Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

Significant Components of Company's Deferred Tax Assets and Liabilities

Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

	December 31,
	2014			2013
Deferred tax assets:
Net operating losses (federal and state)	$	2,996		$	8,994
Accrued expenses		9,381			7,995
Accrued workers compensation costs		13,964			5,489
Stock-based compensation		2,508			1,669
Tax benefits relating to uncertain positions		20			72
Tax credits (federal and state)		9,865			4,318
Other		354			160
Total		39,088			28,697
Valuation allowance		(6,945	)		(5,194	)
Total deferred tax assets		32,143			23,503
Deferred tax liabilities:
Depreciation and amortization		(10,643	)		(22,259	)
Deferred service revenues		(77,827	)		(24,456	)
Prepaid health plan expenses		(2,202	)		(1,143	)
Total deferred tax liabilities		(90,672	)		(47,858	)
Net deferred tax liabilities	$	(58,529	)	$	(24,355	)

Deferred Tax Assets and Liabilities Classified in Consolidated Balance Sheets

The deferred tax assets and liabilities presented above are classified in the accompanying consolidated balance sheets as follows (in thousands):

	December 31,
	2014			2013
Net current deferred tax liabilities	$	(65,713	)	$	(16,535	)
Net non-current deferred tax liabilities		-			(8,888	)
Net current deferred tax assets		-			68
Net non-current deferred tax assets		7,184			1,000
Net deferred tax liabilities	$	(58,529	)	$	(24,355	)

Provision for Income Taxes

The provision for income taxes consists of the following (in thousands):

	Year Ended December 31
	2014			2013			2012
Current:
Federal	$	(31,111	)	$	11,319		$	10,699
Foreign		230			217			142
State		4,618			3,081			1,845
		(26,263	)		14,617			12,686
Deferred:
Federal		38,297			(5,659	)		6,610
State		5,545			(1,021	)		1,048
		43,842			(6,680	)		7,658
	$	17,579		$	7,937		$	20,344

U.S. Federal Statutory Income Tax Rate Reconciled to Effective Tax Rate

The U.S. federal statutory income tax rate reconciled to the Company’s effective tax rate is as follows:

	Year Ended December 31
	2014			2013			2012
U.S. federal statutory tax rate		35.00	%		35.00	%		35.00	%
State income taxes, net of federal benefit		3.8			3.8			3.4
Tax rate change		7.8			1.5			0.7
Nondeductible transaction costs		0.9			-			0.6
Nondeductible meals, entertainment and penalties		4.3			4.1			0.9
Stock-based compensation		4.5			(0.1	)		0.1
Uncertain tax positions		0.8			(2.3	)		(0.2	)
Tax credits		(3.6	)		(4.3	)		(0.9	)
Other		(0.3	)		(0.1	)		(0.6	)
		53.20	%		37.60	%		39.00	%

Reconciliation of Beginning and Ending Amount of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalties) is as follows (in thousands):

	December 31,
	2014			2013			2012
Unrecognized tax benefits at January 1	$	2,300		$	2,710		$	2,516
Additions for tax positions of prior periods		25			–			110
Additions for tax positions of current period		182			286			49
Additions due to acquisitions		–			–			509
Reductions for tax positions of prior period:
Settlements with taxing authorities		–			(406	)		–
Lapse of applicable statute of limitations		–			(290	)		(330	)
Adjustments to tax positions		(36	)		–			(144	)
Unrecognized tax benefits at December 31	$	2,471		$	2,300		$	2,710

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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