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SEC Filings

LIQUIDITY SERVICES INC filed this Form 10-K on 11/21/2014
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Table of Contents

Liquidity Services, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

11. Income Taxes (Continued)

        The reconciliation of the U.S. federal statutory rate to the effective rate for continuing operations is as follows:

  Year ended September 30,  
  2014   2013   2012  

U.S. statutory rate

    35.0 %   35.0 %   35.0 %

Permanent items

    0.5     0.6      

State taxes

    2.7     3.9     3.9  

Net foreign rate differential

    (2.5 )   (0.7 )   (0.8 )

Change in valuation allowance

    3.6     1.3     1.5  

Provision for income taxes

    39.3 %   40.1 %   39.6 %

        At September 30, 2014 and 2013, the Company had deferred tax assets related to available foreign net operating loss (NOL) carryforwards of approximately $6,426,000 and $4,572,000, respectively. All but approximately $547,000 of our NOLs maintain an indefinite carryforward life. The NOLs with limited carryforward periods will expire beginning in 2017 through 2034. Due to historic losses of those foreign entities, the Company does not believe that it is more likely than not that the related deferred tax assets will be realized and a full valuation allowance has been recorded. In addition, the Company also recorded a deferred tax asset of $1,674,000 related to NOL carryforwards related to its acquisition of Network International, Inc. in 2010. These NOL carryforwards expire in 2023. The Company will adjust these NOL carryforwards and the related valuation allowance as the related tax returns are filed.

        The Company has not recorded a provision for deferred U.S. tax expense on the undistributed earnings of foreign subsidiaries since the Company intends to indefinitely reinvest the earnings of these foreign subsidiaries outside the U.S. The amount of such undistributed foreign earnings was approximately $8.0 million as of September 30, 2014. As of September 30, 2014 and 2013, approximately $9.3 million and $10.5 million, respectively, of cash and cash equivalents was held overseas and not available to fund domestic operations without incurring taxes upon repatriation.

        The Company applies the authoritative guidance related to uncertainty in income taxes. The Company has concluded that there were no uncertain tax positions identified during its analysis. The Company's policy is to recognize interest and penalties in the period in which they occur in the income tax provision. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions and in foreign jurisdictions, primarily Canada and the U.K. Currently, the Company is subject to income tax examinations for fiscal 2011 and 2012. The Company anticipates no material tax liability to arise from this examination. The statute of limitations for years prior to fiscal 2011 is now closed. However, certain tax attribute carryforwards that were generated prior to fiscal 2011 may be adjusted upon examination by tax authorities if they are utilized.

12. Stockholders' Equity

    2006 Omnibus Long-Term Incentive Plan

        In conjunction with the Company's initial public offering, the board of directors and the Company's shareholders approved the 2006 Omnibus Long-Term Incentive Plan, or the 2006 Plan, on