| Income Taxes | 6. Income Taxes Geographic sources of income (loss) before income taxes are as follows: For the Year Ended December 31, 2015 2014 2013 (In thousands) United States $ (39,684 ) $ 16,571 $ (36,829 ) Foreign 107,219 119,507 160,816 Total income before income taxes $ 67,535 $ 136,078 $ 123,987 The provision for income taxes includes current federal, state and foreign taxes payable and those deferred because of temporary differences between the financial statement and the tax bases of assets and liabilities. The components of the provision (benefit) for income taxes are as follows: For the Year Ended December 31, 2015 2014 2013 (In thousands) Current Federal $ — $ — $ — State 11 (46 ) — Foreign 28,721 51,081 30,902 28,732 51,035 30,902 Deferred Federal — — (8,556 ) State — — 9 Foreign (697 ) (17,190 ) 291 (697 ) (17,190 ) (8,256 ) Total provision $ 28,035 $ 33,845 $ 22,646 The reconciliation between the U.S. federal statutory income tax rate of 35% and our income tax provision is as follows: For the Year Ended December 31, 2015 2014 2013 (In thousands) U.S. federal tax at 35% $ 23,637 $ 47,627 $ 43,396 State taxes, net of federal benefit 2,622 1,940 1,124 Foreign income taxed at different rates (11,756 ) 6,579 (17,814 ) Foreign exchange (loss) gain (5,680 ) (17,321 ) 844 Change in valuation allowance 18,259 (13,527 ) (32,415 ) Adjustments related to prior years (912 ) 3,643 2,727 Income tax credits generated (1,919 ) (2,557 ) (2,622 ) Repatriation of foreign earnings and profits 91 3,958 6,499 Expiration of capital loss carryforward — — 15,555 Expiration of net operating losses 74 2,534 — Non-deductible loss on acquisition of J-Devices (Note 3) 4,857 — — Debt conversion costs — — 4,067 Other (1,238 ) 969 1,285 Total $ 28,035 $ 33,845 $ 22,646 In 2015, we recognized a loss in connection with our increased ownership interest in J-Devices which is not deductible for income taxes. The 2014 change in foreign income taxed at different rates was due to a change in the geographic income mix which resulted in a lower tax benefit. During 2013, we incurred costs which are not deductible for income tax purposes including certain costs in connection with the exchange of the 2014 Notes for shares of our common stock. In 2015, the valuation allowance on our deferred tax assets increased by $18.3 million primarily as a result of the generation of U.S. net operating loss carryforwards. In 2014, the valuation allowance on our deferred tax assets decreased by $29.3 million primarily as a result of the utilization of U.S. net operating loss carryforwards and the reduction of valuation allowance as the result of the sale of a subsidiary. In 2013, the valuation allowance on our deferred tax assets decreased by $30.6 million primarily as a result of the utilization of U.S. net operating loss carryforwards and expiring capital losses. Also during 2013, we concluded that sufficient net positive evidence existed to release the valuation allowance against the deferred tax assets at one of our foreign jurisdictions. The following is a summary of the components of our deferred tax assets and liabilities: December 31, 2015 2014 (In thousands) Deferred tax assets: Net operating loss carryforwards $ 147,056 $ 120,639 Income tax credits 27,212 24,754 Property, plant and equipment 21,921 19,796 Accrued liabilities 62,016 76,682 Unrealized foreign exchange loss 869 4,947 Other 16,659 12,963 Total deferred tax assets 275,733 259,781 Valuation allowance (168,105 ) (149,847 ) Total deferred tax assets net of valuation allowance 107,628 109,934 Deferred tax liabilities: Property, plant and equipment 31,345 27,921 Deferred gain 3,716 5,036 Other 6,713 2,844 Total deferred tax liabilities 41,774 35,801 Net deferred tax assets $ 65,854 $ 74,133 Recognized as: Other current assets $ — $ 21,864 Other assets 70,784 54,950 Accrued expenses — (1,092 ) Other non-current liabilities (4,930 ) (1,589 ) Total $ 65,854 $ 74,133 As a result of certain income tax accounting realization requirements with respect to accounting for share-based compensation, the table of deferred tax assets and liabilities shown above does not include certain deferred tax assets at December 31, 2015 and 2014 that arose directly from tax deductions related to equity compensation that is greater than the compensation recognized for financial reporting. At December 31, 2015 , our deferred tax assets do not include $12.8 million of excess tax deductions from equity compensation that are part of net operating loss carryforwards, which, if such deferred tax assets are subsequently realized will be recorded to contributed capital. As a result of net operating loss carryforwards, we were not able to recognize the excess tax benefits of stock option deductions in 2015 because the deductions did not reduce income tax payable using a with-and-without approach for the utilization of tax attributes. As a result of certain capital investments, export commitments and employment levels, income from operations in Korea, Malaysia, the Philippines and Taiwan was subject to reduced income tax rates and in some cases was exempt from income taxes. The reduced tax rates or tax exemptions expire at various dates through 2024 . We recognized $3.3 million , $0.9 million and $4.8 million in tax benefits as a result of the tax holidays in 2015, 2014 and 2013, respectively. The benefit of the tax holidays on diluted earnings per share was approximately $0.01 , $0.00 and $0.02 for 2015 , 2014 and 2013 , respectively. Our net operating loss carryforwards (“NOL’s”) are as follows: For the Year Ended December 31, 2015 2014 Expiration (In thousands) U.S. Federal NOL’s $ 363,648 $ 317,841 2021-2035 U.S. State NOL’s 182,420 173,756 2016-2035 Foreign NOL’s 64,999 4,962 2017-2025 We monitor on an ongoing basis our ability to utilize our deferred tax assets and whether there is a need for a related valuation allowance. In evaluating our ability to recover our deferred tax assets in the jurisdictions from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of recent operations. For most of our foreign deferred tax assets, we consider it more likely than not that we will have sufficient taxable income to allow us to realize these deferred tax assets. As of December 31, 2015, our net deferred tax assets include $38.2 million from our operations in Korea, including the deferred tax asset associated with a $62.9 million net operating loss carryforward. At this time, we consider it more likely than not we will have sufficient taxable income in the future that will allow us to realize these deferred tax assets. However, it is possible that some or all of these net operating loss carryforwards could ultimately expire unused, in the event future taxable income falls short of our current expectations. If our assessment of the recoverability of Korean deferred tax assets changes in the future, we may need to establish a valuation allowance against such deferred tax assets. The deferred tax assets associated with our U.S. federal and state net operating losses available for carryforward have been fully reserved with valuation allowances at December 31, 2015 and 2014 . Also, our ability to utilize our U.S. net operating loss carryforwards may be limited in the future if we experience an ownership change as defined by the Internal Revenue Code. At December 31, 2015 , we have various tax credits available to be carried forward including U.S. foreign income tax credits totaling $8.1 million , expiring in 2016, and income tax credits totaling $13.0 million expiring in varying amounts through 2020 at our subsidiary in Korea. The deferred tax assets associated with the U.S. foreign income tax credits and certain foreign income tax credits have been fully reserved with a valuation allowance. Income tax credits generated by certain of our foreign subsidiaries in 2015 , 2014 and 2013 have been recognized in our income tax provision. Income taxes have not been provided on approximately $754.2 million of the undistributed earnings of our foreign subsidiaries at December 31, 2015 , over which we have sufficient influence to control the distribution of such earnings and have determined that substantially all such earnings have been reinvested indefinitely. These earnings could become subject to either or both U.S. federal income tax and foreign withholding tax if they are remitted as dividends, if foreign earnings are loaned to any of our domestic companies, or if we sell our investment in certain subsidiaries. We estimate that repatriation of these foreign earnings would generate additional foreign withholding taxes of approximately $21.6 million and insignificant U.S. federal income tax after foreign tax credits. We operate in and file income tax returns in various U.S. and foreign jurisdictions which are subject to examination by tax authorities. Current examinations include our 2012 and 2013 Philippines income tax returns and 2010-2014 Malaysian income tax returns. We have tax returns that are open to examination in various jurisdictions for tax years 2010-2015. The open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations related to the amount and/or timing of income, deductions and tax credits. A reconciliation of the beginning and ending gross amount of unrecognized tax benefits is as follows: For the Year Ended December 31, 2015 2014 2013 (In thousands) Balance at January 1 $ 12,670 $ 27,128 $ 8,218 Additions based on tax positions related to the current year 2,341 6,032 17,752 Additions for tax positions of prior years 3,341 1,240 2,723 Reductions for tax positions of prior years (4,815 ) (15,433 ) (108 ) Reductions related to settlements with tax authorities — (6,297 ) (1,353 ) Reductions from lapse of statutes of limitations (591 ) — (104 ) Balance at December 31 $ 12,946 $ 12,670 $ 27,128 The net increase in our unrecognized tax benefits was $0.3 million from December 31, 2014 to December 31, 2015 . Our unrecognized tax benefits increased primarily related to income attribution and income characterization. These increases were offset by reductions due to a change in filing position and the lapse of statues of limitations related to reserves associated with income attribution. At December 31, 2015 , all of our gross unrecognized tax benefits would reduce our effective tax rate, if recognized. The liability related to our unrecognized tax benefits is $7.8 million as of December 31, 2015 , and is reported as a component of other non-current liabilities. The unrecognized tax benefits presented in the table above include positions that have reduced deferred tax assets, which are not included in the liability reported as a component of other non-current liabilities. We recognize accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense in our Consolidated Statement of Operations. During 2015, we accrued $0.2 million of interest and penalties related to various uncertain tax positions. The balance of accrued and unpaid interest and penalties is $0.6 million as of December 31, 2015 and is included as a component in other non-current liabilities in connection with our unrecognized tax benefits. It is reasonably possible that the total amount of unrecognized tax benefits related to income attribution will decrease by up to $0.1 million due to the lapse of statues of limitations in foreign jurisdictions. Our unrecognized tax benefits are subject to change as examinations of specific tax years are completed in the respective jurisdictions. Tax return examinations involve uncertainties and there can be no assurance that the outcome of examinations will be favorable. |
