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10-K
GRAHAM HOLDINGS CO filed this Form 10-K on 02/23/2018
Entire Document
 


imposed by the Tax Act on unremitted non-U.S. subsidiary earnings. The Company estimates that unremitted non-U.S. subsidiary earnings, when distributed, will not be subject to tax except to the extent non-U.S. withholding taxes are imposed. Accordingly, the Company recorded net deferred tax benefits and a corresponding reduction in deferred tax liabilities of $28.3 million in the fourth quarter of 2017 with respect to unremitted non-U.S. subsidiary earnings. Approximately $1.6 million of deferred tax liabilities remain recorded on the books with respect to future non-U.S. withholding taxes the Company estimates may be imposed on future cash distributions. The Company estimates that it will not receive a future U.S. tax benefit for $2.5 million of existing foreign tax credit carryovers as a result of the Tax Act changes; accordingly, the Company established a full valuation allowance of $2.5 million at December 31, 2017.
In March 2016, the FASB issued new guidance that requires all excess tax benefits and tax deficiencies related to stock-based compensation to be recognized in the income statement. The Company adopted the new guidance as of January 1, 2017. As a result of the adoption, the Company recognized $6.0 million in excess tax benefits related to stock-based compensation in 2017. Excess tax benefits and tax deficiencies that occurred prior to January 1, 2017 were not recognized in the income statement, and were instead recorded to additional paid-in capital.
During 2016, certain intercompany loans were capitalized and other intercompany loans were designated as long-term investments, resulting in the write-off of $11.0 million in U.S. deferred tax assets. Also, the Company benefited from a favorable $5.6 million out of period deferred tax adjustment related to the KHE goodwill impairment recorded in the third quarter of 2015.
During 2015, in addition to the income tax provision for continuing operations presented above, the Company also recorded tax expense on discontinued operations. Income from discontinued operations and net (loss) gain on dispositions of discontinued operations have been reclassified from previously reported income from operations and reported separately as income from discontinued operations, net of tax. Tax expense of $27.8 million was recorded in discontinued operations in 2015
Deferred income taxes consist of the following:
 
As of December 31
(in thousands)
2017
 
2016
Accrued postretirement benefits
$
5,333

 
$
9,444

Other benefit obligations
78,815

 
120,792

Accounts receivable
5,481

 
10,780

State income tax loss carryforwards
35,434

 
23,178

U.S. Federal income tax loss carryforwards
2,857

 
6,212

U.S. Federal foreign income tax credit carryforwards
2,522

 
1,921

Non-U.S. income tax loss carryforwards
18,797

 
19,246

Non-U.S. capital loss carryforwards
2,336

 
1,929

Other
26,546

 
44,401

Deferred Tax Assets
178,121

 
237,903

Valuation allowances
(48,742
)
 
(41,319
)
Deferred Tax Assets, Net
$
129,379

 
$
196,584

Property, plant and equipment
11,248

 
13,591

Prepaid pension cost
283,604

 
349,878

Unrealized gain on available-for-sale securities
70,827

 
61,964

Goodwill and other intangible assets
109,428

 
132,997

Non-U.S. withholding tax
1,606

 

Deferred Tax Liabilities
$
476,713

 
$
558,430

Deferred Income Tax Liabilities, Net
$
347,334

 
$
361,846

The Company has $635.1 million of state income tax net operating loss carryforwards available to offset future state taxable income. State income tax loss carryforwards, if unutilized, will start to expire approximately as follows:
(in millions)
 
2018
$
8.3

2019
2.6

2020
18.3

2021
20.1

2022
1.0

2023 and after
584.8

Total
$
635.1


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