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Income Taxes | 12 Months Ended
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Dec. 31, 2014
Income Taxes [Abstract] |
Income Taxes | NOTE 1 1. INCOME TAXES Earnings before income taxes were as follows (in thousands):
| For the Years Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Domestic | $ | 148,510 |  | $ | 184,086 |  | $ | 184,159 |
International |  | 98,045 |  |  | 79,175 |  |  | 76,458 |
| $ | 246,555 |  | $ | 263,261 |  | $ | 260,617 |
The provision (benefit) for income taxes comprised the following (in thousands):
| For the Years Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Current |  |  |  |  |  |  |  |  |
Federal | $ | 39,713 |  | $ | 50,999 |  | $ | 59,887 |
State |  | 4,692 |  |  | 5,639 |  |  | 5,879 |
International |  | 20,213 |  |  | 16,657 |  |  | 18,534 |
|  | 64,618 |  |  | 73,295 |  |  | 84,300 |
Deferred |  |  |  |  |  |  |  |  |
Federal |  | 2,301 |  |  | 3,203 |  |  | (198) |
State |  | 33 |  |  | 329 |  |  | 72 |
International |  | (2,348) |  |  | (1,360) |  |  | (1,844) |
|  | (14) |  |  | 2,172 |  |  | (1,970) |
| $ | 64,604 |  | $ | 75,467 |  | $ | 82,330 |
The provision for income taxes differs from the amounts computed by applying the statutory federal income tax rate as follows:
| For the Years Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
U.S. federal statutory rate |  | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State income tax, net of federal tax benefit |  | 1.5 |  |  | 1.5 |  |  | 1.5 |
International income taxes |  | (7.0) |  |  | (4.6) |  |  | (3.8) |
Domestic manufacturing exclusions |  | (1.2) |  |  | (1.4) |  |  | (1.5) |
Research and development credit |  | (1.3) |  |  | (2.3) |  |  | - |
Other, net |  | (0.8) |  |  | 0.5 |  |  | 0.4 |
Effective tax rate |  | 26.2 | % |  | 28.7 | % |  | 31.6 | %
Our effective income tax rate was 26.2% for the year ended December 31, 2014 and 28.7% for the year ended December 31, 2013. The decrease in our effective income tax rate for the year ended December 31, 2014, as compared to the year ended December 31, 2013, was related to higher relative earnings subject to international tax rates that are lower than domestic tax rates, a non-recurring benefit related to the deferral of intercompany profits that were included in prior year tax provisions in error, which is not material to current or prior interim or annual periods, and the resolution of domestic and international tax audits, which resulted in a net reduction in our provision for uncertain tax positions. These favorable factors were partly offset by a reduction in the benefit from the U.S. research and development (“R&D”) tax credit. During the three months ended March 31, 2013, legislation in the U.S. retroactively allowed the R&D tax credit for all of 2012 and extended the R&D tax credit through the year ending December 31, 2013. As a result, in the year ending December 31, 2013 we recorded the benefit of two years of R&D tax credit as compared to the year ending December 31, 2014 in which we have recorded only the benefit related to that year’s activities. Our effective income tax rate was 28.7% for the year ended December 31, 201 3 and 31.6% for the year ended December 31, 2012. The decrease in our effective income tax rate for the year ended December 31, 2013, as compared to the year ended December 31, 2012, was due primarily to the R&D tax credit. For the year ended December 31, 2012, the U.S. legislation authorizing the R&D tax credit had expired and no associated tax benefit was recognized within this period. On January 2, 2013, U.S. federal legislation was enacted that retroactively allowed an R&D tax credit for all of 2012 and extended the R&D tax credit through the year ended December 31, 2013. Because the related legislation was enacted in 2013, the full benefit of the R&D tax credit related to the prior year’s activities was recognized in 2013. In addition, higher relative earnings subject to international tax rates that are lower than domestic tax rates also contributed to the decrease in our effective income tax rate. We have business operations in Switzerland and the Netherlands and have been granted tax rulings by each jurisdiction. Our tax rulings in Switzerland and the Netherlands are set to expire on December 31, 2015 and December 31, 2022, respectively. As a result of the tax rulings, our net income was higher by $8.5 million, $6.5 million and $6.0 million for the years ended December 31, 2014, 2013 and 2012, respectively. The benefit from these tax rulings is reflected within the overall benefit received from international income taxes in the table above. We consider the majority of the operating earnings of non-U.S. subsidiaries to be indefin itely invested outside the U.S. The cumulative earnings of these subsidiaries w ere $431.7 mill ion at December 31, 2014. No provision has been made for U.S. federal and state, or international taxes that may result from future remittances of the undistributed earnings of non-U.S. subsidiaries. Should we repatriate these earnings in the future, we would have to adjust the income tax provision in the period in which the decision to repatriate earnings is made. A determination of the related tax liability that would be paid on these undistributed earnings if repatriated is not practicable. For the operating earnings not considered to be indefinitely invested outside the U.S., we have accounted for the tax impact on a current basis. The components of the net deferred tax assets (liabilities) included in the accompanying consolidated balance sheets are as follows (in thousands):
|  | December 31, 2014 |  | December 31, 2013 |
|  |  | Current |  |  | Long-Term |  |  | Current |  |  | Long-Term |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |
Accrued expenses |  | $ | 20,377 |  | $ | 7,824 |  | $ | 19,833 |  | $ | 1,622 |
Accounts receivable reserves |  |  | 2,591 |  |  | - |  |  | 1,153 |  |  | - |
Deferred revenue |  |  | 8,697 |  |  | 3,084 |  |  | 5,872 |  |  | 1,552 |
Inventory basis differences |  |  | 3,154 |  |  | 347 |  |  | 2,670 |  |  | - |
Property-based differences |  |  | - |  |  | 1,601 |  |  | - |  |  | 1,728 |
Share-based compensation |  |  | 2,490 |  |  | 8,936 |  |  | 2,325 |  |  | 7,923 |
Other |  |  | 171 |  |  | 255 |  |  | 13 |  |  | 150 |
Net operating loss carryforwards |  |  | 65 |  |  | 4,368 |  |  | 500 |  |  | 4,182 |
Unrealized losses on foreign currency exchange contracts, interest rate swaps and investments |  |  | - |  |  | - |  |  | 1,580 |  |  | - |
Total assets |  |  | 37,545 |  |  | 26,415 |  |  | 33,946 |  |  | 17,157 |
Valuation allowance |  |  | (457) |  |  | (4,221) |  |  | (642) |  |  | (4,559) |
Total assets, net of valuation allowance |  |  | 37,088 |  |  | 22,194 |  |  | 33,304 |  |  | 12,598 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred instrument costs |  |  | - |  |  | (10,149) |  |  | - |  |  | (3,093) |
Property-based differences |  |  | - |  |  | (33,978) |  |  | - |  |  | (25,823) |
Intangible asset basis differences |  |  | - |  |  | (16,882) |  |  | - |  |  | (15,513) |
Other |  |  | (610) |  |  | (517) |  |  | (190) |  |  | (790) |
Unrealized gains on foreign currency exchange contracts, interest rate swaps and investments |  |  | (2,603) |  |  | - |  |  | (1,303) |  |  | - |
Total liabilities |  |  | (3,213) |  |  | (61,526) |  |  | (1,493) |  |  | (45,219) |
Net deferred tax assets (liabilities) |  | $ | 33,875 |  | $ | (39,332) |  | $ | 31,811 |  | $ | (32,621) |
We record a liability for uncertain tax positions that do not meet the more likely than not standard as prescribed by the authoritative guidance for income tax accounting. We record tax benefits for only those positions that we believe will more likely than not be sustained. Unrecognized tax benefits are the differences between tax positions taken, or expected to be taken, in tax returns, and the benefits recognized for accounting purposes. We classify certain uncertain tax positions as long-term liabilities. The total amount of unrecognized tax benefits at December 31, 2014 a nd December 31, 2013 was $5.9 million and $6.3 million, respectively. Of the total unrecognized tax benefits at December 31, 2014 and 2013, $5.0 million and $5.7 million, respectively, comprise unrecognized tax positions that woul d, if recognized, affect our effective tax rate. The ultimate deductibility of the remaining unrecognized tax positions is highly certain but there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. During each of the years ended December 31, 2014, 2013 and 2012, we recorded interest expense and penalties of $0.3 million as income tax expense in our consolidated statement of income. At December 31, 2014 and 2013, we had $0.5 million and $0.6 million, respectively, of estimated interest expense and penalties accrued in our consolidated balance sheets. The following table summarizes the changes in unrecognized tax benefits during the years ended December 31, 201 4, 201 3 and 201 2 (in thousands):
| For the Years Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Total amounts of unrecognized tax benefits, beginning of period | $ | 6,325 |  | $ | 5,906 |  | $ | 5,149 |
Gross increases in unrecognized tax benefits as a result of tax positions taken during a prior period |  | 432 |  |  | 8 |  |  | 290 |
Gross increases in unrecognized tax benefits as a result of tax positions taken in the current period |  | 1,789 |  |  | 1,954 |  |  | 1,436 |
Decreases in unrecognized tax benefits relating to settlements with taxing authorities |  | (2,242) |  |  | (317) |  |  | - |
Decreases in unrecognized tax benefits as a result of a lapse of the applicable statutes of limitations |  | (362) |  |  | (1,226) |  |  | (969) |
Total amounts of unrecognized tax benefits, end of period | $ | 5,942 |  | $ | 6,325 |  | $ | 5,906 |
In 2015, it is reasonably possible that we could recognize u p to $0.4 mill ion of income tax benefits that have not been recognized at December 31, 2014. The income tax benefits are due primarily to the lapse in the statutes of limitations for various U.S. and international tax jurisdictions. In the ordinary course of our business, our income tax filings are regularly under audit by tax authorities. While we believe we have appropriately provided for all uncertain tax positions, amounts asserted by taxing authorities could be greater or less than our accrued position. Accordingly, additional provisions on income tax matters, or reductions of pre viously accrued provisions, could be recorded in the future as we revise our estimates due to changing facts and circumstances or the underlying matters are settled or otherwise resolved. W e are currently under tax examinations by various state and international tax authorities. We anticipate that these examinations will be concluded within the next year. We are no longer subject to U.S. federal examinations for tax years before 2013. With few exceptions, we are no longer subject to income tax examinations in any state and local, or international jurisdictions in which we conduct significant taxable activities for years before 2006. At December 31, 2014, we had net operating loss carryforwards in certain state and international jurisdictions of approximately $41.6 million available to offset future taxable income. Most of these net operating loss carryforwards will expire at various dates through 2018 and the remainder have indefinite lives. We have recorded a valuation allowance of $4.7 million against certain deferred tax assets related to temporary differences including net operating loss carryforwards, as it is more likely than not that they will not be realized or utilized within the carryforward period.

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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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