Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.7.0.1
Income Taxes
12 Months Ended
Dec. 31, 2016
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES
Income tax benefit (expense) for the years ended December 31 is as follows:
 
2016
 
2015
 
2014
Current income tax benefit (expense)
 
 
 
 
 
Federal
$

 
$

 
$

State
94

 

 

Foreign
(1,036
)
 
(225
)
 

 
(942
)
 
(225
)
 

Deferred income tax benefit (expense)
 
 
 
 
 
Federal
2,113

 
24,151

 
(14,112
)
State
6,936

 
9,736

 
1,420

Foreign
(2,560
)
 
1,035

 
9

Net operating loss carryforwards created
105,165

 
88,110

 
61,640

 
111,654

 
123,032

 
48,957

Income tax benefit (expense) before valuation allowances
110,712

 
122,807

 
48,957

Deferred tax valuation allowances
(114,980
)
 
(114,106
)
 
(52,529
)
Income tax benefit (expense)
$
(4,268
)
 
$
8,701

 
$
(3,572
)

A reconciliation of the reported amount of income tax expense to the amount computed by applying the statutory federal income tax rate to earnings from continuing operations before income taxes is as follows:
 
2016
 
2015
 
2014
U.S. Federal income tax expense at a statutory rate of 35 percent
$
(17,143
)
 
$
56,144

 
$
(30,139
)
State taxes, net of federal income tax benefit
11,442

 
12,777

 
5,119

Tax position on government incentives
117,630

 
85,423

 
76,662

Goodwill impairment tax impact
2,876

 
(35,062
)
 

Bargain purchase gain

 
1,875

 

Foreign net operating loss expiration
(2,383
)
 

 

Other
(1,710
)
 
1,650

 
(2,685
)
Total (expense) benefits for income taxes before valuation allowances
110,712

 
122,807

 
48,957

Valuation allowances
(114,980
)
 
(114,106
)
 
(52,529
)
Total benefit (expense) for income taxes
$
(4,268
)
 
$
8,701

 
$
(3,572
)

The Company receives government incentive payments and excludes this revenue from federal and state taxable income. This tax position of excluding government incentives from taxable income has been accepted by the Internal Revenue Service under audit for 2010 and 2011 and has been approved by the Joint Committee on Taxation. As a result of excluding these government incentive payments, the Company currently has cumulative losses in recent years and initially established a valuation allowance in 2013 to reduce its total deferred tax assets to the amount more-likely-than-not to be realized.
In 2015, the Company had a non-cash impairment charge for goodwill of $175,028, of which $91,961 was not deductible for tax purposes. A $32,186 tax impact related to the non-deductible portion of the goodwill impairment charge is reflected in the tax reconciliation above for 2015 in the amount of $35,062, offset with $2,876 in 2016.
The tax effects of temporary differences that give rise to the Company’s deferred tax assets and liabilities at December 31 are as follows:
 
2016
 
2015
Deferred Tax Assets:
 
 
 
Goodwill
$
42,082

 
$
39,172

Net operating loss carryforwards
346,768

 
243,865

Tax credit carryforwards
1,597

 
1,597

Start-up costs
857

 
988

Stock-based compensation
5,853

 
4,703

Terminal leases
2,603

 
3,859

Capitalized research and development
11,394

 
8,096

Accrued compensation
4,419

 
2,546

Inventory capitalization
3,227

 
2,046

Allowance for doubtful accounts
800

 
567

Other
2,363

 
1,569

Deferred tax assets
421,963

 
309,008

Deferred Tax Liabilities:
 
 
 
Prepaid expenses
(1,724
)
 
(1,338
)
Property, plant and equipment
(61,431
)
 
(65,398
)
Intangibles
(3,591
)
 
(3,909
)
Deferred revenue
(3,454
)
 

Convertible debt
(5,797
)
 
(3,626
)
Unrealized gain (loss) on available for sale investments
874

 
(1,752
)
Other
(2,084
)
 
(2,007
)
Deferred tax liabilities
(77,207
)
 
(78,030
)
Net deferred tax assets (liabilities)
344,756

 
230,978

Valuation allowance
(365,035
)
 
(250,164
)
Net deferred taxes
$
(20,279
)
 
$
(19,186
)

At December 31, 2016, the Company has recorded a deferred tax asset of $346,768 reflecting the benefit of federal, state and foreign net operating loss carry-forwards. Federal net operating loss carry-forward totals $887,228 and will begin to expire in 2028, while the amount and expiration dates of state net operating losses vary by jurisdiction. Changes in ownership of the Company, as defined by Section 382 of the Internal Revenue Code of 1986, as amended, may limit the utilization of federal and state net operating losses and credit carry-forwards in any one year. The Company has performed an ownership change analysis in 2016 to determine the impact of changes in ownership on utilization of carry-forward attributes, the results of which have been incorporated into our financial statements.
In evaluating available evidence around the recoverability of net deferred tax assets, the Company considers, among other factors, historical financial performance, expectation of future earnings, length of statutory carry-forward periods and ability to carry back losses to prior periods, experience with operating loss and tax credit carry-forwards expiring unused, tax planning strategies and timing for the of reversals of temporary differences. In evaluating losses, management considers the nature, frequency and severity of losses in light of the conditions giving rise to those losses. As a result of the above described tax position of excluding government incentive payments from taxable income, the Company currently has cumulative losses in recent years and has established a valuation allowance to reduce its total deferred tax assets to the amount more-likely-than-not to be realized. Activity regarding the valuation allowance for deferred tax assets was as follows:
 
2016
 
2015
 
2014
Beginning of year balance
$
250,164

 
$
136,547

 
$
76,916

Changes in valuation allowance charged to income
114,980

 
114,106

 
52,529

Foreign currency translation
(109
)
 
(773
)
 

Acquisition

 
284

 
7,102

End of year balance
$
365,035

 
$
250,164

 
$
136,547


The Company analyzes filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, and all open tax years in these jurisdictions to determine if it has any uncertain tax positions on any of its income tax returns. An uncertain tax position represents the Company’s expected treatment of a tax position taken in a filed tax return, or planned to be taken in a tax return not yet filed, that has not been reflected in measuring income tax expense for financial reporting purposes. The Company does not recognize income tax benefits associated with uncertain tax positions where it is determined that it is not more-likely-than-not, based on the technical merits, that the position will be sustained upon examination.
A reconciliation of the total amounts of unrecognized tax benefits at December 31 is as follows:
 
2016
 
2015
 
2014
Beginning and end of year balance
$
1,900

 
$
1,900

 
$
1,900


The amount of unrecognized tax benefits that would affect the effective tax rate if the tax benefits were recognized was $0 at December 31, 2016, 2015 and 2014. The remaining liability for unrecognized tax benefits is related to tax positions for which there is a related deferred tax asset. The Company does not believe it is reasonably possible that the amounts of unrecognized tax benefits existing as of December 31, 2016 will significantly increase or decrease over the next twelve months. Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense. The Company has not recorded any such amounts in the periods presented.
The Company is subject to tax in the U.S. and various state and foreign jurisdictions. The U.S. Internal Revenue Service has examined the Company's federal income tax returns through 2008, as well as 2010 and 2011. All other years are subject to examination, while various state and foreign income tax returns also remain subject to examination by state taxing authorities.
The Company considers its foreign earnings of non U.S. subsidiaries to be permanently reinvested. Any amount would become taxable upon a repatriation of assets from the subsidiary or a sale or liquidation of the subsidiary. The Company has not made a provision for U.S. or additional foreign withholding taxes. The Company has $0 deferred tax liability related to investments in its foreign subsidiaries.  If the Company had a deferred tax liability related to its foreign subsidiaries it would be unrecorded as the Company considers its foreign earnings indefinitely reinvested.