EEI 2017 Form 10-K

Table of Contents As of July 31, 2017, net operating losses attributable to operations in Brazil, Peru, Chili and Canada and net operating losses for U.S. federal and state income tax purposes exist. The U.S. federal net operating loss at July 31, 2017 is approximately $0.8 million. The Company periodically evaluates the likelihood of realization of deferred tax assets, and provides for a valuation allowance when necessary. Activity within the deferred tax asset valuation allowance is summarized in the following table. Fiscal Year Ended July 31, 2017 2016 (in thousands) Balance at beginning of period $ 2,278 $ 560 Additions during the period 2 1,765 Reductions during period (260) (47) Balance at end of period $ 2,020 $ 2,278 The valuation allowance maintained by the Company primarily relates to: (i) net operating losses in Brazil and Canada, the utilization of which is dependent on future earnings; (ii) excess foreign tax credit carryforwards, the utilization of which is dependent on future foreign source income; and (iii) capital loss carryforwards, the utilization of which is dependent on future capital gains. Additions to the valuation allowance during fiscal year 2017 primarily related to a deferred tax asset that resulted from net operating loss carryforwards from the Company’s Brazilian operations. During fiscal year 2017, based on available evidence including recent cumulative operating losses, management determined that it is more likely than not that these deferred tax assets will not be realized. During the fiscal years ended July 31, 2017, 2016 and 2015, the Company recorded $0.3 million, $0.1 million and $0, respectively, of income taxes applicable to undistributed earnings of foreign subsidiaries that will not be indefinitely reinvested in those operations. At July 31, 2017, the Company’s operations in Chile, Peru and Ecuador had $7.1 million of combined undistributed earnings that were indefinitely reinvested in those operations. The Company files numerous consolidated and separate income tax returns in U.S. federal, state and foreign jurisdictions. The Company’s U.S. federal tax matters for fiscal years 2014 through 2017 remain subject to examination by the IRS. The Company’s state, local and foreign tax matters for fiscal years 2013 through 2017 remain subject to examination by the respective tax authorities. No waivers have been executed that would extend the period subject to examination beyond the period prescribed by statute. The Company had approximately $0.3 million, $0.1 million and $0.1 million of uncertain tax positions (“UTPs”) at July 31, 2017, 2016 and 2015, respectively. For the year ended July 31, 2017, the company reversed a previously recorded uncertain tax position and associated penalties and interest for approximately $0.1 and recorded additional UTPs of approximately $0.3 with additional interest and penalties of $0.1 million. It is reasonably possible that the liability associated with UTPs will increase or decrease within the next twelve months. At this time, an estimate of the range of the reasonably possible outcomes cannot be made. The Company recognizes interest accrued related to liabilities for UTPs in other accrued liabilities on the consolidated balance sheets and in administrative and indirect operating expenses on the consolidated statements of operations. The Company recorded interest and penalties expense related to liabilities for UTPs for $0.1 million during fiscal year ended July 31, 2017 and less than $0.1 million for fiscal years 2016 and 2015. 52