Note J - Income Taxes

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

NOTE J—INCOME TAXES

Income tax expense consisted of the following at December 31:

	2014		2013			2012
Current:
Federal	$	13,383	$	15,154		$	7,730
State		3,151		3,247			1,328
Foreign		3,563		1,651			1,184
		20,097		20,052			10,242
Deferred:
Federal		3,264		2,523			10,977
State		399		323			2,550
Foreign		360		(2	)		67
		4,023		2,844			13,594
Income Tax Expense	$	24,120	$	22,896		$	23,836

      Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes. Such amounts are classified in the consolidated statements of financial position as current or non-current assets or liabilities based upon the classification of the related assets and liabilities.

Deferred tax assets (liabilities) consisted of the following at December 31:

	2014			2013
Deferred Tax Assets
Current:
Stock option compensation	$	319		$	503
Allowance for bad debt		789			687
Accrued PTO		1,975			2,647
Accrued bonus		608			524
Foreign tax credits		322			642
Accrued liabilities		1,890			1,474
Total current deferred tax asset		5,903			6,477
Non-current:
Foreign net operating loss (NOL) carry forward		542			513
Federal/state net operating loss (NOL) carry forward		3,447			271
Stock option compensation		3,757			2,237
Deferred rent		5,086			4,096
Deferred compensation		2,823			2,273
Foreign tax credits		2,060			947
State tax credits		1,016			712
Federal tax credits		225			—
Foreign exchange		447			—
Accrued liabilities and other		1,375			2,592
Total non-current deferred tax assets		20,778			13,641
Less: Valuation Allowance		(542	)		(513	)
Total Deferred Tax Assets	$	26,139		$	19,605
Deferred Tax Liabilities
Current:
Retention	$	(1,899	)	$	(1,319	)
Prepaids		(1,549	)		(946	)
Payroll taxes		(1,064	)		(819	)
Unbilled revenue		(8,483	)		(9,449	)
Other		(219	)		(88	)
Total current deferred liability		(13,214	)		(12,621	)
Non-current:
Depreciation		(8,766	)		(4,751	)
Amortization		(39,318	)		(19,022	)
Other		(39	)		(135	)
Total non-current deferred tax liabilities		(48,123	)		(23,908	)
Total Deferred Tax Liabilities		(61,337	)		(36,529	)
Total Net Deferred Tax Liability	$	(35,198	)	$	(16,924	)

At December 31, 2014 and 2013, the Company had net operating loss (“NOL”) carry-forwards for foreign income taxes of approximately $1.9 million and $1.6 million, respectively, all of which may be carried forward indefinitely.

At December 31, 2014, the Company had NOL carry-forwards for U.S. federal and state income tax purposes of approximately $14 million, which expire in 2034. The Company also had federal tax credits totaling $0.2 million, all of which may be carried forward indefinitely. The Company acquired these NOLs and credits as a result of its purchase of Olson in November 2014. Internal Revenue Code Section 382 imposes an annual limitation on the use of a corporation’s NOLs, tax credits and other carryovers after an “ownership change” occurs.

Section 382 imposes an annual limitation on the amount of post-ownership change taxable income a corporation may offset with pre-ownership change NOLs and credits. In general, the annual limitation is determined by multiplying the value of the corporation’s stock immediately before the ownership change (subject to certain adjustments) by the applicable long-term tax-exempt rate. Any unused portion of the annual limitation is available for use in future years until such NOLs are scheduled to expire (in general, NOLs may be carried forward 20 years). The Company presently estimates that it will be able to fully utilize the acquired NOLs and credits prior to their expiration.

At December 31, 2014, the Company had gross state income tax credit carry-forwards of approximately $1.5 million, which expire between 2017 and 2024. A deferred tax asset of approximately $1.0 million (net of federal benefit) has been established related to these state income tax credit carry-forwards as of December 31, 2014.

The need to establish valuation allowances for deferred assets is based on a more-likely-than-not threshold that the benefit of such assets will be realized in future periods. Appropriate consideration has been given to all available evidence, including historical operating results, projections of taxable income, and tax planning alternatives. The Company concluded that a valuation allowance of approximately $0.5 million is required for tax attributes related to specified foreign jurisdictions as of each of December 31, 2014 and 2013.

Effective January 1, 2009, the Company made no provisions for deferred U.S. income taxes or additional foreign taxes on any unremitted earnings of its controlled foreign subsidiaries because the Company considers these earnings to be permanently invested. If these earnings were repatriated, in the form of dividends or otherwise, the Company would be subject to U.S. income tax on these earnings. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable due to the complexities associated with this hypothetical calculation; however, unrecognized foreign tax credit carry forwards would be available to reduce some portion of the U.S. tax liability. The Company has $2.4 million of foreign tax credits available for carry forward related to its foreign branch operations as of December 31, 2014.

On September 13, 2013, the Treasury Department and the Internal Revenue Service issued final regulations regarding the deduction and capitalization of amounts paid to acquire, produce, improve or dispose of tangible personal property. These regulations are generally effective for tax years beginning on or after January 1, 2014. The application of these regulations did not have a material impact on the consolidated financial statements for fiscal year 2014.

The total amount of unrecognized tax benefits as of both December 31, 2014 and 2013, was $0.7 million. Included in the balance as of December 31, 2014 and 2013, were $0.6 million and $0.2 million, respectively, of tax positions that, if recognized, would impact the effective tax rate.

The unrecognized tax benefit reconciliation, excluding penalty and interest, is as follows:

Unrecognized tax benefits at January 1, 2012	$	1,061
Increase attributable to tax positions taken during the current period		78
Decrease attributable to lapse of statute of limitations		(48	)
Unrecognized tax benefits at December 31, 2012		1,091
Decrease attributable to settlements		(8	)
Increase attributable to tax positions taken during a prior period		43
Decrease attributable to lapse of statute of limitations		(424	)
Unrecognized tax benefits at December 31, 2013		702
Increase (decrease) in unrecognized tax benefits		—
Unrecognized tax benefits at December 31, 2014	$	702

The Company’s policy is not to recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. The Company had approximately $0.2 million of accrued penalty and interest at both December 31, 2014, and 2013, respectively.

The Company’s 2008 through 2014 tax years remain subject to examination by the Internal Revenue Service for U.S. federal tax purposes. In addition, certain significant state and foreign tax jurisdictions are either currently under examination or remain open under the statute of limitations and subject to examination for the tax years from 2008 to 2014.

Although the Company believes it has adequately provided for all uncertain tax positions, amounts asserted by taxing authorities could be greater than the Company’s accrued position. Accordingly, additional provisions on federal, state and foreign income tax related matters could be recorded in the future as revised estimates are made or the underlying matters are effectively settled or otherwise resolved. Conversely, the Company could settle positions with the tax authorities for amounts lower than have been accrued. The Company believes it is reasonably possible that, during the next 12 months, the Company’s liability for uncertain tax positions may decrease by approximately $0.3 million.     

The Company’s provision for income taxes differs from the anticipated United States federal statutory rate. Approximate differences between the statutory rate and the Company’s provision are as follows:

	2014			2013			2012
Taxes at statutory rate		35.0	%		35.0	%		35.0	%
State taxes, net of federal benefit		4.2	%		4.2	%		4.6	%
Foreign tax rate differential and U.S. unrepatriated earnings		(0.6	)%		(0.3	)%		(0.3	)%
Other permanent differences		2.0	%		0.7	%		0.8	%
Prior year tax adjustments and changes in unrecognized tax benefits		(2.3	)%		(2.1	)%		(0.9	)%
Tax credits		(0.7	)%		(0.7	)%		(0.7	)%
		37.6	%		36.8	%		38.5	%