v2.4.1.9

Income Taxes | 12 Months Ended
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Dec. 31, 2014
Income Taxes | (11) Income Taxes U.S. and international components of income (loss) from continuing operations before income taxes (in thousands) were comprised of the following for the periods indicated:
|  | Years Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
U.S. |  | $ | (5,389 | ) |  | $ | (6,158 | ) |  | $ | 587 |
Foreign |  |  | 16,440 |  |  |  | 22,909 |  |  |  | 31,620 |
Total |  | $ | 11,051 |  |  | $ | 16,751 |  |  | $ | 32,207 |
The benefit from or provision for income taxes from continuing operations (in thousands) consisted of the following for the periods indicated:
|  | Years Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (306 | ) |  | $ | (12,404 | ) |  | $ | 533 |
State |  |  | (1 | ) |  |  | 172 |  |  |  | 68 |
Foreign |  |  | 7,638 |  |  |  | 5,994 |  |  |  | 7,269 |
|  | $ | 7,331 |  |  | $ | (6,238 | ) |  | $ | 7,870 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (2,132 | ) |  | $ | (3,417 | ) |  | $ | 995 |
State |  |  | (1,038 | ) |  |  | 267 |  |  |  | 1,310 |
Foreign |  |  | 1,855 |  |  |  | (411 | ) |  |  | (441 | )
|  | $ | (1,315 | ) |  | $ | (3,561 | ) |  | $ | 1,864 |
Total provision (benefit) |  | $ | 6,016 |  |  | $ | (9,799 | ) |  | $ | 9,734 |
The benefit from or provision for income taxes from continuing operations differs from the amount computed by applying the federal statutory income tax rate to the Company’s income from continuing operations before income taxes as follows for the periods indicated:
|  | Years Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Income tax expense at federal statutory rate |  |  | 35.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
State taxes, net of federal tax effect |  |  | -4.3 | % |  |  | 2.0 | % |  |  | 3.0 | %
Foreign earnings taxed at different rates |  |  | 2.9 | % |  |  | -18.3 | % |  |  | -21.5 | %
Withholding tax |  |  | 14.3 | % |  |  | 9.7 | % |  |  | 6.3 | %
Foreign tax credit |  |  | -9.6 | % |  |  | -5.4 | % |  |  | -3.4 | %
Other international components |  |  | 0.8 | % |  |  | 3.4 | % |  |  | 1.9 | %
Change in valuation allowance |  |  | 21.1 | % |  |  | -0.8 | % |  |  | 0.1 | %
Deferred tax adjustments and rate changes |  |  | -4.9 | % |  |  | -2.8 | % |  |  | 0.6 | %
Meals and entertainment |  |  | 5.9 | % |  |  | 4.5 | % |  |  | 2.9 | %
Non-deductible officers compensation |  |  | 2.0 | % |  |  | 7.1 | % |  |  | 2.1 | %
Personal use of corporate aircraft |  |  | 2.5 | % |  |  | 2.5 | % |  |  | 2.6 | %
Subpart F income |  |  | 4.0 | % |  |  | 2.4 | % |  |  | 1.2 | %
Research and development tax credit |  |  | -13.7 | % |  |  | -12.6 | % |  |  | 0.7 | %
Other permanent differences |  |  | -1.6 | % |  |  | 0.8 | % |  |  | 0.6 | %
Release of unrecognized tax benefits |  |  | 0.0 | % |  |  | -86.0 | % |  |  | -1.9 | %
Total |  |  | 54.4 | % |  |  | -58.5 | % |  |  | 30.2 | %
The 2013 “research and development tax credit” rate of negative 12.6% is comprised of U.S. research and development tax credits generated in 2013 and 2012. The 2012 U.S. research and development tax credit was retroactively reinstated by the American Taxpayer Relief Act of 2012 signed into law on January 2, 2013 and recorded as a tax benefit in the first quarter of 2013. The Company’s U.S. and foreign effective tax rates for income from continuing operations before income taxes were as follows for the periods indicated:
|  | Years Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
U.S. |  |  | 64.5 | % |  |  | 249.7 | % |  |  | 495.1 | %
Foreign |  |  | 57.7 | % |  |  | 24.4 | % |  |  | 21.6 | %
Combined |  |  | 54.4 | % |  |  | -58.5 | % |  |  | 30.2 | %
Except as discussed below, the Company intends to indefinitely reinvest its undistributed earnings of all of its foreign subsidiaries. Therefore, the annualized effective tax rate applied to the Company’s pre-tax income from continuing operations does not include any provision for U.S. federal and state income taxes on the amount of the undistributed foreign earnings. U.S. federal tax laws, however, require the Company to include in its U.S. taxable income certain investment income earned outside of the U.S. in excess of certain limits (“Subpart F deemed dividends”). Because Subpart F deemed dividends are already required to be recognized in the Company’s U.S. federal income tax return, the Company regularly repatriates Subpart F deemed dividends to the U.S. and no additional tax is incurred on the distribution. The Company repatriated Subpart F deemed dividends to the U.S. of $1.3 million, $1.0 million and $2.5 million in 2014, 2013, and 2012, respectively, with no additional tax incurred. As of December 31, 2014 and December 31, 2013, the amount of cash and cash equivalents and short-term investments held by U.S. entities was $139.1 million and $160.5 million, respectively, and by non-U.S. entities was $206.4 million and $196.9 million, respectively. If the cash and cash equivalents and short-term investments held by non-U.S. entities were to be repatriated to the U.S., the Company would generate U.S. taxable income to the extent of the Company’s undistributed foreign earnings, which amounted to $201.7 million at December 31, 2014. Although the tax impact of repatriating these earnings is difficult to determine, the Company would not expect the maximum effective tax rate that would be applicable to such repatriation to exceed the U.S. statutory rate of 35.0%, after considering applicable foreign tax credits. Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities (in thousands) were as follows for the periods indicated:
|  | December 31, |
|  | 2014 |  |  | 2013 |
Deferred tax assets, net: |  |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 6,911 |  |  | $ | 981 |
Tax credits |  |  | 10,402 |  |  |  | 8,723 |
Intangible assets |  |  | 59 |  |  |  | 1,317 |
Deferred revenue adjustment |  |  | 1,989 |  |  |  | 2,746 |
Accrued compensation |  |  | 11,452 |  |  |  | 17,465 |
Share-based compensation expense |  |  | 5,485 |  |  |  | 714 |
Deferred rent |  |  | 3,428 |  |  |  | 3,709 |
Other |  |  | 3,425 |  |  |  | 2,197 |
|  |  | 43,151 |  |  |  | 37,852 |
Valuation allowance |  |  | (2,311 | ) |  |  | (77 | )
Deferred tax assets, net of valuation allowance |  |  | 40,840 |  |  |  | 37,775 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Prepaid expenses and other |  |  | 1,044 |  |  |  | 1,084 |
Property and equipment |  |  | 17,149 |  |  |  | 15,751 |
Capitalized software development costs |  |  | 5,637 |  |  |  | 3,791 |
Total deferred tax liabilities |  |  | 23,830 |  |  |  | 20,626 |
Total net deferred tax asset |  | $ | 17,010 |  |  | $ | 17,149 |
Reported as: |  |  |  |  |  |  |  |
Current deferred tax assets, net |  | $ | 19,936 |  |  | $ | 21,555 |
Non-current deferred tax assets, net |  |  | 1,160 |  |  |  | 3,204 |
Current deferred tax liabilities |  |  | (557 | ) |  |  | (422 | )
Non-current deferred tax liabilities |  |  | (3,529 | ) |  |  | (7,188 | )
Total net deferred tax asset |  | $ | 17,010 |  |  | $ | 17,149 |
The table of deferred tax assets and liabilities shown above does not include a deferred tax asset of $0.2 million related to U.S. federal net operating loss carryforwards of $0.4 million as of December 31, 2014 that arose directly from tax deductions related to equity compensation in excess of compensation recognized for financial reporting. As of December 31, 2014, the Company had unrecognized tax benefits of $2.5 million, which are recorded in other long-term liabilities. The change in unrecognized tax benefits (in thousands) is presented in the table below:
Unrecognized tax benefits at January 1, 2014 |  | $ | 2,312 |
Increase related to positions taken in prior period |  |  | 938 |
Increase related to positions taken in current period |  |  | 270 |
Decrease related to expiration of statute of limitations |  |  | (60 | )
Unrecognized tax benefits at December 31, 2014 |  |  | 3,460 |
Accrued interest |  |  | 292 |
Netting of deferred tax assets and unrecognized tax benefits |  |  | (1,273 | )
Unrecognized tax benefits recorded in other long-term liabilities at December 31, 2014 |  | $ | 2,479 |
If recognized, $1.7 million of the gross unrecognized tax benefits would impact the Company’s effective tax rate. Over the next 12 months, the amount of the Company’s liability for unrecognized tax benefits shown above is not expected to change by a material amount. The Company recognizes estimated accrued interest related to unrecognized tax benefits in the provision for income tax accounts. During the year ended December 31, 2014, the Company recognized an immaterial amount of accrued interest. During the years ended December 31, 2013 and 2012, the Company (released) recognized approximately ($1.0) million and $0.4 million, respectively, in accrued interest. The amount of accrued interest related to the above unrecognized tax benefits was approximately $0.3 million and $0.3 million as of December 31, 2014 and December 31, 2013, respectively. The Company files tax returns in numerous foreign countries as well as the U.S. and its tax returns may be subject to audit by tax authorities in all countries in which it files. Each country has its own statute of limitations for making assessment of additional tax liabilities. The Company’s U.S. tax returns for tax years from 2011 forward are subject to examination by the Internal Revenue Service. The Company’s major foreign tax jurisdictions and the tax years that remain subject to examination are Germany for tax years 2009 forward, Poland and China for tax years 2010 forward, Spain for tax years 2011 forward, and the United Kingdom for tax years 2013 forward. The Company settled tax examinations in Germany for tax years 2005 through 2008 and Spain for tax years 2009 through 2010 in the second quarter and fourth quarter of 2013, respectively. To date there have been no material audit assessments related to audits in the U.S. or any of the applicable foreign jurisdictions. The Company had $14.7 million and $0.0 million of U.S. net operating loss carryforwards as of December 31, 2014 and 2013, respectively. The Company had $3.4 million and $4.4 million of foreign net operating loss carryforwards as of December 31, 2014 and 2013, respectively. The Company had domestic research and development tax credit, foreign tax credit, and alternative minimum tax credit carryforward tax assets totaling $10.5 million and $8.7 million at December 31, 2014 and 2013, respectively, which begin to expire in 2016. The timing and ability of the Company to use these losses and credits may be limited by Internal Revenue Code provisions regarding changes in ownership of the Company as discussed below. The Company’s valuation allowances of $2.3 million and $0.1 million at December 31, 2014 and 2013, respectively, primarily relate to certain foreign net operating loss carryforward and foreign tax credit carryforward tax assets. In determining the Company’s provision for or benefit from income taxes, net deferred tax assets, liabilities, and valuation allowances, management is required to make judgments and estimates related to projections of domestic and foreign profitability, the timing and extent of the utilization of net operating loss carryforwards, applicable tax rates, transfer pricing methodologies, and prudent and feasible tax planning strategies. As a multinational company, the Company is required to calculate and provide for estimated income tax liabilities for each of the tax jurisdictions in which it operates. This process involves estimating current tax obligations and exposures in each jurisdiction, as well as making judgments regarding the future recoverability of deferred tax assets. Changes in the estimated level of annual pre-tax income, changes in tax laws, particularly related to the utilization of net operating losses in various jurisdictions, and changes resulting from tax audits can all affect the overall effective income tax rate which, in turn, impacts the overall level of income tax expense or benefit and net income. Judgments and estimates related to the Company’s projections and assumptions are inherently uncertain; therefore, actual results could differ materially from projections. The timing and manner in which the Company will use net operating loss carryforward tax assets, research and development tax credit carryforward tax assets, alternative minimum tax credit carryforward tax assets, and foreign tax credit carryforward tax assets in any year, or in total, may be limited by provisions of the Internal Revenue Code regarding changes in the Company’s ownership. Currently, the Company expects to use the tax assets, subject to Internal Revenue Code limitations, within the carryforward periods. If the Company is unable to achieve profitability in future periods, particularly relating to the U.S. operations, it may not be able to realize these tax assets. Valuation allowances have been established where the Company has concluded that it is more likely than not that such deferred tax assets are not realizable. If the Company is unable to achieve profitability in future periods, it may be required to increase the valuation allowance against the deferred tax assets, which could result in a charge that would materially adversely affect net income in the period in which the charge is incurred. Section 382 provides an annual limitation on the amount of federal net operating losses and tax credits that may be used in the event of an ownership change. The limitation is based on, among other things, the value of the company as of the change date multiplied by a U.S. federal long-term tax exempt interest rate. The Company does not currently expect the limitations under the §382 ownership change rules to impact the Company’s ability to use its net operating loss carryforwards or tax credits that existed as of the date of the ownership change.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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