EDGEWATER TECHNOLOGY INC/DE/ - 10-K filing on 2014-03-10

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Components of Company's Income Tax Provision

Significant components of the Company’s income tax (benefit) provision consisted of the following:


	Year Ended December 31,
	2013			2012			2011
	(In Thousands)
Current tax expense:
Federal	$	-		$	-		$	-
State		234			263			650
Foreign		95			93			57

		329			356			707
Deferred tax expense (benefit):
Federal		5,088			1,178			333
State		748			173			49
Foreign		-			-			-
Change in valuation allowance		(36,226	)		(1,323	)		(324	)

		(30,390	)		28			58
Unrecognized tax benefit		(28	)		17			78

Income tax provision	$	(30,089	)	$	401		$	843

Statutory Federal Tax Rate of Income (Loss) from Continuing Operations

The differences in income taxes determined by applying the statutory federal tax rate of 34% to income (loss) from continuing operations before income taxes and the amounts recorded in the accompanying consolidated statements of comprehensive income result from the following:


	Year Ended December 31,
	2013						2012						2011
	Amount			Rate			Amount			Rate			Amount			Rate
	(Dollar Amounts In Thousands)
Income tax at statutory rate	$	1,570			34.0	%	$	628			34.0	%	$	404			34.0	%
Add (deduct):
State income taxes, net of federal tax benefit		243			5.2			174			9.4			435			36.6
Tax rate difference on foreign income taxes		47			1.0			188			10.1			222			18.7
Tax rate change on deferred tax attributes		(169	)		(3.6	)		-			-			-
Non-deductible items		98			2.1			160			8.6			(243	)		(20.4	)
Net decrease in deferred tax attributes		4,370			94.6			516			27.9			319			26.9
Decrease in valuation allowance against certain deferred tax assets		(36,226	)		(784.3	)		(1,323	)		(71.6	)		(324	)		(27.3	)
Unrecognized tax benefits		(28	)		(0.6	)		17			0.9			78			6.6
Other, net		6			0.1			41			2.4			(48	)		(4.1	)

	$	(30,089	)		(651.5	)%	$	401			21.7	%	$	843			71.0	%

Components of Deferred Tax Assets and Liabilities

Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2013 and 2012 are as follows:


	December 31,
	2013			2012
	(In Thousands)
Deferred income tax assets:
Net operating loss carryforwards and credits	$	19,552		$	24,883
Acquired intangible assets		7,543			8,121
Reserves and accruals		1,656			2,149
Share-based compensation		2,775			2,438
Depreciation		346			268

Total deferred income tax assets		31,872			37,859
Deferred income tax liabilities:
Acquired intangible assets		(96	)		(213	)
Other		(4	)		(6	)

Total deferred income tax liabilities		(100	)		(219	)
Valuation allowance		(1,500	)		(37,726	)

Deferred income tax asset (liability), net	$	30,272		$	(86	)

Components of the Net Deferred Tax Assets (Liabilities)

Components of the net deferred tax assets (liabilities) reported in the accompanying consolidated balance sheets are as follows:


	December 31, 2013						December 31, 2012
	Current			Long-term			Current			Long-term
	(In Thousands)
Assets	$	1,238		$	30,625		$	1,119		$	36,610
Liabilities		(4	)		(87	)		(3	)		(86	)
Valuation allowance		(59	)		(1,441	)		(1,110	)		(36,616	)

Net deferred tax asset (liability)	$	1,175		$	29,097	)	$	6		$	(92	)

Deferred Tax Valuation Allowance

Annual changes to the deferred tax valuation allowance are as follows:


	Year Ended December 31,
	2013			2012			2011
	(In Thousands)
Balance, beginning of year	$	37,726		$	39,049		$	39,373
Additions		—			—			—
Reductions, net		(36,226	)		(1,323	)		(324	)

Balance, end of year	$	1,500		$	37,726		$	39,049

Reconciliation of Unrecognized Tax Benefits

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:


	Year Ended December 31,
	2013			2012			2011
	(In Thousands)
Gross unrecognized tax benefits at beginning of year	$	140		$	155		$	203
Increases in tax positions in the current year		—			—			—
Settlements		(32	)		(15	)		(48	)

Gross unrecognized tax benefits at end of year	$	108		$	140		$	155