XML 50 R13.htm IDEA: XBRL DOCUMENT v2.4.1.9
Income Taxes
3 Months Ended
Mar. 31, 2015
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The Company evaluates its deferred tax assets quarterly to determine if valuation allowances are required. In assessing the realizability of deferred tax assets, the Company considers both positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The Company recognized valuation allowances of $2.0 million and $1.8 million against its deferred tax assets related to certain state tax jurisdictions as of March 31, 2015 and December 31, 2014, respectively. During the three months ended March 31, 2015 and 2014, the Company increased its valuation allowances against deferred tax assets related to continuing operations by $0.2 million and $0.1 million, respectively. The Company is not permitted to carry back any of its existing tax net operating losses related to certain state tax jurisdictions; therefore, to the extent the Company generates future tax net operating losses, the Company may be required to increase the valuation allowance on deferred tax assets, which may increase the effective tax rate. However, given our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that we are able to actually achieve.
As of December 31, 2014, the Company recognized a liability for uncertain tax positions of $2.9 million within accrued expenses and other liabilities on the condensed consolidated balance sheets related to a payment during 2013 to The Gores Group, LLC (“Gores”) to terminate our management services agreement with Gores (the “Gores Termination Fee”). During the three months ended March 31, 2015, the Company received new information, including a favorable tax ruling from the Internal Revenue Service. With this new information, the Company believes it is more likely than not that its recognition of the payment of the Gores Termination Fee as a deduction will be sustained under examination. During the three months ended March 31, 2015, the Company recognized a $3.0 million tax benefit (the “Gores Termination Fee Tax Benefit”), which resulted from the removal of the liability for uncertain tax positions of $2.9 million and an increase in its deferred tax assets of $0.2 million related to state net operating loss carry-forwards, which were offset by an increase in a valuation allowance of $0.1 million related to the expected realization of these state net operating loss carry-forwards. As of March 31, 2015, the Company has no remaining liabilities for uncertain tax positions.

For the three months ended March 31, 2015, the Company’s effective income tax rate including discontinued operations and other discrete items was 207.6%. Excluding the discrete tax impact related to the Gores Termination Fee Tax Benefit, the effective tax rate from continuing operations for the three months ended March 31, 2015 was 33.5%, which varied from the federal statutory rate of 35% primarily due to the reduction in the annual effective tax rate from a permanent domestic manufacturing deduction under Internal Revenue Code Section 199 (the “Manufacturing Deduction”). For the three months ended March 31, 2014, the Company’s effective income tax rate including discontinued operations and other discrete items was 31.1%, which varied from the federal statutory rate of 35% primarily due to the unfavorable impact of non-deductible secondary offering transaction costs and a reduction in the annual effective tax rate from the Manufacturing Deduction.
The effective income tax rate on continuing operations for the three months ended March 31, 2015 was 206.4% compared to an effective income tax rate on continuing operations of 31.2% for the three months ended March 31, 2014. The increase in the tax rate was primarily due to the discrete tax impact related to the Gores Termination Fee Tax Benefit.