Income Taxes

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of (loss) income from continuing operations before income taxes and equity in losses of joint venture were as follows:

	Successor			Predecessor
	September 1, 2017 through December 31, 2017			January 1, 2017 through August 31, 2017		Year Ended December 31, 2016
Domestic	$	(16,934	)	$	27,153	$	(104,524	)
Non-United States ("U.S")	419			7,650		(7,935		)

The income taxes benefit consisted of the following components:

	Successor			Predecessor
	September 1, 2017 through December 31, 2017			January 1, 2017 through August 31, 2017			Year Ended December 31, 2016
Federal
current	$	—		$	—		$	—
deferred	(3,106		)	(1,412		)	(4,231		)
State
current	—			25			25
deferred	(316		)	—			(114		)
Foreign
current	249			953			1,783
deferred	(15		)	(953		)	(9		)
	$	(3,188	)	$	(1,387	)	$	(2,546	)

The items accounting for differences between the income tax benefit computed at the federal statutory rate and the provision for income taxes were as follows:

	Successor			Predecessor
	September 1, 2017 through December 31, 2017			January 1, 2017 through August 31, 2017			Year Ended December 31, 2016
Federal income tax at statutory rates	$	(5,780	)	$	12,181		$	(39,361	)
State income taxes, net of federal income tax benefits	(2,871		)	(2,347		)	(5,118		)
Permanent items:
Section 956 inclusions	294			2,132			13,132
Convertible debt – non-deductible	—			(29,903		)	3,024
Intercompany bad debt deduction	(11,680		)	—			—
Other permanent differences	943			1,941			2,719
Federal and state income tax on joint venture	—			—			(1,660		)
Rate differential on foreign income	(34		)	(490		)	795
Valuation allowance	19,157			15,771			23,746
Discrete impact of the Tax Act	(4,799		)	—			—
Other	1,582			(672		)	177
Income tax benefit	$	(3,188	)	$	(1,387	)	$	(2,546	)
Effective income tax benefit rate	19.3		%	(4.0		)%	2.3		%

On December 22, 2017, the U.S. enacted significant changes to the U.S. tax law following the passage and signing of the Tax Act. The Tax Act included significant changes to existing tax law, including, but not limited to, a permanent reduction to the U.S. federal corporate income tax rate from 35% to 21%.

On December 22, 2017, the SEC issued SAB 118, which expresses views of the SEC regarding ASC 740 in the reporting period that includes the enactment date of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record and provisional estimate in the financial statements.

As a result of the Tax Act's impact on the realizability of the Company's deferred tax assets, and after consideration of the impacts to valuation allowances, the Company has recognized a net tax benefit of $4,799, which was recorded as additional income tax benefit for the period September 1, 2017 through December 31, 2017 (Successor). The Company has recorded provisional adjustments but it has not completed its accounting for income tax effects for certain elements of the Tax Act.

A deferred tax asset of $17,044 at December 31, 2017 associated with the temporary difference between the financial reporting basis and tax basis at the Effective Date of an embedded derivative liability was reclassified from a liability to additional paid-in capital on December 31, 2017 (see Note 9 - Stockholders' Equity).

Significant components of deferred tax assets and liabilities of December 31, 2017 and 2016 are as follows:

	Successor			Predecessor
	December 31,			December 31,
	2017			2016
Deferred tax assets:
Pension and postretirement benefits	$	—		$	809
Deferred compensation	540			595
Restructuring related and other reserves	5			4
Alternative minimum tax and net operating loss carryforward	55,295			91,769
Intangible assets and goodwill	6,439			11,647
Other, net	1,692			2,818
Deferred tax assets before valuation allowance	63,971			107,642
Valuation allowance	(52,153		)	(79,908		)
Total deferred tax assets	$	11,818		$	27,734
Deferred tax liabilities:
Depreciation	$	4,991		$	5,006
Inventory	3,301			20,172
Pension	135			—
Excess of book basis over tax basis in investments	238			—
Convertible debt discount	17,773			1,883
Other, net	268			292
Total deferred tax liabilities	26,706			27,353
Net deferred tax (liabilities) assets	$	(14,888	)	$	381

As of December 31, 2017 (Successor), the Company had $162,523 of federal and $207,131 of state net operating loss carryforwards which will begin expiring in 2032 and 2018, respectively, $2,010 of federal AMT credits which will be fully refundable by 2021 as a result of the Tax Act, and $546 of state credit carryforwards which will begin expiring in 2024. Substantially all of the Company's federal and state net operating loss carryforwards are expected to be limited by IRC Section 382 due to the ownership change in 2017 resulting from the Company's restructuring through its chapter 11 cases. As of December 31, 2017 (Successor), the Company had $37,335 of foreign net operating loss carryforwards, of which a significant portion carry forward for an indefinite period.

The Company continues to maintain valuation allowances against substantially all U.S. and foreign deferred tax assets to reduce those deferred tax assets to amounts that are realizable either through future reversals of existing taxable temporary differences or through taxable income in carryback years for the applicable jurisdictions.

Activity in the Company's valuation allowances for the U.S. and non-U.S. operations were as follows:

	Successor			Predecessor
	September 1, 2017 through December 31, 2017			January 1, 2017 through August 31, 2017			Year Ended December 31, 2016
Domestic
Balance, beginning of period	$	47,898		$	69,683		$	55,474
Provision charged to expense	(6,403		)	(16,765		)	18,906
Fresh-start accounting adjustments	—			(5,020		)	—
Provision charged to discontinued operations and other comprehensive income	1,542			—			(4,697		)
Balance, end of period	$	43,037		$	47,898		$	69,683
Foreign
Balance, beginning of period	$	8,725		$	10,225		$	8,481
Impact of foreign exchange on beginning of period balance	230			633			(702		)
Fresh-start accounting adjustments	—			(354		)
Provision charged to expense	161			(1,779		)	2,446
Balance, end of period	$	9,116		$	8,725		$	10,225

The Company is subject to taxation in the U.S, state jurisdictions and foreign jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes and recording the related income tax assets and liabilities. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not criterion, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

In the ordinary course of business, the Company is subject to review by domestic and foreign taxing authorities, including the IRS. In general, the Company is no longer subject to audit by the IRS for tax years through 2012 and state, local or foreign taxing authorities for tax years through 2011. Currently, the Company is undergoing an income tax audit related to its Canadian operations for the years 2015 and 2016. The Company does not anticipate that any adjustments from this audit will have a material impact on its consolidated financial position, results of operations or cash flows.

During 2017, the Company pledged its foreign assets as collateral for the New ABL Facility. This resulted in a foreign income inclusion in the U.S. under IRC Section 956, which was comprised of current and accumulated earnings and profits. As a result of this inclusion and the deemed repatriation under the Tax Act, there are no remaining undistributed earnings as of December 31, 2017 (Successor) on which the Company would need to record any additional deferred tax liability in the U.S.