The weighted average grant date fair value of restricted stock units granted during the three-month periods
ended June 30, 2018 and 2017 was $34.47 and $33.06, respectively. The total grant date fair value of restricted stock units that vested during the three-month periods ended June 30, 2018 and 2017 was approximately $3,340,000 and
$2,373,000, respectively.
As of June 30, 2018, there was $30,256,000 of total unrecognized compensation cost related to unvested share-based
awards. This cost is expected to be recognized over a weighted average remaining requisite service period of 4.60 years.
12. Income Taxes
The Companys effective tax rate for the three- and
six-month
periods ended June 30,
2018 was 18.7% and 22.1%, respectively, compared to (130.9%) and (49.0%), respectively, for the corresponding periods in the prior year. The effective tax rate for the three-month period ended June 30, 2018
was lower than the U.S. statutory rate of 21% due to R&D credit activity and windfall benefits on stock option exercises and restricted stock vestings, partially offset by state tax effects and the impact of the Global Intangible
Low-Taxed
Income (GILTI) tax enacted as part of the Act enacted in December 2017. The effective tax rate for the
six-month
period ended June 30, 2018 was
higher than the U.S. statutory tax rate of 21% due to state tax effects and the impact of the GILTI tax. For the three- and
six-month
periods ended June 30, 2017, the effective tax rate was lower than the
U.S. statutory tax rate of 34% primarily due to the sale of intellectual property from Repligen Corporation to Repligen Sweden AB. The Company utilized certain of its U.S. deferred tax assets as a result of this sale and reduced its valuation
allowance on these deferred tax assets by approximately $9,200,000 in the second quarter of 2017. The Company recorded a tax benefit of $5,625,000 on the Companys consolidated statement of operations as a result of the sale of the intellectual
property.
ASU
2016-16
requires the income tax consequences of intra-entity transfers of assets other than
inventory to be recognized when the intra-entity transfer occurs rather than deferring recognition of income tax consequences until the transfer was made with an outside party. The Company adopted the provisions of this ASU in the first quarter of
2018. The adoption resulted in a decrease of $5,609,000 to other assets, a decrease of $4,932,000 to deferred tax liabilities and a decrease of $677,000 to accumulated deficit at January 1, 2018.
At December 31, 2017, the Company had net operating loss carryforwards of approximately $19,652,000 in the U.S., net operating loss carryforwards of
approximately 603,000 (approximately $743,000) in Germany, federal business tax credit carryforwards of $297,000 and state business tax credit carryforwards of approximately $99,000 available to reduce future domestic income taxes, if any. The
net operating loss and business tax credits carryforwards will continue to expire at various dates through December 2037. The net operating loss and business tax credit carryforwards are subject to review and possible adjustment by the Internal
Revenue Service. While an IRC Section 382 study was completed in the second quarter of 2017, and no current limitations were identified, use of these net operating loss and business tax credit carryforwards may be limited in the future based on
certain changes in the ownership interest of significant stockholders.
On December 22, 2017, the Act was signed into law. The Act made significant
changes to federal tax law, including, but not limited to, a reduction in the federal income tax rate from 35% to 21%, taxation of certain global intangible
low-taxed
income, allowing for immediate expensing
of qualified assets, stricter limits on deductions for interest and certain executive compensation, and a
one-time
transition tax on previously deferred earnings of certain foreign subsidiaries. Due to the
complexities involved in accounting for the enactment of the Act, the SEC issued Staff Accounting Bulletin No. 118 (SAB 118), which allows a registrant to record provisional amounts during a measurement period not to extend beyond
one year of the enactment date. Under the SAB 118 guidance, the Company has determined that although its accounting for the effect of certain provisions of the Act is incomplete, it is able to make reasonable estimates for certain effects of tax
reform and therefore have recorded provisional amounts.
The Act lowered the Companys U.S. statutory federal tax rate from 35% to 21% effective
January 1, 2018. The Company recorded a tax benefit of $12,812,000 in the year ended December 31, 2017 for the reduction in its US deferred tax assets and liabilities resulting from the rate change.
The Company is subject to a territorial tax system under the Act, in which the Company is required to provide for tax on GILTI earned by certain foreign
subsidiaries. Additionally, the Company is required to make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI
in the year the tax is incurred as a period expense. As of June 30, 2018, the Company is still evaluating the effects of the GILTI provisions as guidance and interpretations continue to emerge. Therefore, the Company has not determined its
accounting policy on the GILTI provisions. However, the standard requires that the Company reflects the impact of the GILTI provisions as a period expense until the accounting policy is finalized. Therefore, the Company has included the provisional
estimate of GILTI related to current-year operations in its estimated annual effective tax rate only and will be updating the impact and accounting policy as the analysis related to the GILTI provisions is completed.
The Act also includes a
one-time
deemed repatriation transition tax whereby entities that are shareholders of a
specified foreign corporation must include in gross income the undistributed and previously untaxed post-1986 earnings and profits of the specified foreign corporation. The provisional amount recorded at December 31, 2017 increased the
Companys tax provision by $3,266,000. This amount may change as the Company refines its calculations of post-1986 earnings and profits for our foreign subsidiaries, as well as the amounts held in cash.
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