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Income Taxes | 12 Months Ended
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Dec. 31, 2015
Income Tax Disclosure [Abstract] |
Income Taxes |
13) | Income Taxes
Income (loss) before provision (benefit) for income taxes for the years ended December 31, 2015, 2014 and 2013 was as follows:
|  | Year ended December 31, |
|  | 2015 |  |  | 2014 |  |  | 2013 |
Income (loss) before provision (benefit) for income taxes: |  |  |  |  |  |  |  |  |  |  |  |
United States |  | $ | (42,450 | ) |  | $ | (9,341 | ) |  | $ | 8,259 |
Foreign |  |  | 19,500 |  |  |  | 22,513 |  |  |  | 16,919 |
Total |  | $ | (22,950 | ) |  | $ | 13,172 |  |  | $ | 25,178 |
The loss of $42.5 million from domestic operations during 2015, was primarily driven from acquisition related charges (included in selling, general and administrative of $11.7 million, cost of products sold $7.5 million and write-off of debt issuance costs of $18.7 million) of which approximately $3.8 million was non-deductible as these costs were directly facilitative to the acquisitions. The loss of $9.3 million from domestic operations during 2014, was primarily driven from acquisition related charges of $14.8 million (included in selling, general and administrative, cost of products sold, and interest expense) of which approximately $6.0 million were non-deductible as these cost were directly facilitative to the acquisitions. Total income tax expense (benefit) for the years ended December 31, 2015, 2014, and 2013 was as follows:
|  | Year ended December 31, |
|  | 2015 |  |  | 2014 |  |  | 2013 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Federal |  | $ | — |  |  | $ | — |  |  | $ | — |
State |  |  | 420 |  |  |  | 37 |  |  |  | 179 |
Foreign |  |  | 5,940 |  |  |  | 7,082 |  |  |  | 4,490 |
Total current expense |  | $ | 6,360 |  |  | $ | 7,119 |  |  | $ | 4,669 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Federal |  | $ | (13,391 | ) |  | $ | 1,625 |  |  | $ | 3,594 |
State |  |  | (1,869 | ) |  |  | (382 | ) |  |  | 145 |
U.S. deferred tax valuation allowance |  |  | — |  |  |  | (1,434 | ) |  |  | (818 | )
Foreign |  |  | (1,618 | ) |  |  | (1,142 | ) |  |  | 410 |
Total deferred expense (benefit) |  |  | (16,878 | ) |  |  | (1,333 | ) |  |  | 3,331 |
Total expense (benefit) |  | $ | (10,518 | ) |  | $ | 5,786 |  |  | $ | 8,000 |
A reconciliation of income taxes based on the U.S. federal statutory rate of 34% for each of the years ended December 31, 2015, 2014 and 2013 is summarized as follows:
|  | Year ended December 31, |
|  | 2015 |  |  | 2014 |  |  | 2013 |
Income taxes at the federal statutory rate |  | $ | (7,803 | ) |  | $ | 4,478 |  |  | $ | 8,561 |
Impact of incentive stock options |  |  | — |  |  |  | (145 | ) |  |  | 261 |
Decrease in U.S. valuation allowance |  |  | — |  |  |  | (1,434 | ) |  |  | (818 | )
Foreign tax credit (additions) expiration |  |  | (1,343 | ) |  |  | 2,736 |  |  |  | 818 |
Capital gain on return of basis |  |  | — |  |  |  | — |  |  |  | — |
State taxes, net of federal taxes |  |  | (1,592 | ) |  |  | (362 | ) |  |  | 198 |
Non-U.S. earnings taxed at different rates |  |  | (2,308 | ) |  |  | (1,714 | ) |  |  | (834 | )
Non-deductible mergers and acquisition costs |  |  | 1,299 |  |  |  | 1,971 |  |  |  | — |
R&D Tax credit |  |  | (623 | ) |  |  | (529 | ) |  |  | — |
Joint Venture dividend |  |  | 1,147 |  |  |  | 737 |  |  |  | — |
Change in uncertain tax positions |  |  | — |  |  |  | — |  |  |  | 32 |
Other permanent differences, net |  |  | 705 |  |  |  | 48 |  |  |  | (218 | )
|  | $ | (10,518 | ) |  | $ | 5,786 |  |  | $ | 8,000 |
The 2015 effective tax rate of 46% primarily reflects the impact of foreign earnings being taxed at lower rates. The 2014 effective tax rate of 44% reflects the impact of two items related to the merger and acquisition activity in 2014, including: (1) $2.0 million for non-deductible third party merger and acquisition as these costs were directly facilitative to the acquisitions; and (2) $1.3 million for the expiration of foreign tax credits that could not be utilized during 2014 because of the merger related acquisition costs as discussed below. In addition, the rate reflects an offset to the items above for the impact of foreign earnings taxed at lower rates of $1.7 million. The 2013 effective tax rate of 32% reflects the impact of foreign earnings being taxed at lower rates of $0.8 million. The tax effects of the temporary differences as of December 31, 2015, 2014 and 2014 are as follows:
|  | December 31, |
|  | 2015 |  |  | 2014 |  |  | 2013 |
Deferred income tax liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Tax in excess of book depreciation |  | $ | 42,345 |  |  | $ | 35,411 |  |  | $ | 6,673 |
Goodwill |  |  | 1,554 |  |  |  | 1,949 |  |  |  | 2,213 |
Intangible assets |  |  | 91,947 |  |  |  | 15,944 |  |  |  | — |
Other deferred tax liabilities |  |  | 897 |  |  |  | 1,924 |  |  |  | 63 |
Gross deferred income tax liabilities |  |  | 136,743 |  |  |  | 55,228 |  |  |  | 8,949 |
Deferred income tax assets: |  |  |  |  |  |  |  |  |  |  |  |
Goodwill |  |  | 1,666 |  |  |  | 2,411 |  |  |  | 3,215 |
Inventories |  |  | 4,490 |  |  |  | 2,035 |  |  |  | 836 |
Pension/Personnel accruals |  |  | 2,778 |  |  |  | 3,029 |  |  |  | 856 |
Net operating loss carry forwards |  |  | 8,313 |  |  |  | 1,196 |  |  |  | 1,351 |
Foreign tax credits |  |  | 3,242 |  |  |  | 290 |  |  |  | 3,026 |
Guarantee claim deduction |  |  | 1,141 |  |  |  | 1,141 |  |  |  | 1,141 |
Credit carry forwards |  |  | 2,582 |  |  |  | 1,853 |  |  |  | — |
Accruals and reserves |  |  | — |  |  |  | — |  |  |  | 114 |
Other deferred tax assets |  |  | 2,510 |  |  |  | 1,926 |  |  |  | 832 |
Gross deferred income tax assets |  |  | 26,722 |  |  |  | 13,881 |  |  |  | 11,371 |
Valuation allowance on deferred tax assets |  |  | — |  |  |  | — |  |  |  | (1,434 | )
Net deferred income tax assets |  |  | 26,722 |  |  |  | 13,881 |  |  |  | 9,937 |
Net deferred income tax assets (liabilities) |  | $ | (110,021 | ) |  | $ | (41,347 | ) |  | $ | 988 |
With the PEP Acquisition, we assumed $87.6 million in net deferred tax liabilities primarily related to book and tax basis difference in fixed assets and intangibles (excluding goodwill). With the Autocam acquisition, we assumed $43.8 million in net deferred tax liabilities primarily related to book and tax basis differences in fixed assets and intangibles (excluding goodwill). As realization of certain deferred tax assets is not assured, management believes it is more likely than not that those net deferred tax assets will be realized. However, the amount of the deferred tax assets considered realizable could be reduced based on changing conditions. Below is a summary of the activity in the total valuation allowances during the years ended December 31, 2015, 2014 and 2013:
|  | Balance at Beginning of Year |  |  | Additions |  |  | Recoveries |  |  | Balance at End of Year |
2015 |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
2014 |  | $ | 1,434 |  |  | $ | — |  |  | $ | (1,434 | ) |  | $ | — |
2013 |  | $ | 2,252 |  |  | $ | — |  |  | $ | (818 | ) |  | $ | 1,434 |
During 2014, the valuation allowance of $1.4 million on our previously recognized foreign tax credits was reduced by the full $1.4 million for credits which expired as of December 31, 2014. In addition to the foreign tax credits with the full valuation allowance, $1.3 million in foreign tax credits expired unused as of December 31, 2014. These foreign tax credits were not utilized during 2014, as management expected, due to the large amount of non-deductible mergers and acquisition costs incurred related to the four acquisitions completed in 2014. The remaining foreign tax credits, net operating loss and credit carry forwards are expected to be utilized before expiration. We record a valuation allowance when it is “more likely than not” that some portion or all of the deferred income tax assets will not be realized. In reaching this determination, we consider the future reversals of taxable temporary differences, future taxable income, exclusive of taxable temporary differences and carry forwards, taxable income in prior carryback years and tax planning strategies. Unremitted earnings of subsidiaries outside the United States are considered to be reinvested indefinitely at December 31, 2015. It is not practicable to determine the deferred tax liability for temporary differences related to those unremitted earnings. There has been no change in our long term international expansion plans as of December 31, 2015 and our intent and ability is to indefinitely reinvest our foreign earnings. We base this assertion on two factors. The first factor is our intention to invest in foreign countries that are strategically important to our Precision Bearing Components Group, Precision Engineered Products Group and our Autocam Precision Components Group businesses. With the acquisitions completed in 2015 and 2014, we have significantly expanded our international base of operations adding subsidiaries in Mexico, Bosnia and Herzegovina, Brazil, Poland, France and China which will require more foreign investment. Second, we have sufficient access to funds in the U.S. through projected free cash flows and the availability of our US credit facilities to fund currently anticipated domestic operational and investment needs. A reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding interest and penalties for the years ended December 31, 2015, 2014 and 2013 is as follows:
|  | 2015 |  |  | 2014 |  |  | 2013 |
Beginning balance |  | $ | 3,834 |  |  | $ | 873 |  |  | $ | 873 |
Additions for tax positions of prior years |  |  | 2,516 |  |  |  | 3,589 |  |  |  | — |
Reductions for tax positions of prior years |  |  | (626 | ) |  |  | (628 | ) |  |  | — |
Ending balance |  | $ | 5,724 |  |  | $ | 3,834 |  |  | $ | 873 |
As of December 31, 2015, the $5.7 million of unrecognized tax benefits would, if recognized, impact our effective tax rate. The addition for tax positions of prior years was added as part of the purchase price allocation of PEP in 2015 of $2.2 million and Autocam in 2014 of $2.8 million and was included in the fair value of assets acquired and liabilities assumed. (See Note 2 of Notes to Consolidated Financial Statements.) Interest and penalties related to federal, state, and foreign income tax matters are recorded as a component of the provision for income taxes in our Statements of Operations. During 2015, we accrued $30 thousand in foreign interest and $0.3 million in US interest. During 2014, we accrued $31 thousand in foreign interest and $17 thousand in US interest. During 2013, we accrued $32 thousand in foreign interest and penalties. As of December 31, 2015, the total amount accrued for interest and penalties was $1.4 million. We or our subsidiaries file income tax returns in the U.S. federal jurisdiction, and in various states and foreign jurisdictions. With few exceptions, we are no longer subject to federal, state and local income tax examinations by tax authorities for years before 2012. We are no longer subject to non-U.S. income tax examinations within various European Union countries for years before 2010. We do not foresee any significant changes to our unrecognized tax benefits within the next twelve months.

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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=6907707&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=6907707&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=6907707&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=6907707&loc=d3e32537-109319 + Details
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