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. 31, 2016

NOTE D – INCOME TAXES



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

	Year ended
	2014	2015	2016

Current
Federal	$ 22,362	$ 17,492	$ (4,361)
State	1,056	464	756
Foreign	16,265	32,198	45,568

Total Current	39,683	50,154	41,963

Deferred
Federal	(1,096)	(5,220)	(6,813)
State	(43)	(155)	(67)
Foreign	473	3,138	3,428

Total Deferred	(666)	(2,237)	(3,452)

	$ 39,017	$ 47,917	$ 38,511



The income tax provision, as reconciled to the tax computed at the federal statutory rate of 35% for 2014, 2015, and
2016, is as follows:
	Year ended
	2014	2015	2016

Federal income taxes at statutory rate	$ 40,479	$ 49,906	$ 48,493
State income taxes, net of federal tax benefit	653	670	689
Excess tax benefits on equity awards	-	-	(9,140)
Qualified production activities deduction	(887)	(952)	(856)
Foreign rate differential	(603)	(461)	(337)
U.S. research credit	(293)	(425)	(339)
All other, net	(332)	(821)	1

	$ 39,017	$ 47,917	$ 38,511

NOTE D – INCOME TAXES – CONTINUED



The significant categories of deferred taxes are as follows:
	January 2,	December 31,
	2016	2016
Deferred tax assets
Inventory	$ 3,341	$ 3,315
Accruals not currently deductible	5,892	5,233
Equity-based compensation expense	4,476	7,198
Intangible assets	9,283	8,591
Accumulated other comprehensive income	988	3,943
Tax credit carry forwards	-	3,698
Net operating losses	110	424
Other	3,428	4,365

Gross deferred tax assets	27,518	36,767
Valuation allowance	(607)	(640)

Net deferred tax assets	26,911	36,127

Deferred tax liabilities
Depreciation/amortization	(6,137)	(7,016)
Prepaid expenses	(1,566)	(2,222)
Intangible assets	(9,283)	(8,591)
Other	(4,663)	(5,505)

Gross deferred tax liabilities	(21,649)	(23,334)

Net deferred taxes	$ 5,262	$ 12,793



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

	January 2,	December 31,
	2016	2016

Net current deferred tax assets	$ 9,674	$ -
Net noncurrent deferred tax assets	9,844	18,292
Net current deferred tax liabilities	(4,434)	-
Net noncurrent deferred tax liabilities	(9,822)	(5,499)

Net deferred taxes	$ 5,262	$ 12,793

At December 31, 2016, the Company had foreign operating loss carry forwards of approximately $1,444. If these operating losses are not used, a portion of them will begin to expire in 2017. A valuation allowance of $424 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 D – INCOME TAXES – CONTINUED

Also at December 31, 2016, the Company reported U.S. foreign tax credit carry forwards of $3,351. These foreign tax credits can carry forward for 10 years and will not expire until 2026. The Company also reported $339 of U.S. research credit carry forwards. These research credit carry forwards can be carried forward for 20 years and will not expire until 2036. Because these carry-forward credits are expected to be utilized before expiration, no valuation allowance has been provided.

The Company has not recognized a deferred tax liability for the undistributed earnings of certain of its foreign operations that arose during 2016 and in prior years as the Company considers these earnings to be indefinitely reinvested. As of December 31, 2016, the undistributed earnings of these subsidiaries was $19,597. The repatriation of these earnings would result in a tax liability to the Company of approximately $3,083.

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 January 2, 2016 and December 31, 2016, 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 2013 under most circumstances. Certain taxing jurisdictions may provide for additional open years depending upon their statutes or if an audit is on-going.