We are routinely subject to examination by taxing authorities in these various jurisdictions. Our U.S. tax matters for the years 2001 through 2015 remain subject to examination by the Internal Revenue Service (“IRS”) due to our NOL carryforwards. Our U.S. tax matters for the years 2001 through 2015 remain subject to examination by various state and local tax jurisdictions due to our NOL carryforwards. Our tax matters for the years 2009 through 2015 remain subject to examination by the respective foreign tax jurisdiction authorities.