USANA Health Sciences, 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. 28, 2013

NOTE – INCOME TAXES



Income tax expense (benefit) included in income from net earnings consists of the following:

	Year ended
	2011	2012	2013

Current
Federal	$ 22,383	$ 27,779	$ 26,233
State	1,913	1,141	94
Foreign	4,442	4,051	9,626

Total Current	28,738	32,971	35,953

Deferred
Federal	1,044	(145)	5,507
State	(71)	94	(5)
Foreign	(2,985)	(927)	(3,898)

Total Deferred	(2,012)	(978)	1,604

	$ 26,726	$ 31,993	$ 37,557



The income tax provision, as reconciled to the tax computed at the federal statutory rate of 35% for 2011, 2012, and
2013, is as follows:
	Year ended
	2011	2012	2013

Federal income taxes at statutory rate	$ 27,117	$ 34,449	$ 40,803
State income taxes, net of federal tax benefit	1,373	1,201	102
Qualified production activities deduction	(1,576)	(2,651)	(1,700)
Foreign income taxes	-	(337)	(890)
All other, net	(188)	(669)	(758)

	$ 26,726	$ 31,993	$ 37,557

NOTE – INCOME TAXES – CONTINUED



The significant categories of deferred taxes are as follows:
	December 29,	December 28,
	2012	2013
Deferred tax assets
Inventory differences	$ 2,415	$ 3,111
Accruals not currently deductible	2,533	5,345
Equity-based compensation	4,375	2,779
Intangible assets	9,532	10,590
Net operating losses	2,240	530
Other	2,675	2,315

Gross deferred tax assets	23,770	24,670
Valuation allowance	(1,598)	(530)

Net deferred tax assets	22,172	24,140

Deferred tax liabilities
Depreciation/amortization	(5,260)	(5,323)
Accumulated other comprehensive income	(3,833)	(3,418)
Prepaid expenses	(1,240)	(1,370)
Intangible assets	(10,521)	(10,590)
Other	(2,490)	(5,268)

Gross deferred tax liabilities	(23,344)	(25,969)

Net deferred taxes	$ (1,172)	$ (1,829)



The Components of deferred taxes, net on a jurisdiction basis are as follows:

	December 29,	December 28,
	2012	2013

Net current deferred tax assets	$ 4,255	$ 8,588
Net noncurrent deferred tax assets	5,956	5,519
Net current deferred tax liabilities	(1,382)	(5,070)
Net noncurrent deferred tax liabilities	(10,001)	(10,866)

Net deferred taxes	$ (1,172)	$ (1,829)

At December 28, 2013, the Company had foreign operating loss carry forwards of approximately $2,218. If these operating losses are not used, they will expire between 2014 and 2018. A valuation allowance of $530 has been placed on these foreign operating loss carry forwards. The valuation allowance is determined using a more likely than not realization criteria and is based upon all available positive and negative evidence, including future reversals of temporary differences. A future increase or decrease in the current valuation allowance is not expected to impact the income tax provision due to the Company’s ability to fully utilize foreign tax credits associated with taxable income in these jurisdictions.

NOTE – INCOME TAXES – CONTINUED

The Company has not recognized a deferred tax liability for the undistributed earnings of certain of its foreign operations that arose in 2013 and prior years as the Company considers these earnings to be indefinitely reinvested. As of December 28, 2013, the undistributed earnings of these subsidiaries was $10,200. If these earnings were repatriated to the United States, the Company would need to accrue and pay the related tax. However, the Company considers these earnings indefinitely re-invested and has no plans to repatriate these earnings.

The Company recognizes the impact of a tax position in the financial statements if that position is more likely than not of being sustained on audit, based on the technical merits of the position. As of December 29, 2012 and December 28, 2013, the Company had no significant unrecognized tax benefits.

From time to time, the Company is subject to federal, state, and foreign tax authority income tax examinations. The Company remains subject to income tax examinations for each of its open tax years, which extend back to 2010 under most circumstances. Certain taxing jurisdictions may provide for additional open years depending upon their statutes or if an audit is on-going.

- 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.

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