Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.6.0.2
Income Taxes
12 Months Ended
Dec. 31, 2016
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities. Deferred tax assets are reduced, if deemed necessary, by a valuation allowance for the amount of tax benefits which are not expected to be realized. Investment tax credits are recognized on the flow through method.
The provision (benefit) for income taxes consists of the following:
(In thousands)
2016
 
2015
 
2014
Current
 
 
 
 
 
U.S. Federal
$
21,667

 
$
24,809

 
$
22,705

State
2,899

 
2,382

 
3,797

Foreign
551

 
137

 
1,112

Deferred
 
 
 
 
 
U.S. Federal
(2,871
)
 
703

 
(3,035
)
State
(1,140
)
 
(1,019
)
 
(655
)
Foreign
(745
)
 
64

 
(987
)
 
$
20,361

 
$
27,076

 
$
22,937


The effective tax rates differ from the statutory federal income tax rate as follows:
 
2016
 
2015
 
2014
Statutory Federal Income Tax Rate
35.0
 %
 
35.0
 %
 
35.0
 %
Permanent Items
 
 
 
 
 
Non-deductible Stock Compensation Expense
1.1
 %
 
0.6
 %
 
0.6
 %
Domestic Production Activity Deduction
(3.3
)%
 
(2.9
)%
 
(2.6
)%
Other
0.2
 %
 
0.2
 %
 
0.1
 %
Foreign Tax Benefits
(1.1
)%
 
(1.1
)%
 
(1.7
)%
State Income Tax, Net of Federal Income Tax Effect
1.8
 %
 
0.9
 %
 
2.6
 %
Research and Development Tax Credits
(3.7
)%
 
(2.7
)%
 
(4.3
)%
Other
(0.4
)%
 
(1.2
)%
 
(0.7
)%
Effective Tax Rate
29.6
 %
 
28.8
 %
 
29.0
 %


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.
No provision has been made for U.S. federal or foreign taxes on that portion of certain foreign subsidiaries’ undistributed earnings ($13.1 million at December 31, 2016) considered to be permanently reinvested. It is not practicable to determine the amount of tax that would be payable if these amounts were repatriated to the U.S.
Significant components of the Company’s deferred tax assets and liabilities as of December 31, are as follows:
(In thousands)
2016
 
2015
Deferred Tax Assets:
 
 
 
Asset Reserves
$
9,208

 
$
8,709

Deferred Compensation
8,378

 
7,986

Capital Lease Basis Difference
1,690

 
1,753

State Investment and Research and Development Tax Credit Carryforwards, Net of Federal Tax
665

 
533

Customer Advanced Payments and Deferred Revenue
3,750

 
1,722

State Net Operating Loss Carryforwards and Other
4,282

 
2,401

Total Gross Deferred Tax Assets
27,973

 
23,104

Valuation Allowance for State Deferred Tax Assets and Tax Credit Carryforwards, Net of Federal Tax
(3,816
)
 
(2,640
)
Deferred Tax Assets
24,157

 
20,464

Deferred Tax Liabilities:
 
 
 
Depreciation
12,972

 
12,561

Goodwill and Intangible Assets
18,558

 
20,113

Other
1,280

 
1,199

Deferred Tax Liabilities
32,810

 
33,873

Net Deferred Tax Liabilities
$
(8,653
)
 
$
(13,409
)

The net deferred tax assets and liabilities presented in the Consolidated Balance Sheets are as follows at December 31:
(In thousands)
2016
 
2015
Other Assets — Long-term
$
2,644

 
$
1,558

Deferred Tax Liabilities — Long-term
(11,297
)
 
(14,967
)
Net Deferred Tax Liabilities
$
(8,653
)
 
$
(13,409
)

At December 31, 2016, state tax credit carryforwards amounted to approximately $1.0 million, of which $0.8 million will expire from 2017 through 2030 and $0.2 million will carryforward until utilized. At December 31, 2016, state net operating loss carryforwards which the Company expects to utilize amounted to approximately $8.2 million and expire at various dates between 2032 and 2034.
Due to the uncertainty as to the Company’s ability to generate sufficient taxable income in certain states in the future and utilize certain of the Company’s state operating loss carryforwards before they expire, the Company has recorded a valuation allowance accordingly. These state net operating loss carryforwards amount to approximately $52.9 million and expire at various dates from 2021 through 2035. The excess tax benefits associated with stock option exercises are recorded directly to shareholders’ equity only when realized and amounted to approximately $0.8 million, $3.0 million and $5.3 million for the years ended December 31, 2016, 2015, and 2014 respectively.
The Company has analyzed its filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. Should the Company need to accrue a liability for uncertain tax benefits, any interest associated with that liability would be recorded as interest expense. Penalties, if any, would be recorded as operating expenses. As of December 31, 2016, we no longer have any unrecognized tax benefits. Reserves for uncertain tax positions that had been recorded pursuant to ASC Topic 740-10 as of December 31, 2014 were reversed during the year-ended December 31, 2015. No additional reserves for uncertain income tax positions were deemed necessary for the year ended December 31, 2016. A reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties which are insignificant, is as follows:
(in thousands)
2016
 
2015
 
2014
Balance at Beginning of the Year
$

 
$
181

 
$
1,940

Decreases as a Result of Tax Positions Taken in Prior Years

 
(181
)
 
(1,901
)
Increases as a Result of Tax Positions Taken in the Current Year

 

 
142

Balance at End of the Year
$

 
$

 
$
181



There are no penalties or interest liabilities accrued as of December 31, 2016 or 2015, nor are any material penalties or interest costs included in expense for each of the years ended December 31, 2016, 2015 and 2014. The years under which we conducted our evaluation coincided with the tax years currently still subject to examination by major federal and state tax jurisdictions, those being 2013 through 2016 for federal purposes and 2012 through 2016 for state purposes.
Pretax income from the Company’s foreign subsidiaries amounted to $1.6 million, $3.6 million and $4.3 million for 2016, 2015 and 2014, respectively. The balance of pretax earnings for each of those years were domestic.