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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | (8) Income Taxes U.S. and international components of income before income taxes (in thousands) were comprised of the following for the periods indicated:
|  | Years Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
|  |  |  |  |  | (as adjusted) |  |  | (as adjusted) |
U.S. |  | $ | (18,295 | ) |  | $ | 18,814 |  |  | $ | 52,802 |
Foreign |  |  | 38,777 |  |  |  | 52,660 |  |  |  | 62,131 |
Total |  | $ | 20,482 |  |  | $ | 71,474 |  |  | $ | 114,933 |
The provision for income taxes (in thousands) consisted of the following for the periods indicated:
|  | Years Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
|  |  |  |  |  | (as adjusted) |  |  | (as adjusted) |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (1,916 | ) |  | $ | 48,794 |  |  | $ | 18,453 |
State |  |  | 1,656 |  |  |  | 4,077 |  |  |  | 3,681 |
Foreign |  |  | 6,460 |  |  |  | 4,074 |  |  |  | 4,941 |
|  | $ | 6,200 |  |  | $ | 56,945 |  |  | $ | 27,075 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (6,071 | ) |  | $ | (1,649 | ) |  | $ | (4,165 | )
State |  |  | (2,047 | ) |  |  | (1,260 | ) |  |  | (801 | )
Foreign |  |  | (101 | ) |  |  | (757 | ) |  |  | 585 |
|  | $ | (8,219 | ) |  | $ | (3,666 | ) |  | $ | (4,381 | )
Total (benefit) provision |  | $ | (2,019 | ) |  | $ | 53,279 |  |  | $ | 22,694 |
The provision for income taxes differs from the amount computed by applying the federal statutory income tax rate to the Company’s income before income taxes as follows for the periods indicated:
|  | Years Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
|  |  |  |  |  | (as adjusted) |  |  | (as adjusted) |
Income tax expense at federal statutory rate |  |  | 21.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
State taxes, net of federal tax effect |  |  | (1.3 | )% |  |  | 2.5 | % |  |  | 1.6 | %
Foreign earnings taxed at different rates |  |  | (20.5 | )% |  |  | (24.2 | )% |  |  | (15.4 | )%
Withholding tax |  |  | 5.5 | % |  |  | 1.9 | % |  |  | 1.3 | %
Foreign tax credit |  |  | (5.2 | )% |  |  | (1.1 | )% |  |  | (0.9 | )%
Other international components |  |  | 0.3 | % |  |  | 0.0 | % |  |  | (0.1 | )%
Change in valuation allowance |  |  | 2.5 | % |  |  | 0.2 | % |  |  | (0.8 | )%
Deferred tax adjustments and rate changes |  |  | (1.7 | )% |  |  | 4.0 | % |  |  | 0.0 | %
Section 199 Deduction |  |  | 0.0 | % |  |  | (1.4 | )% |  |  | (1.8 | )%
Subpart F income |  |  | 7.0 | % |  |  | 1.5 | % |  |  | 0.6 | %
Research and development tax credit |  |  | (11.8 | )% |  |  | (1.1 | )% |  |  | (0.8 | )%
GILTI, net of foreign tax credit |  |  | 0.5 | % |  |  | 0.0 | % |  |  | 0.0 | %
FDII |  |  | (4.5 | )% |  |  | 0.0 | % |  |  | 0.0 | %
Transition Tax |  |  | (15.2 | )% |  |  | 55.4 | % |  |  | 0.0 | %
Other permanent differences |  |  | 13.5 | % |  |  | 1.8 | % |  |  | 1.0 | %
Total |  |  | (9.9 | )% |  |  | 74.5 | % |  |  | 19.7 | %
The Company’s U.S. and foreign effective tax rates for income before income taxes were as follows for the periods indicated:
|  | Years Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
|  |  |  |  |  | (as adjusted) |  |  | (as adjusted) |
U.S. |  |  | 45.8 | % |  |  | 265.6 | % |  |  | 32.5 | %
Foreign |  |  | 16.4 | % |  |  | 6.3 | % |  |  | 8.9 | %
Combined |  |  | (9.9 | )% |  |  | 74.5 | % |  |  | 19.7 | %
The change in the Company’s effective tax rate in 2018, as compared to the prior year, was primarily due to the change in proportion of U.S. versus foreign income and an estimated one-time tax provision of $44.0 million during the year ended December 31, 2017 as a result of the Tax Act. The Tax Act imposes a Transition Tax on previously untaxed accumulated and current E&P of certain foreign subsidiaries of the Company. To determine the amount of the Transition Tax, the Company must determine, among other things, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. In the year ended December 31, 2017, the Company made a reasonable estimate of the Transition Tax and recorded a provisional Transition Tax obligation of $40.3 million, of which $36.8 million was recorded in “other long-term liabilities” in the Company’s Consolidated Balance Sheets. Upon refining its non-U.S. E&P and associated income taxes in 2018, the Company recorded a measurement-period adjustment to reduce the Transition Tax by $3.1 million. As of December 31, 2018, the Company’s total provision for the Transition Tax was $37.2 million, of which $8.3 million had been paid and $28.9 million was recorded in “Other long-term liabilities” in the Company’s Consolidated Balance Sheets. The Tax Act also reduced the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018. Consequently, the Company has recorded a decrease related to its U.S. deferred tax assets and liabilities, with a corresponding net deferred income tax expense of $3.7 million for the year ended December 31, 2017 as a result of re-measuring net deferred tax assets at the new lower corporate tax rate of 21%. Additionally, the Tax Act requires certain GILTI earned by a CFC to be included in the gross income of the CFC’s U.S. shareholder. GAAP allows the Company to either: (i) treat taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”); or (ii) factor such amounts into its measurement of deferred taxes (the “deferred method”). The Company elected the period cost method. The Tax Act allows a U.S. corporation a deduction equal to a certain percentage of its FDII. The Company estimated the impact of the GILTI tax and FDII deduction in determining its 2018 annual effective tax rate that is reflected in its benefit from income taxes for the year ended December 31, 2018. As of December 31, 2018, the Company intends to indefinitely reinvest $197.4 million of its undistributed foreign earnings. However, under the Tax Act, those undistributed earnings (as computed for U.S. federal income tax purposes) are subject to the Transition Tax, which was recorded at a provisional amount of $40.3 million during the year ended December 31, 2017 and subsequently reduced by $3.1 million during the year ended December 31, 2018. As of December 31, 2018 and 2017, the amount of cash and cash equivalents and short-term investments held by the Company’s U.S. entities was $173.6 million and $293.8 million, respectively, and by the Company’s non-U.S. entities was $402.5 million and $381.4 million, respectively. The Company earns a significant amount of its revenues outside the United States and its accumulated foreign earnings and profits as of December 31, 2018 and 2017 were $397.4 million and $360.9 million, respectively. As of December 31, 2018, the Company intends to indefinitely reinvest $197.4 million of its undistributed foreign earnings. This amount takes into consideration a possible one-time repatriation in 2019. If the Company elects to make such one-time repatriation of cash and cash equivalents and short-term investments held by the Company’s non-U.S. entities to the United States, after taking into account the Transition Tax described above, the Company expects that such repatriation would generate only an immaterial U.S. tax expense related to U.S. state income taxes. 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, |
|  | 2018 |  |  | 2017 |
|  |  |  |  |  | (as adjusted) |
Deferred tax assets, net: |  |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 841 |  |  | $ | 761 |
Tax credits |  |  | 1,839 |  |  |  | 1,520 |
Intangible assets |  |  | 0 |  |  |  | 10 |
Deferred revenue adjustment |  |  | 543 |  |  |  | 1,214 |
Accrued compensation |  |  | 6,519 |  |  |  | 2,863 |
Share-based compensation expense |  |  | 12,987 |  |  |  | 11,597 |
Deferred rent |  |  | 1,764 |  |  |  | 0 |
Other |  |  | 2,115 |  |  |  | 2,457 |
Deferred tax assets before valuation allowance |  |  | 26,608 |  |  |  | 20,422 |
Valuation allowance |  |  | (1,507 | ) |  |  | (1,015 | )
Deferred tax assets, net of valuation allowance |  |  | 25,101 |  |  |  | 19,407 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Prepaid expenses and other |  |  | 1,049 |  |  |  | 1,301 |
Property and equipment |  |  | 5,841 |  |  |  | 6,778 |
Capitalized software development costs |  |  | 0 |  |  |  | 695 |
Method change |  |  | 932 |  |  |  | 1,340 |
Total deferred tax liabilities |  |  | 7,822 |  |  |  | 10,114 |
Total net deferred tax asset |  | $ | 17,279 |  |  | $ | 9,293 |
Reported as: |  |  |  |  |  |  |  |
Non-current deferred tax assets, net |  |  | 17,316 |  |  |  | 9,297 |
Non-current deferred tax liabilities |  |  | (37 | ) |  |  | (4 | )
Total net deferred tax asset |  | $ | 17,279 |  |  | $ | 9,293 |
As of December 31, 2018, the Company had unrecognized tax benefits of $4.8 million, recorded in “Other long-term liabilities” in the Company’s Consolidated Balance Sheets. The change in unrecognized tax benefits (in thousands) is presented in the table below:
Unrecognized tax benefits at January 1, 2018 (as adjusted) |  | $ | 3,444 |
Increase related to positions taken in prior period |  |  | 314 |
Increase related to positions taken in current period |  |  | 596 |
Decrease related to expiration of statute of limitations |  |  | (295 | )
Unrecognized tax benefits at December 31, 2018 |  |  | 4,059 |
Accrued interest |  |  | 705 |
Unrecognized tax benefits recorded in other long-term liabilities at December 31, 2018 |  | $ | 4,764 |
If recognized, $4.2 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 years ended December 31, 2018, 2017, and 2016, the Company released or recognized an immaterial amount of accrued interest. The amount of accrued interest related to the above unrecognized tax benefits was approximately $0.7 million and $0.6 million as of December 31, 2018 and 2017, respectively. The Company files tax returns in numerous foreign countries as well as the United States 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. In 2018, the Company settled the tax examination in China for tax years 2008 to 2016 without any material audit assessments. The Company’s U.S. tax returns for tax years from 2015 forward are subject to potential examination by the Internal Revenue Service. The Company’s major foreign tax jurisdictions and the tax years that remain subject to potential examination are Italy for tax years 2013 forward; Poland for tax years 2014 forward; Spain for tax years 2015 forward; and Germany and the United Kingdom for tax years 2016 forward. To date there have been no material audit assessments related to audits in the United States or any of the applicable foreign jurisdictions. The Company had no U.S. NOL carryforwards as of December 31, 2018 and 2017. The Company had $3.6 million and $2.5 million of foreign NOL carryforwards as of December 31, 2018 and 2017, respectively. The Company’s valuation allowances of $1.5 million and $1.0 million at December 31, 2018 and 2017, respectively, primarily relate to certain foreign tax credit carryforward tax assets. The Company assessed whether its valuation allowance analyses are affected by various aspects of the Tax Act (e.g., deemed repatriation of deferred foreign income, GILTI inclusions, new categories of foreign tax credits) and concluded that they were not significantly affected by the Tax Act. 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 NOL carryforwards, applicable tax rates, transfer pricing methods, 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 changes related to the utilization of NOLs 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 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. 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 sustain 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 of the Internal Revenue Code provides an annual limitation on the amount of federal NOLs 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 Section 382 ownership change rules to impact the Company’s ability to use its NOL 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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