Hillman Solutions Corp. Annual report pursuant to Section 13 and 15(d)

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

The components of the Company’s income tax provision for the three years ended December 31, 2013 were as follows:


	Year Ended December 31,
	2013			2012			2011
Current:
Federal & State	$	552		$	206		$	217
Foreign		795			344			317

Total current		1,347			550			534

Deferred:
Federal & State		(2,857	)		(5,000	)		(5,119	)
Foreign		(890	)		(746	)		(271	)

Total deferred		(3,747	)		(5,746	)		(5,390	)

Valuation allowance		(381	)		28			177

Provision (benefit) for income taxes	$	(2,781	)	$	(5,168	)	$	(4,679	)

The table below reflects the significant components of the Company’s net deferred tax assets and liabilities at December 31, 2013 and 2012:


	As of December 31, 2013						As of December 31, 2012
	Current			Non-current			Current			Non-current
Deferred Tax Asset:
Inventory	$	8,377		$	—		$	5,994		$	—
Bad debt reserve		978			—			1,116			—
Casualty loss reserve		297			410			708			308
Accrued bonus / deferred compensation		1,805			4,608			1,546			1,592
Litigation settlement accrual		—			546			—			—
Derivative security value		(120	)		—			740			—
Medical insurance reserve		355			—			508			—
Deferred lease incentive		—			389			—			422
Original issue discount amortization		—			596			—			536
Transaction costs		—			3,454			—			3,348
Federal / foreign net operating loss		—			20,595			—			23,164
State net operating loss		—			2,524			—			2,963
Unrecognized tax benefit		—			(2,024	)		—			(3,002	)
Federal capital loss carryforwards		—			—			—			374
Tax credit carryforwards		—			2,881			—			2,618
All other items		10			718			578			835

Gross deferred tax assets		11,702			34,697			11,190			33,158
Valuation allowance for deferred tax assets		(606	)		(2,302	)		(726	)		(2,374	)

Net deferred tax assets	$	11,096		$	32,395		$	10,464		$	30,784

Deferred Tax Liability:
Intangible asset amortization	$	—		$	135,335		$	—		$	135,946
Property and equipment		—			17,106			—			12,504
All other items		—			14			—			283

Deferred tax liabilities	$	—		$	152,455		$	—		$	148,733

Net deferred tax liability				$	108,964					$	107,485

Long term net deferred tax liability				$	120,060					$	117,949
Current net deferred tax asset					11,096						10,464
Long term net deferred tax asset					—						—

Net deferred tax liability				$	108,964					$	107,485

Below is a reconciliation of statutory income tax rates to the effective income tax rates for the periods indicated:


	Year Ended December 31,
	2013			2012			2011
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
Non-U.S. taxes and the impact of non-U.S. losses for which a current tax benefit is not available		-19.6	%		-6.1	%		-0.9	%
State and local income taxes, net of U.S. federal income tax benefit		-0.1	%		1.9	%		2.5	%
Adjustment of reserve for change in valuation allowance and other items		15.0	%		1.2	%		-1.2	%
Adjustment for change in tax law		8.9	%		-0.4	%		-2.6	%
Adjustment of unrecognized tax benefits		36.6	%		11.6	%		0.0	%
Permanent differences:
Acquisition and related transaction costs		-4.0	%		-0.9	%		0.0	%
Meals and entertainment expense		-3.5	%		-1.1	%		-0.9	%
Other permanent differences		0.0	%		0.0	%		0.0	%
Reconciliation of tax provision to return		2.0	%		0.5	%		0.5	%
Reconciliation of other adjustments		0.5	%		0.0	%		0.0	%

Effective income tax rate		70.8	%		41.7	%		32.4	%

A summary of the changes for the last three years follows:


	2013			2012			2011
Unrecognized tax benefits - January 1	$	3,002		$	4,440		$	4,433

Gross increases - tax positions in current period		—			—			7
Gross increases - tax positions in prior period		560			—			—
Gross decreases - tax positions in prior period		(1,538	)		(1,438	)		—

Unrecognized tax benefits - December 31	$	2,024		$	3,002		$	4,440


Amount of unrecognized tax benefit that, if recognized would affect the company’s effective tax rate	$	2,024		$	3,002		$	4,440