Income Taxes | 14. Income Taxes The Company’s income tax (provision) benefit consists of the following components: Year Ended December 31, 2015 2014 2013 Current: Federal $ (988 ) $ (1,062 ) $ 127 State (159 ) (150 ) 167 International (544 ) (86 ) 219 Total current (1,691 ) (1,298 ) 513 Deferred: Federal (5,695 ) (1,118 ) 8,017 State 68 (76 ) 1,675 International (981 ) 999 905 Total deferred (6,608 ) (195 ) 10,597 Total income tax (provision) benefit $ (8,299 ) $ (1,493 ) $ 11,110 The components of the deferred tax assets and liabilities consisted of the following at: December 31, 2015 December 31, 2014 Deferred Income Tax Deferred Income Tax Assets Liabilities Assets Liabilities Current: Allowance for bad debts $ — $ — $ 415 $ — Inventory — — 11,513 — Net operating losses — — 340 — Tax credits — — 2,370 — Deferred compensation — — 3,912 — Deferred revenue — — 1,969 — Accrued liabilities — — 2,517 Other — — — (208 ) Total current — — 23,036 (208 ) Noncurrent: Allowance for bad debts 376 — — — Deferred compensation 4,013 — — — Inventory 10,604 — — — Fixed assets and intangibles — (7,667 ) — (6,485 ) Investments 2,133 — 2,073 — Net operating losses 2,830 — 3,293 — Tax credits 4,645 — 2,596 — Deferred revenue 4,968 — 5,318 — Accrued liabilities 1,847 — 357 — Other — (258 ) — — Valuation allowance (1,106 ) — (959 ) — Total noncurrent 30,310 (7,925 ) 12,678 (6,485 ) Total $ 30,310 $ (7,925 ) $ 35,714 $ (6,693 ) The Company expects its deferred tax assets of $22,385, net of the valuation allowance at December 31, 2015 of $1,106, to be realized through the generation of future taxable income and the reversal of existing taxable temporary differences, see Note 3. Valuation allowances are established when necessary to reduce deferred tax assets to amounts which are more likely than not to be realized. As such, valuation allowances of $1,106 and $959 have been established at December 31, 2015 and December 31, 2014, respectively, against a portion of the deferred tax assets relating to certain net operating loss carryforwards. The Company recorded a tax benefit from the exercise of stock options in the amount of $1,139, $539, and $315 for the years ended December 31, 2015, 2014 and 2013, respectively. As of December 31, 2015, the Company has U.S. federal net operating loss carryforwards of $1,978 that will expire in 2027. As of December 31, 2015, the Company has U.S. state net operating loss carryforwards of $20,766 that will expire in the years 2018 through 2035. As of December 31, 2015, the Company has foreign net operating loss carryforwards of $4,447 that will carryfoward indefinitely. As of December 31, 2015, the Company has research tax credit carryforwards of $5,693 that will expire in years 2027 through 2035. As of December 31, 2015, the Company has alternative minimum tax credit carryforwards of $827 that will carryfoward indefinitely. On December 18, 2015, the Protecting Americans from Tax Hikes (“PATH”) Act was signed into law. The PATH retroactively extended the research tax credit to the beginning of 2015. In addition, under PATH the research tax credit is made permanent. Under ASC 740, Accounting for Income Taxes U.S. income taxes have not been provided on the undistributed earnings of the Company’s foreign subsidiaries. It is not practicable to estimate the amount of tax that might be payable. The Company’s intention is to indefinitely reinvest earnings of its foreign subsidiaries outside of the U.S. As of December 31, 2015 and 2014, the amount of undistributed earnings related to the Company’s foreign subsidiaries considered to be indefinitely reinvested was $11,227 and $7,238, respectively. The Company evaluates the need for deferred tax asset valuation allowances based on a more likely than not standard. The ability to realize deferred tax assets depends on the ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. The assessment regarding whether a valuation allowance is required or should be adjusted also considers all available positive and negative evidence. It is difficult to conclude a valuation allowance is not required when there is significant objective and verifiable negative evidence, such as cumulative losses in recent years. The Company utilizes a rolling three years of actual results as the primary measure of cumulative losses in recent years. On a rolling three years, the Company’s U.S. operations are in a cumulative income position. The Company considers this objectively verifiable evidence that its current U.S. operations existing on December 31, 2015, have consistently demonstrated the ability to operate at a profit. The Company has a history of utilizing 100 percent of its U.S. deferred taxes assets before they expire and the forecasts of taxable earnings project a complete realization of all U.S. deferred tax assets before they expire, including under stressed scenarios. The Company’s German and French operations are in a cumulative loss position. However, after adjusting projections of profitability for items not indicative of its ability to generate taxable income in future years its German operations are in a cumulative income position. The Company considers this objectively verifiable evidence that its current German operations existing on December 31, 2015, have consistently demonstrated the ability to operate at a profit. As of December 31, 2015, the Company’s German deferred tax assets primarily relate to net operating loss carryforwards. In general, the Company’s foreign net operating loss carryforwards can be carried forward indefinitely. As a result, the Company has not recorded an additional valuation allowance charge on its German deferred tax assets. The Company has recorded additional valuation allowances on its French deferred tax assets. The Company has evaluated all available positive and negative evidence, including the extent to which that evidence was objectively verifiable. The Company has concluded, for those jurisdictions where valuation allowances have not been established, the positive evidence outweighed the negative evidence and the deferred tax assets are more likely than not realizable as of December 31, 2015. The Company will continue to regularly assess the realizability of our deferred tax assets. Changes in historical earnings performance and future earnings projections, among other factors, may cause the Company to adjust its valuation allowance, which would impact the Company’s income tax expense in the period the Company determines that these factors have changed. As of December 31, 2015, the Company has $1,986 of unrecognized tax benefits, of which $110 were recorded in other liabilities and $1,876 of unrecognized tax benefits were recorded net against deferred tax assets in the accompanying consolidated balance sheet. The Company’s unrecognized tax benefits are summarized as follows: Year Ended December 31, 2015 2014 2013 Opening balance $ 1,787 $ 2,825 $ 1,797 Reductions based on tax positions related to the current year — (136 ) (174 ) Additions for tax positions of prior years 199 — 1,337 Reductions for tax positions of prior years — (902 ) (135 ) $ 1,986 $ 1,787 $ 2,825 The unrecognized tax benefits if recognized, would favorably impact the Company’s effective tax rate. The Company’s policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in the provision for income taxes. There were no interest and penalties recorded in 2015, 2014 and 2013 and no interest and penalties accrued at December 31, 2015 and 2014. One of the Company’s foreign subsidiaries is undergoing an examination by the German tax authorities. The German examination covers the foreign subsidiary’s 2010 through 2013 tax years. The effective tax rate differs from the statutory federal income tax rate for the following reasons: Year Ended December 31, 2015 2014 2013 Statutory federal rate 35.00 % 35.00 % 35.00 % State income taxes—net of federal tax benefit 0.25 % 3.51 % 4.14 % Foreign rate differential (2.18 %) 4.99 % (0.46 %) Other permanent expenses 0.56 % (1.25 %) (4.27 %) Research tax credits (0.28 %) (7.52 %) 3.56 % Domestic production activities deduction — (4.33 %) — Unrecognized tax benefits — 0.86 % Valuation allowance 0.85 % 5.26 % — Other reconciling items, net 1.55 % (0.02 %) (0.42 %) Effective tax rate 35.75 % 35.64 % 38.41 % For the years ended December 31, 2015, 2014 and 2013, the Company had no individually significant other reconciling items. |