| The Company and Significant Accounting Policies | 2. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES Nature of Business The Company is a leading global media company that, through its television and radio segments, reaches and engages U.S. Hispanics across acculturation levels and media channels. Additionally, the Company’s digital segment, whose operations are located primarily in Spain, Mexico, Argentina and other countries in Latin America, reaches a global market. The Company’s portfolio encompasses integrated marketing and media solutions, comprised of television, radio, and digital properties (including data analytics services). The Company’s management has determined that the Company operates in three reportable segments as of September 30, 2018, based upon the type of advertising medium, which segments are television, radio, and digital. As of September 30, 2018, the Company owns and/or operates 55 primary television stations, located primarily in California, Colorado, Connecticut, Florida, Kansas, Massachusetts, Nevada, New Mexico, Texas and Washington, D.C. The Company’s television operations comprise the largest affiliate group of both the top-ranked primary television network of Univision and Univision’s UniMás network. The television broadcasting segment includes revenue generated from advertising, retransmission consent agreements and the monetization of the Company’s spectrum assets. Radio operations consist of 49 operational radio stations, 38 FM and 11 AM, in 16 markets located in Arizona, California, Colorado, Florida, Nevada, New Mexico and Texas. The Company also operates Entravision Solutions as its national sales representation division, through which it sells advertisements and syndicate radio programming to more than 300 stations across the United States. The Company operates a proprietary technology and data platform that delivers digital advertising in various advertising formats that allows advertisers to reach audiences across a wide range of Internet-connected devices on its owned and operated digital media sites, the digital media sites of its publisher partners, and on other digital media sites it can access through third-party platforms and exchanges. Restricted Cash As of September 30, 2018, the Company’s balance sheet includes $0.8 million in restricted cash, which was deposited into a separate account as temporary collateral for the Company’s letters of credit. As of December 31, 2017, the Company’s balance sheet includes $222.3 million in restricted cash of which $221.5 million relates to proceeds received by the Company for its participation in the Federal Communications Commission (“FCC”) auction for broadcast spectrum which were deposited into the account of a qualified intermediary to comply with Internal Revenue Code Section 1031 requirements to execute a like-kind exchange. The remaining $0.8 million in restricted cash was used as temporary collateral for the Company’s letters of credit. Related Party Substantially all of the Company’s stations are Univision- or UniMás-affiliated television stations. The Company’s network affiliation agreement with Univision provides certain of its owned stations the exclusive right to broadcast Univision’s primary network and UniMás network programming in their respective markets. Under the network affiliation agreement, the Company retains the right to sell no less than four minutes per hour of the available advertising time on stations that broadcast Univision network programming, and the right to sell approximately four and a half minutes per hour of the available advertising time on stations that broadcast UniMás network programming, subject to adjustment from time to time by Univision. Under the network affiliation agreement, Univision acts as the Company’s exclusive third-party sales representative for the sale of certain national advertising on the Company’s Univision- and UniMás-affiliate television stations, and it pays certain sales representation fees to Univision relating to sales of all advertising for broadcast on the Company’s Univision- and UniMás-affiliate television stations. During the three-month periods ended September 30, 2018 and 2017, the amount the Company paid Univision in this capacity was $2.2 million and $2.4 million, respectively. During the nine-month periods ended September 30, 2018 and 2017, the amount the Company paid Univision in this capacity was $6.4 million and $7.1 million, respectively. The Company also generates revenue under two marketing and sales agreements with Univision, which gives the Company the right to manage the marketing and sales operations of Univision-owned Univision affiliates in six markets – Albuquerque, Boston, Denver, Orlando, Tampa and Washington, D.C. Under the Company’s proxy agreement with Univision, the Company grants Univision the right to negotiate the terms of retransmission consent agreements for its Univision- and UniMás-affiliated television station signals. Among other things, the proxy agreement provides terms relating to compensation to be paid to the Company by Univision with respect to retransmission consent agreements entered into with multichannel video programming distributors (“MVPDs”). As of September 30, 2018, the amount due to the Company from Univision was $4.3 million related to the agreements for the carriage of its Univision and UniMás-affiliated television station signals. During the three-month periods ended September 30, 2018 and 2017, retransmission consent revenue accounted for approximately $8.4 million and $8.5 million, respectively, of which $6.5 million and $8.3 million, respectively, relate to the Univision proxy agreement. During the nine-month periods ended September 30, 2018 and 2017, retransmission consent revenue accounted for approximately $26.4 million and $23.9 million, respectively, of which $21.5 million and $22.9 million, respectively, relate to the Univision proxy agreement. The term of the proxy agreement extends with respect to any MVPD for the length of the term of any retransmission consent agreement in effect before the expiration of the proxy agreement. Univision currently owns approximately 10% of the Company’s common stock on a fully-converted basis. The Class U common stock held by Univision has limited voting rights and does not include the right to elect directors. As the holder of all of the Company’s issued and outstanding Class U common stock, so long as Univision holds a certain number of shares, the Company will not, without the consent of Univision, merge, consolidate or enter into another business combination, dissolve or liquidate the Company or dispose of any interest in any Federal Communications Commission license for any of its Univision-affiliated television stations, among other things. Each share of Class U common stock is automatically convertible into one share of Class A common stock (subject to adjustment for stock splits, dividends or combinations) in connection with any transfer to a third party that is not an affiliate of Univision. Stock-Based Compensation The Company measures all stock-based awards using a fair value method and recognizes the related stock-based compensation expense in the consolidated financial statements over the requisite service period. As stock-based compensation expense recognized in the Company’s consolidated financial statements is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Stock-based compensation expense related to grants of stock options and restricted stock units was $1.3 million and $1.1 million for the three-month periods ended September 30, 2018 and 2017, respectively. Stock-based compensation expense related to grants of stock options and restricted stock units was $3.7 million and $3.1 million for the nine-month periods ended September 30, 2018 and 2017, respectively. Stock Options Stock-based compensation expense related to stock options is based on the fair value on the date of grant using the Black-Scholes option pricing model and is amortized over the vesting period, generally between 1 to 4 years. As of September 30, 2018, there was less than $0.1 million of total unrecognized compensation expense related to grants of stock options that is expected to be recognized over a weighted-average period of 0.4 years. Restricted Stock Units Stock-based compensation expense related to restricted stock units is based on the fair value of the Company’s stock price on the date of grant and is amortized over the vesting period, generally between 1 to 4 years. The following is a summary of non-vested restricted stock units granted (in thousands, except grant date fair value data):
Nine-Month Period
Ended September 30, 2018
Number
Weighted-Average
Restricted stock units
120
$
4.00
As of September 30, 2018, there was approximately $3.7 million of total unrecognized compensation expense related to grants of restricted stock units that is expected to be recognized over a weighted-average period of 1.3 years. Income (Loss) Per Share The following table illustrates the reconciliation of the basic and diluted income (loss) per share computations required by Accounting Standards Codification (“ASC”) Topic 260, “Earnings per Share” (in thousands, except share and per share data):
Three-Month Period
Nine-Month Period
Ended September 30,
Ended September 30,
2018
2017
2018
2017
Basic earnings per share:
Numerator:
Net income (loss)
$
2,215
$
157,208
$
5,248
$
163,321
Denominator:
Weighted average common shares outstanding
88,852,342
90,517,492
89,371,750
90,370,679
Per share:
Net income (loss) per share
$
0.02
$
1.74
$
0.06
$
1.81
Diluted earnings per share:
Numerator:
Net income (loss)
$
2,215
$
157,208
$
5,248
$
163,321
Denominator:
Weighted average common shares outstanding
88,852,342
90,517,492
89,371,750
90,370,679
Dilutive securities:
Stock options and restricted stock units
1,270,083
1,643,616
1,202,913
1,615,267
Diluted shares outstanding
90,122,425
92,161,108
90,574,663
91,985,946
Per share:
Net income (loss) per share
$
0.02
$
1.71
$
0.06
$
1.78
Basic income (loss) per share is computed as net income (loss) divided by the weighted average number of shares outstanding for the period. Diluted income (loss) per share reflects the potential dilution, if any, that could occur from shares issuable through stock options and restricted stock awards. For the three-month period ended September 30, 2018 there were no dilutive securities excluded from the computation of diluted income per share. For the nine-month period ended September 30, 2018, a total 92,979 shares of dilutive securities were not included in the computation of diluted income per share because the exercise prices of the dilutive securities were greater than the average market price of the common shares. For the three- and nine-month periods ended September 30, 2017, a total of 277 and 11,346 shares of dilutive securities, respectively, were not included in the computation of diluted income per share because the exercise prices of the dilutive securities were greater than the average market price of the common shares. Treasury Stock Treasury stock is included as a deduction from equity in the Stockholders’ Equity section of the consolidated balance sheets. On July 13, 2017, the Board of Directors approved a share repurchase program of up to $15.0 million of the Company’s outstanding common stock. Board of Directors approved the repurchase of up to an additional $15.0 million of the Company’s Class A common stock, for a total repurchase authorization of up to $30.0 million. Under the share repurchase program, the Company is authorized to purchase shares from time to time through open market purchases or negotiated purchases, subject to market conditions and other factors There were no repurchases of 2017 Credit Facility On November 30, 2017 (the “Closing Date”), the Company entered into its 2017 Credit Facility pursuant to the 2017 Credit Agreement. The 2017 Credit Facility consists of a $300.0 million senior secured Term Loan B Facility (the “Term Loan B Facility”), which was drawn in full on the Closing Date. In addition, the 2017 Credit Facility provides that the Company may increase the aggregate principal amount of the 2017 Credit Facility by up to an additional $100.0 million plus the amount that would result in its first lien net leverage ratio (as such term is used in the 2017 Credit Agreement) not exceeding 4.0 to 1.0, subject to satisfying certain conditions. Borrowings under the Term Loan B Facility were used on the Closing Date to (a) repay in full all of the Company’s and its subsidiaries’ outstanding obligations under the Company’s previous credit facility (“2013 Credit Facility”) and to terminate the agreement governing the 2013 Credit Facility (“2013 Credit Agreement”), (b) pay fees and expenses in connection with the 2017 Credit Facility, and (c) for general corporate purposes. The 2017 Credit Facility is guaranteed on a senior secured basis by certain of its existing and future wholly-owned domestic subsidiaries, and is secured on a first priority basis by the Company’s and those subsidiaries’ assets. The Company’s borrowings under the 2017 Credit Facility bear interest on the outstanding principal amount thereof from the date when made at a rate per annum equal to either: (i) the Eurodollar Rate (as defined in the 2017 Credit Agreement) plus 2.75%; or (ii) the Base Rate (as defined in the 2017 Credit Agreement) plus 1.75%. The Term Loan B Facility expires on November 30, 2024 (the “Maturity Date”). The amounts outstanding under the 2017 Credit Facility may be prepaid at the Company’s option without premium or penalty, provided that certain limitations are observed, and subject to customary breakage fees in connection with the prepayment of a Eurodollar rate loan. The principal amount of the Term Loan B Facility shall be paid in installments on the dates and in the respective amounts set forth in the 2017 Credit Agreement, with the final balance due on the Maturity Date. Subject to certain exceptions, the 2017 Credit Facility contains covenants that limit the ability of the Company and its restricted subsidiaries to, among other things:
•
incur liens on the Company’s property or assets;
•
make certain investments;
•
incur additional indebtedness;
•
consummate any merger, dissolution, liquidation, consolidation or sale of substantially all assets;
•
dispose of certain assets;
•
make certain restricted payments;
•
make certain acquisitions;
•
enter into substantially different lines of business;
•
enter into certain transactions with affiliates;
•
use loan proceeds to purchase or carry margin stock or for any other prohibited purpose;
•
change or amend the terms of the Company’s organizational documents or the organization documents of certain restricted subsidiaries in a materially adverse way to the lenders, or change or amend the terms of certain indebtedness;
•
enter into sale and leaseback transactions;
•
make prepayments of any subordinated indebtedness, subject to certain conditions; and
•
change the Company’s fiscal year, or accounting policies or reporting practices. The 2017 Credit Facility also provides for certain customary events of default, including the following:
•
default for three (3) business days in the payment of interest on borrowings under the 2017 Credit Facility when due;
•
default in payment when due of the principal amount of borrowings under the 2017 Credit Facility;
•
failure by the Company or any subsidiary to comply with the negative covenants and certain other covenants relating to maintaining the legal existence of the Company and certain of its restricted subsidiaries and compliance with anti-corruption laws;
•
failure by the Company or any subsidiary to comply with any of the other agreements in the 2017 Credit Agreement and related loan documents that continues for thirty (30) days [or ten (10) days in the case of failure to comply with covenants related to inspection rights of the administrative agent and lenders and permitted uses of proceeds from borrowings under the 2017 Credit Facility] after the Company’s officers first become aware of such failure or first receive written notice of such failure from any lender;
•
default in the payment of other indebtedness if the amount of such indebtedness aggregates to $15.0 million or more, or failure to comply with the terms of any agreements related to such indebtedness if the holder or holders of such indebtedness can cause such indebtedness to be declared due and payable;
•
certain events of bankruptcy or insolvency with respect to the Company or any significant subsidiary;
•
final judgment is entered against the Company or any restricted subsidiary in an aggregate amount over $15.0 million, and either enforcement proceedings are commenced by any creditor or there is a period of thirty (30) consecutive days during which the judgment remains unpaid and no stay is in effect;
•
any material provision of any agreement or instrument governing the 2017 Credit Facility ceases to be in full force and effect; and
•
any revocation, termination, substantial and adverse modification, or refusal by final order to renew, any media license, or the requirement (by final non-appealable order) to sell a television or radio station, where any such event or failure is reasonably expected to have a material adverse effect. The Term Loan B Facility does not contain any financial covenants. In connection with the Company entering into the 2017 Credit Agreement, the Company and its restricted subsidiaries also entered into a Security Agreement, pursuant to which the Company and the Credit Parties each granted a first priority security interest in the collateral securing the 2017 Credit Facility for the benefit of the lenders under the 2017 Credit Facility. Additionally, the 2017 Credit Agreement contains a definition of “Consolidated EBITDA” that excludes revenue related to the Company’s participation in the FCC auction for broadcast spectrum and related expenses, as compared to the definition of “Consolidated Adjusted EBITDA” under the 2013 Credit Agreement which included such items. The carrying amount of the Term Loan B Facility as of September 30, 2018 was was Derivative Instruments Prior to November 28, 2017, the Company used derivatives in the management of interest rate risk with respect to interest expense on variable rate debt. The Company was party to interest rate swap agreements with financial institutions that fixed the variable benchmark component (LIBOR) of its interest rate on a portion of its term loan beginning December 31, 2015. On November 28, 2017, the Company terminated these swap agreements in conjunction with the refinancing of its debt. The Company’s current policy prohibits entering into derivative instruments for speculation or trading purposes. The carrying amount of the Company’s interest rate swap agreements were recorded at fair value, including consideration of non-performance risk, when material. The fair value of each interest rate swap agreement was determined by using multiple broker quotes, adjusted for non-performance risk, when material, which estimate the future discounted cash flows of any future payments that may be made under such agreements. Fair Value Measurements The Company measures certain financial assets and liabilities at fair value on a recurring basis. Fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. ASC Topic 820, “Fair Value Measurements and Disclosures” (“Topic 820”), defines and establishes a framework for measuring fair value and expands disclosures about fair value measurements. In accordance with Topic 820, the Company has categorized its financial assets and liabilities, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy as set forth below. Level 1 – Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the company has the ability to access at the measurement date. Level 2 – Assets and liabilities whose values are based on quoted prices for similar attributes in active markets; quoted prices in markets where trading occurs infrequently; and inputs other than quoted prices that are observable, either directly or indirectly, for substantially the full term of the asset or liability. Level 3 – Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheets (in millions):
September 30, 2018
Total Fair Value and Carrying Value on Balance
Fair Value Measurement Category
Sheet
Level 1
Level 2
Level 3
Assets:
Money market account
$
83.3
$
-
$
83.3
$
-
Certificates of deposit
$
8.2
$
-
$
8.2
$
-
Corporate bonds
$
124.2
$
-
$
124.2
$
-
Liabilities:
Contingent consideration
$
15.0
$
-
$
-
$
15.0
December 31, 2017
Total Fair Value and Carrying Value on Balance
Fair Value Measurement Category
Sheet
Level 1
Level 2
Level 3
Liabilities:
Contingent consideration
$
15.9
$
-
$
-
$
15.9
As of September 30, 2018, the Company held investments in a money market fund, certificates of deposit, and corporate bonds. All certificates of deposit are within the current Federal Deposit Insurance Corporation insurance limits and all corporate bonds are investment grade. The Company’s available for sale securities are comprised of certificates of deposit and bonds. These securities are valued using quoted prices for similar attributes in active markets (Level 2). Since these investments are classified as available for sale, they are recorded at their fair market value within “Marketable securities” in the consolidated balance sheet and their unrealized gains or losses are included in “Accumulated other comprehensive income (loss)”. As of September 30, 2018, the following table summarizes the amortized cost and the unrealized gains (losses) of the available for sale securities (in thousands):
Certificates of Deposit
Corporate Bonds
Amortized Cost
Unrealized gains (losses)
Amortized Cost
Unrealized gains (losses)
Due within a year
$
2,400
$
(5)
$
25,118
$
(67
)
Due after one year through five years
5,882
(53)
100,528
(1,393)
Total
$
8,282
$
(58)
$
125,646
$
(1,460
) The Company periodically reviews its available for sale securities for other-than-temporary impairment. For the three- and nine-month periods ended September 30, 2018, the Company did not consider any of its securities to be other-than-temporarily impaired and, accordingly, did not recognize any impairment losses. Included in interest income for the three- and nine-month periods ended September 30, 2018 was interest income related to the Company’s available-for-sale securities of $0.9 and $2.7 million, respectively. Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive income (loss) includes the cumulative gains and losses of derivative instruments that qualify as cash flow hedges, foreign currency translation adjustments and changes in the fair value of available for sale securities. The following table provides a roll-forward of accumulated other comprehensive income (loss) for the nine-month periods ended September
2018
2017
Accumulated other comprehensive income (loss) as of January 1,
$
(0.1
)
$
(3.0
)
Foreign currency translation (gain) loss
(0.2
)
0.1
Change in fair value of available for sale securities
(1.5
)
-
Change in fair value of interest rate swap agreements
-
2.1
Income tax benefit (expense)
0.4
(0.8
)
Other comprehensive income (loss), net of tax
(1.3
)
1.4
Accumulated other comprehensive income (loss) as of September 30,
$
(1.4
)
$
(1.6
) Foreign Currency The Company’s reporting currency is the United States dollar. All transactions initiated in foreign currencies are translated into U.S. dollars in accordance with ASC Topic 830, “Foreign Currency Matters” and the related rate fluctuation on transactions is included in “Foreign currency gain (loss)” in the consolidated statements of operations. For foreign operations with the local currency as the functional currency, assets and liabilities are translated from the local currencies into U.S. dollars at the exchange rate prevailing at the balance sheet date and equity is translated at historical rates. Revenues and expenses are translated at the average exchange rate for the period. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining other comprehensive (income) loss. Based on recent data reported by the International Monetary Fund, Argentina was identified as a country with a highly inflationary economy. According to U.S. GAAP, a registrant should apply highly inflationary accounting in the first reporting period after such determination. Therefore, the Company transitioned the accounting for its Argentine operations to highly inflationary status as of July 1, 2018 and, commencing that date, changed the functional currency from the Argentine Peso to U.S. dollar. Cost of Revenue Cost of revenue related to the Company’s television segment consists primarily of the carrying value of spectrum usage rights that were surrendered in the FCC auction for broadcast spectrum. Cost of revenue related to the Company’s digital segment consists primarily of the costs of online media acquired from third-party publishers. Assets Held For Sale Assets are classified as held for sale when the carrying value is expected to be recovered through a sale rather than through their continued use and all of the necessary classification criteria have been met. Assets held for sale are recorded at the lower of their carrying value or estimated fair value less selling costs and classified as current assets. Depreciation is not recorded on assets classified as held for sale. During the second quarter, the Company relocated the operations of two of its television stations in the Palm Springs market and management approved the sale of the vacated building. The building and related improvements met the criteria for classification as assets held for sale and their carrying value is presented separately in the consolidated balance sheet. Assets held for sale are classified as current assets as management believes the sale will be completed within one year. Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842) Codification Improvements to Topic 842, Leases Leases (Topic 842): Targeted Improvements In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Non-employee Share-based Payment Accounting In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), Newly Adopted Accounting Standards In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. Income Tax Accounting Implications of the Tax Cuts and Jobs Act In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting effective for interim and annual reporting periods beginning after December 15, 2017. In January 2017, the FASB issued ASU 2017-01 , Business Combinations (Topic 805): Clarifying the Definition of a Business, In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force), In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers On January 1, 2018, the Company adopted ASC Topic 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC Topic 605, “Revenue Recognition”. Opening retained earnings as of January 1, 2018 were not affected as there was no cumulative impact of adopting Topic 606. United States Tax Reform On December 22, 2017, the President signed the 2017 Tax Act. The 2017 Tax Act makes broad and complex changes to the United States tax code that affected the Company’s financial results for the year ended December 31, 2017 and may affect financial results for the year ending December 31, 2018 and future years, including, but not limited to, some or all of the following: (1) a reduction of the U.S. federal corporate tax rate from 35% to 21%; (2) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries; (3) a new provision designed to tax global intangible low-taxed income (“GILTI”); (4) limitations on the deductibility of certain executive compensation; and (5) limitations on the use of Federal Tax Credits to reduce the U.S. income tax liability. The staff of the SEC issued SAB 118, which provides guidance on accounting for the tax effects of the 2017 Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the 2017 Tax Act enactment date for the Company to complete the accounting under ASC Topic 740, “Income Taxes” (“Topic 740”). In accordance with SAB 118, the Company must reflect the income tax effects of those aspects of the Act for which the accounting under Topic 740 is complete. To the extent that accounting for certain income tax effects of the 2017 Tax Act is incomplete but the Company is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. The Company was able to make a reasonable estimate of the impact of the reduction in the corporate tax rate and no significant provisional items were identified that could result in a material impact to the estimate upon finalization in 2018. Effective January 1, 2018, the 2017 Tax Act subjects a U.S. corporation to tax on its GILTI. The Company has elected an accounting policy to treat taxes due on the GILTI inclusion as a current period expense. The impact of this treatment on the effective tax rate for the period ended September 30, 2018 was not significant. |
