XML 37 R20.htm IDEA: XBRL DOCUMENT
v3.19.1

INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2018
INCOME TAXES | NOTE K — INCOME TAXES The components of income before income taxes and equity in earnings are as follows:
|  | Year Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
|  | (in thousands) |
Domestic |  | $ | 5,455 |  |  | $ | 17,728 |  |  | $ | 22,114 |
Foreign |  |  | (4,946 | ) |  |  | (6,949 | ) |  |  | (112 | )
Total income before income taxes and equity in earnings |  | $ | 509 |  |  | $ | 10,779 |  |  | $ | 22,002 |
The provision for income taxes (before equity in earnings) consists of:
|  | Year Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
|  | (in thousands) |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 775 |  |  | $ | 7,041 |  |  | $ | 8,000 |
State and local |  |  | 351 |  |  |  | 957 |  |  |  | 498 |
Foreign |  |  | (323 | ) |  |  | 4 |  |  |  | 483 |
Deferred |  |  | 2,086 |  |  |  | 1,030 |  |  |  | (1,951 | )
Income tax provision |  | $ | 2,889 |  |  | $ | 9,032 |  |  | $ | 7,030 |
On December 22 , 2017 , the Tax Act was enacted. The Tax Act revises the U.S. corporate income tax by, among other things, lowering the corporate income tax rate from 35 % to 21 %, adopting a quasi-territorial income tax system, imposing a one-time transition tax on foreign unremitted earnings, and setting limitations on the deductibility of certain costs (e.g., interest expense). For the year ended December 31 , 2017 , the Company accrued $ 338,000 of tax expense for the Tax Act’s one-time transition tax on the Company’s material wholly owned foreign subsidiaries’ accumulated, unremitted earnings and $ 3.0 million in provisional expense related to the net change in deferred tax assets stemming from the Tax Act’s reduction of the U.S. federal tax rate from 35 % to 21 %. In response to the Act, the U.S. Securities and Exchange Commission (“SEC”) provided guidance by issuing Staff Accounting Bulletin No. 118 (“SAB 118”), which has since been codified by the release of ASU No. 2018- 05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. ASU 2018-05 allows companies to record provisional amounts during a measurement period with respect to the impacts of the Act for which the accounting requirements under ASC Topic 740 are not complete, but a reasonable estimate has been determined. The measurement period under ASU 2018-05 ends when a company has obtained, prepared, and analyzed the information that was needed in order to complete the accounting requirements under ASC Topic 740, but cannot exceed one year. As of December, 31, 2018, the Company has completed the accounting for the effects of the Act. The Company has included the impact of the Act on its annual effective tax rate and has recorded an additional provision of $ 0.7 million primarily related to an adjustment to the estimated transition tax liability, including an uncertain tax position. Since January 1, 2018, the Tax Act has subjected the Company to a tax on global intangible low-taxed income (“ GILTI ”) earned by certain foreign subsidiaries, base erosion anti-abuse tax (“BEAT”), foreign derived intangible income tax (“ FDII ”), and IRC Section 163(j) interest limitation (“Interest Limitation”). Entities can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. The Company has elected to account for the GILTI tax as a current period expense. The Company did not have GILTI liability and was not subject to BEAT in 2018. The tax impact of FDII was immaterial. The Company incurred an Interest Limitation in 2018, resulting in a deferred tax asset related to interest carried forward of approximately $1.0 million. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred income tax assets and (liabilities) are as follows:
|  | December 31, |
|  | 2018 |  |  | 2017 |
|  | (in thousands) |
Deferred income tax assets: |  |  |  |  |  |  |  |
Deferred rent expense |  | $ | 3,504 |  |  | $ | 2,212 |
Stock options |  |  | 2,982 |  |  |  | 2,903 |
Inventory |  |  | 1,446 |  |  |  | 970 |
Operating loss and non-deductible interest carry-forward |  |  | 7,071 |  |  |  | 4,114 |
Accounts receivable allowances |  |  | 734 |  |  |  | 264 |
Accrued compensation |  |  | 1,026 |  |  |  | 623 |
Depreciation and amortization |  |  | — |  |  |  | 247 |
Other |  |  | 1,753 |  |  |  | 1,882 |
Total deferred income tax assets |  | $ | 18,516 |  |  | $ | 13,215 |
Deferred income tax liabilities: |  |  |  |  |  |  |  |
Fixed assets |  | $ | (2,540 | ) |  | $ | — |
Intangibles |  |  | (27,534 | ) |  |  | (8,732 | )
Equity in earnings |  |  | — |  |  |  | (56 | )
Total deferred income tax liabilities |  |  | (30,074 | ) |  |  | (8,788 | )
Net deferred income tax (liability) asset |  |  | (11,558 | ) |  |  | 4,427 |
Valuation allowance |  |  | (2,850 | ) |  |  | (3,024 | )
Net deferred income tax (liability) asset |  | $ | (14,408 | ) |  | $ | 1,403 |
As of December 31, 2018, a preliminary net deferred tax liability of $13.9 million was recorded in purchase accounting in connection with the Filament acquisition, including uncertain tax positions of $0.3 million. The Company continues to assess the tax accounting consideration under business combination accounting which concludes during the first quarter of 2019. The Company has generated various state net operating loss carryforwards of which $24.9 million remained at December 31, 2018 that begin to expire in 2026. The Company has net operating losses in foreign jurisdictions of $15.9 million at December 31, 2018 that begin to expire in 2020. The Company also has U.S. losses of $5.3 million that can be carried forward indefinitely and are subject to IRC section 382 limitations. The provision for income taxes (before equity in earnings) differs from the amounts computed by applying the applicable federal statutory rates as follows:
|  | Year Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Provision for federal income taxes at the statutory rate |  |  | 21.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
Increases (decreases): |  |  |  |  |  |  |  |  |  |  |  |
State and local income taxes, net of Federal income tax benefit |  |  | 97.4 |  |  |  | 6.1 |  |  |  | 3.6 |
Foreign rate differences |  |  | (110.3 | ) |  |  | 7.2 |  |  |  | (7.9 | )
Non-deductible expenses |  |  | 228.5 |  |  |  | 3.7 |  |  |  | 3.4 |
Tax Act- revaluation of net deferred tax assets and other |  |  | 16.8 |  |  |  | 27.7 |  |  |  | — |
Tax Act- transition tax |  |  | 43.0 |  |  |  | 3.1 |  |  |  | — |
Uncertain tax positions |  |  | 302.8 |  |  |  | 0.6 |  |  |  | — |
Research and development credit |  |  | (18.5 | ) |  |  | — |  |  |  | — |
Federal return to provision |  |  | (27.5 | ) |  |  | — |  |  |  | — |
Other |  |  | 14.4 |  |  |  | 0.4 |  |  |  | (2.1 | )
Provision for income taxes |  |  | 567.6 | % |  |  | 83.8 | % |  |  | 32.0 | %
The estimated values of the Company’s gross uncertain tax positions at December 31, 2018, 2017 and 2016 are liabilities of $2.0 million, $161,000 and $109,000, respectively, and consist of the following:
|  | Year Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
|  | (in thousands) |
Balance at January 1 |  | $ | (161 | ) |  | $ | (109 | ) |  | $ | (157 | )
Additions based on tax positions related to the current year |  |  | (626 | ) |  |  | (82 | ) |  |  | — |
Additions based on tax positions related to the prior year |  |  | (1,302 | ) |  |  | — |  |  |  | — |
Reductions for tax position of prior years |  |  | 114 |  |  |  | 30 |  |  |  | — |
Settlements |  |  | — |  |  |  | — |  |  |  | 48 |
Balance at December 31 |  | $ | (1,975 | ) |  | $ | (161 | ) |  | $ | (109 | )
The Company had approximately $29,000 and $24,000, net of federal and state tax benefit, accrued at December 31, 2018 and 2017, respectively, for the payment of interest. The Company’s policy for recording interest and penalties is to record such items as a component of the provision for income taxes. If the Company’s tax positions are ultimately sustained, the Company’s liability, including interest, would be reduced by $2.0 million, all of which would impact the Company’s tax provision. On a quarterly basis, the Company evaluates its tax positions and revises its estimates accordingly. The Company believes that it is reasonably possible that none of its tax positions will be resolved within the next twelve months. The Company is no longer subject to U.S. Federal income tax examinations for the years prior to 2015. The Company has identified the following jurisdictions as “major” tax jurisdictions: U.S. Federal, California, Massachusetts, Georgia, New Jersey, New Mexico, Texas and the United Kingdom. At December 31, 2018, the periods subject to examination by the Company’s major state jurisdictions are generally for the years ended 2014 through 2017 . In certain jurisdictions Filament may have additional periods subject to examination.

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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration