EEI 2017 Form 10-K

Table of Contents Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes using enacted tax rates expected to be in effect for the year in which the temporary differences are expected to reverse. Our policy is to establish a valuation allowance if it is “more likely than not” that the related tax benefits will not be realized. At July 31, 2017 and 2016, we determined based on available evidence, including historical financial results for the last three years and forecasts of future results, that it is “more likely than not” that a portion of these items may not be recoverable in the future. Accordingly, we maintain total valuation allowances of $2.0 million and $2.3 million as a reduction of deferred tax assets at July 31, 2017 and 2016, respectively. The valuation allowance related to deferred tax assets is considered to be a critical estimate because, in assessing the likelihood of realization of deferred tax assets, management considers taxable income trends and forecasts. Actual income taxes expensed and/or paid could vary from estimated amounts due to the impacts of various factors, including: · changes to tax laws enacted by taxing authorities; · final review of filed tax returns by taxing authorities; and · actual financial condition and results of operations for future periods that could differ from forecasted amounts. Inflation During fiscal years 2017, 2016 and 2015, inflation did not have a material impact on our business because a significant amount of our contracts are either cost based or contain commercial rates for services that are adjusted annually. Off-Balance Sheet Arrangements We had outstanding letters of credit drawn under our lines of credit to support operations of $2.5 million and $2.2 million at July 31, 2017 and 2016, respectively. Other than these letters of credit, we did not have any off-balance sheet arrangements as of July 31, 2017 or 2016. 29