InfuSystem Holdings, Inc. Annual report pursuant to section 13 and 15(d)

Annual report pursuant to section 13 and 15(d)

Income Taxes

Income Taxes

12 Months Ended

Dec. 31, 2013

8.	Income Taxes

The following table summarizes income (loss) before income taxes for the years ended December 31 (in thousands):


	2013		2012
U.S income (loss)	$	2,281	$	(3,501	)
Non-U.S. income		419		1,349

Income (loss) before income taxes	$	2,700	$	(2,152	)

The following table summarizes the components of the consolidated provision for income taxes for the years ended December 31 (in thousands):


	2013			2012
U.S Federal income tax benefit (expense)
Current	$	—		$	93
Deferred		(1,107	)		717

Total U.S. Federal income tax benefit (expense)		(1,107	)		810
State and local income tax benefit (expense)
Current		(3	)		18
Deferred		(73	)		191

Total state and local income tax benefit (expense)		(76	)		209

Foreign income tax benefit (expense)
Current		152			(356	)

Total income tax benefit (expense)	$	(1,031	)	$	663

The following table summarizes a reconciliation of the effective income tax rate to the U.S. federal statutory rate for the years ended December 31 as follows:


	2013			2012
Income tax expense at the statutory rate		34.00	%		34.00	%
State and local income tax expense		(0.35	%)		1.78	%
Foreign income tax		(2.88	%)		(10.23	%)
Permanent differences		2.85	%		(5.38	%)
Resolution of uncertain tax positions		0.00	%		11.15	%
Other adjustments		4.58	%		(0.48	%)

Effective income tax rate		38.20	%		30.84	%

The following table summarizes the temporary differences and carryforwards that give rise to deferred tax assets and liabilities as of December 31 (in thousands):


	2013			2012
Deferred Federal income tax assets —
Bad debt reserves	$	1,635		$	1,075
Stock based compensation		736			635
Net operating loss		4,728			5,564
Accrued compensation		166			483
Alternative minimum tax credit		47			47
Inventories		77			70
Accrued rent		27			18
Goodwill and intangible assets		10,376			11,609
Other		44			14

Total deferred Federal income tax assets		17,836			19,515

Deferred Federal income tax liabilities —
Depreciation and asset basis differences		(1,199	)		(1,772	)

Total deferred Federal income tax liabilities		(1,199	)		(1,772	)

Net deferred Federal income tax asset		16,637			17,743
Net deferred state and local income tax asset		1,959			2,034

Net deferred income taxes	$	18,596		$	19,777

The classification of net deferred income taxes as of December 31, 2013 is summarized as follows (in thousands):


	Current		Long-term			Total
Deferred tax assets	$	2,296	$	19,011		$	21,307
Deferred tax liabilities		—		(2,711	)		(2,711	)

Net deferred income taxes	$	2,296	$	16,300		$	18,596

The classification of net deferred income taxes as of December 31, 2012 is summarized as follows (in thousands):


	Current		Long-term			Total
Deferred tax assets	$	1,971	$	21,751		$	23,722
Deferred tax liabilities		—		(3,945	)		(3,945	)

Net deferred income taxes	$	1,971	$	17,806		$	19,777

As of December 31, 2013 and 2012, the Company had federal and state net operating loss carryforward remaining of approximately $14.3 million and $16.4 million, respectively. The federal net operating losses can be used for a 20-year period, and if unused, will begin to expire in 2028. The state net operating losses have expiration periods which range from 5 to 20 years, vary by state, and will begin to expire in 2014. The Company expects to be able to utilize these net operating loss carryforwards and therefore has not recorded a valuation allowance which is discussed in more detail below.

The Company’s realization of its deferred tax assets is dependent upon many factors, including, but not limited to, the Company’s ability to generate sufficient taxable income. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. After reviewing the historical losses for non-recurring items, including the 2011 goodwill impairment, sufficient earnings history exists to support the realization of the deferred tax assets. This evidenced ability to generate sufficient taxable income is the basis for the Company’s assessment that the deferred tax assets are more likely than not to be realized. The Company is carrying on business in Canada as a branch; all the foreign earnings are repatriated to the U.S., concurrently subject to U.S. taxation and impact the effective tax rate.

The Company uses a recognition threshold and measurement attribute for the financial statement recognition of uncertain tax positions. The changes in unrecognized tax benefits were as follows for the years ended December 31:


	2013		2012
Beginning balance	$	—	$	240
Additions to prior year tax positions		—		—
Reductions to prior year tax positions		—		(109	)
Reductions for lapse in statute of limitations		—		(131	)

Ending balance	$	—	$	—

The federal income tax returns of the Company for the years 2010 through 2013 are subject to examination by the Internal Revenue Service. With respect to state jurisdictions, we are generally no longer subject to tax examinations on returns filed for the years prior to 2008. The state income tax returns and other state tax filings of the Company are subject to examination by the state taxing authorities, for various periods generally up to four years after they are filed. Canadian income tax returns of the Company for the years 2010 through 2013 are open to Canada Revenue Administration examination.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details