Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.20.4
Income Taxes
12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes
13.
Income Taxes
The components of income from continuing operations before provision for income taxes consisted of the following (in thousands):
 
    
Years Ended December 31,
 
    
2020
    
2019
    
2018
 
United States
   $ 62,206      $ 112,425      $ 119,446  
Foreign
     (2,842      (4,913      (2,226
    
 
 
    
 
 
    
 
 
 
     $ 59,364      $ 107,512      $ 117,220  
    
 
 
    
 
 
    
 
 
 
 
The provision for income taxes consisted of the following (in thousands):
 
    
Years Ended December 31,
 
    
2020
    
2019
    
2018
 
Federal:
                          
Current
   $ 12,437      $ 22,638      $ 24,101  
Deferred
     310        665        (268
    
 
 
    
 
 
    
 
 
 
       12,747        23,303        23,833  
    
 
 
    
 
 
    
 
 
 
State:
                          
Current
     3,616        7,718        6,004  
Deferred
     163        (507      162  
    
 
 
    
 
 
    
 
 
 
       3,779        7,211        6,166  
    
 
 
    
 
 
    
 
 
 
Foreign:
                          
Current
     —          —          —    
Deferred
     —          68        (36
    
 
 
    
 
 
    
 
 
 
       —          68        (36
    
 
 
    
 
 
    
 
 
 
     $ 16,526      $ 30,582      $ 29,963  
    
 
 
    
 
 
    
 
 
 
Significant components of the Company’s deferred tax assets, net consisted of the following (in thousands):
 
    
December 31,
 
    
2020
    
2019
 
Deferred Tax Assets:
                 
Accrued expenses and bonuses
   $ 3,078      $ 2,481  
Bad debt and other reserves
     4,889        2,744  
Deferred compensation
     12,536        13,346  
Operating lease ROU assets, net
     21,125        21,761  
Stock-based compensation
     7,403        7,847  
Net operating and capital loss carryforwards
     3,932        3,612  
State taxes
     (163      139  
Amortizable intangibles and other
     1,070        328  
    
 
 
    
 
 
 
Deferred tax assets before valuation allowance
     53,870        52,258  
Valuation allowance
     (4,418      (3,921
    
 
 
    
 
 
 
Deferred Tax Assets
     49,452        48,337  
    
 
 
    
 
 
 
Deferred Tax Liabilities:
                 
Fixed assets
     (6,814      (4,422
Operating lease liabilities
     (19,357      (20,117
Prepaid expenses
     (533      (940
Other comprehensive income
     (800      (552
Goodwill and other
     (574      (184
    
 
 
    
 
 
 
Deferred Tax Liabilities
     (28,078      (26,215
    
 
 
    
 
 
 
Deferred Tax Assets, Net
   $ 21,374      $ 22,122  
    
 
 
    
 
 
 
As of December 31, 2020, and 2019, the Company had state and Canadian net operating loss carryforwards of approximately $15.4 million and $14.0 million, respectively, principally all of which will begin to expire in 2033.
A valuation allowance is required when it is more-likely-than not that all or a portion of a deferred tax asset will not be realized. Realization of a deferred tax asset is dependent upon taxable income in prior carryback years, estimates of future taxable income, tax planning strategies and reversals of existing taxable temporary differences. The Company determined that as of December 31, 2020 and 2019, $4.4 million and $3.9 million, respectively, of the deferred tax assets related to state and Canadian losses do not satisfy the recognition criteria. The Company has therefore recorded a valuation allowance for this amount. The valuation allowance for deferred tax assets was increased by $497,000, $1.4 million and $677,000 during 2020, 2019 and 2018, respectively. The increases are primarily related to the Company’s Canadian operations.
The provision for income taxes differs from the amount computed by applying the statutory federal corporate income tax rate to income before provision for income taxes and consisted of the following (dollars in thousands):
 
    
Years Ended December 31,
 
    
2020
   
2019
   
2018
 
    
Amount
    
Rate
   
Amount
    
Rate
   
Amount
    
Rate
 
Income tax expense at the federal statutory rate
   $ 12,466        21.0   $ 22,578        21.0   $ 24,616        21.0
State income tax expense, net of federal benefit
     2,983        5.0     5,698        5.3     4,550        3.9
Windfall tax benefits, net related to stock-based compensation
     240        0.4     (196      (0.2 )%      (1,535      (1.3 )% 
Change in valuation allowance
     497        0.8     1,351        1.3     677        0.6
Permanent and other items
(1)
     340        0.6     1,151        1.0     1,655        1.4
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
 
     $ 16,526        27.8   $ 30,582        28.4   $ 29,963        25.6
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
 
 
(1)
 
Permanent items relate principally to compensation charges, qualified transportation fringe benefits, reversal of uncertain tax positions and meals and entertainment.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits consisted of the following (in thousands):
 
    
Years Ended December 31,
 
    
2020
    
2019
    
2018
 
Beginning balance
   $ 775      $ 1,246      $ —    
Gross increase (decrease) as a result of positions taken:
                          
Prior periods
     —          —          1,246  
Current period
     —          —          —    
Settlement with tax authorities
     —          —          —    
Expiration of applicable statutes of limitation
     (720      (471      —    
    
 
 
    
 
 
    
 
 
 
Ending balance
   $ 55      $ 775      $ 1,246  
    
 
 
    
 
 
    
 
 
 
It is reasonably possible that the unrecognized tax benefits balance may decrease by $55,000 during the next 12 months due to the expiration of the statute of limitations. During the years ended December 31, 2020 and 2019, penalties of $13,000 and $136,000, respectively, were recorded relating to unrecognized tax benefits.
 
The Company is subject to tax in various jurisdictions and, as a matter of ordinary course, the Company may be subject to income tax examinations by the federal, state and foreign taxing authorities for the tax years 2016 to 2020.
 
The Company is not currently under income tax examination by any taxing authority.
The Company has not provided for U.S. taxes on unremitted earnings of its foreign subsidiary as this subsidiary is operating at a loss and has no earnings and profits to remit. As a result, deferred taxes were not provided related to the cumulative translation adjustments.