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Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes |
14) | Income Taxes
As of December 31, 2017, the Company had not fully completed its accounting for the tax effects of the enactment of the Act. The Company has recognized the provisional tax impacts related to the transition tax and the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the year ended December 31, 2017 in accordance with the guidance provided in SAB 118. The Company has not yet completed sufficiently detailed calculations of the post-1986 foreign earnings and profits and the income tax pools for all foreign subsidiaries. In addition, the Company has identified items that require additional guidance from the Internal Revenue Service regarding certain aspects of tax computations required by the Act. The estimates of the impacts of the Act on the Company are based on the Company’s current assumptions and understanding of the provisions of the Act. The ultimate impacts of the Act on the Company may differ from these provisional amounts due to additional analysis, changes in interpretations and assumptions the Company has made and additional regulatory guidance that may be issued. SAB 118 also requires certain specific additional disclosures as follows:
| • |  | Provisional amounts were reported for the transition tax and the revaluation of deferred taxes as a result of the statutory rate change and other factors.
| • |  | The provisional amount recorded for the transition tax impacts current and long-term income taxes payable. The provisional amount recorded to revalue deferred taxes impacts long-term deferred tax assets and liabilities.
| • |  | The Company needs to complete a detailed analysis of undistributed cumulative earnings and profits and foreign tax pools of its foreign subsidiaries and receive additional guidance from the Internal Revenue Service in order to complete the accounting requirements under ASC topic 740 for the provisional amounts.
A reconciliation of the Company’s effective tax rate to the U.S. federal statutory rate is as follows:
|  | Years Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
U.S. Federal income tax statutory rate |  |  | 35.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
Federal tax credits |  |  | (0.7 | ) |  |  | (1.8 | ) |  |  | (1.2 | )
State income taxes, net of federal benefit |  |  | 1.0 |  |  |  | 0.8 |  |  |  | 1.3 |
Effect of foreign operations taxed at various rates |  |  | (12.1 | ) |  |  | (12.7 | ) |  |  | (6.4 | )
Qualified production activity tax benefit |  |  | (1.4 | ) |  |  | (2.9 | ) |  |  | (1.6 | )
Transition tax, net of foreign tax credits |  |  | 6.4 |  |  |  | — |  |  |  | — |
Revaluation of US deferred income taxes |  |  | (5.0 | ) |  |  | — |  |  |  | — |
Stock based compensation |  |  | (2.5 | ) |  |  | — |  |  |  | — |
Deferred tax asset valuation allowance |  |  | (0.1 | ) |  |  | 2.1 |  |  |  | — |
Release of income tax reserves (including interest) |  |  | (0.4 | ) |  |  | (2.4 | ) |  |  | (4.8 | )
Foreign dividends, net of foreign tax credits |  |  | 3.3 |  |  |  | (2.2 | ) |  |  | 0.7 |
Acquisition and integration related costs |  |  | — |  |  |  | 1.5 |  |  |  | — |
Other |  |  | 0.7 |  |  |  | 0.7 |  |  |  | 0.3 |
|  |  | 24.2 | % |  |  | 18.1 | % |  |  | 23.3 | %
The components of income from operations before income taxes and the related provision for income taxes consist of the following:
|  | Years Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Income from operations before income taxes: |  |  |  |  |  |  |  |  |  |  |  |
United States |  | $ | 224,979 |  |  | $ | 42,491 |  |  | $ | 90,401 |
Foreign |  |  | 222,646 |  |  |  | 85,486 |  |  |  | 69,067 |
|  | $ | 447,625 |  |  | $ | 127,977 |  |  | $ | 159,468 |
Current taxes: |  |  |  |  |  |  |  |  |  |  |  |
United States |  | $ | 77,023 |  |  | $ | 17,693 |  |  | $ | 15,813 |
State |  |  | 6,149 |  |  |  | 2,359 |  |  |  | 2,927 |
Foreign |  |  | 30,152 |  |  |  | 41,938 |  |  |  | 18,021 |
|  |  | 113,324 |  |  |  | 61,990 |  |  |  | 36,761 |
Deferred taxes: |  |  |  |  |  |  |  |  |  |  |  |
United States |  |  | (16,250 | ) |  |  | (23,604 | ) |  |  | (862 | )
State and Foreign |  |  | 11,419 |  |  |  | (15,218 | ) |  |  | 1,272 |
|  |  | (4,831 | ) |  |  | (38,822 | ) |  |  | 410 |
Provision for income taxes |  | $ | 108,493 |  |  | $ | 23,168 |  |  | $ | 37,171 |
The significant components of the deferred tax assets and deferred tax liabilities are as follows:
|  | Years Ended December 31, |
|  | 2017 |  |  | 2016 |
Deferred tax assets: |  |  |  |  |  |  |  |
Carry-forward losses and credits |  | $ | 25,834 |  |  | $ | 50,673 |
Inventory and warranty reserves |  |  | 17,734 |  |  |  | 24,253 |
Accrued expenses and other reserves |  |  | 15,393 |  |  |  | 16,176 |
Stock-based compensation |  |  | 5,092 |  |  |  | 8,995 |
Executive supplemental retirement benefits |  |  | 4,984 |  |  |  | 6,888 |
Other |  |  | 597 |  |  |  | — |
Total deferred tax assets |  | $ | 69,634 |  |  | $ | 106,985 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Acquired intangible assets |  |  | (83,092 | ) |  |  | (127,571 | )
Depreciation and amortization |  |  | (10,150 | ) |  |  | (16,428 | )
Loan costs |  |  | (2,157 | ) |  |  | (7,282 | )
Foreign withholding taxes |  |  | (16,206 | ) |  |  | — |
Unrealized gain |  |  | (469 | ) |  |  | (3,195 | )
Other |  |  | — |  |  |  | (1,336 | )
Total deferred tax liabilities |  |  | (112,074 | ) |  |  | (155,812 | )
Valuation allowance |  |  | (13,629 | ) |  |  | (12,527 | )
Net deferred tax (liabilities) assets |  | $ | (56,069 | ) |  | $ | (61,354 | )
As of December 31, 2017, a provisional adjustment reducing the net deferred tax liabilities of the Company was made in the amount of $22,345 due to the U.S. tax rate reduction as a result of the enactment of the Act and other related factors. As of December 31, 2017, the Company had federal, state and foreign gross research and other tax credit carry-forwards of $36,496. Included in the total carry-forward are $12,559 of credits that can be carried forward indefinitely and the remaining credits expire at various dates through 2035. The Company also had, state and foreign gross net operating loss carry-forwards of $43,431. Included in the total carry-forward are $37,098 of losses that can be carried forward indefinitely while the remaining losses expire at various dates through 2035. Although the Company believes that its tax positions are consistent with applicable U.S. federal, state and international laws, it maintains certain tax reserves as of December 31, 2017 in the event its tax positions were to be challenged by the applicable tax authority and additional tax assessed on audit. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
|  | Years Ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Balance at beginning of year |  | $ | 25,465 |  |  | $ | 4,332 |  |  | $ | 19,610 |
Increases/(decreases) for prior years |  |  | 640 |  |  |  | (195 | ) |  |  | (26 | )
Increases for the current year |  |  | 4,340 |  |  |  | 23,940 |  |  |  | 322 |
Reductions related to settlements with taxing authorities |  |  | — |  |  |  | — |  |  |  | (15,370 | )
Reductions related to expiration of statute of limitations |  |  | (3,100 | ) |  |  | (2,612 | ) |  |  | (204 | )
Balance at end of year |  | $ | 27,345 |  |  | $ | 25,465 |  |  | $ | 4,332 |
As of December 31, 2017, the total amount of gross unrecognized tax benefits, which excludes interest and penalties, was $27,345. As of December 31, 2016, the total amount of gross unrecognized tax benefits, which excludes interest and penalties, was $25,465. The net increase from December 31, 2016 was primarily attributable to the addition of reserves related to foreign withholding tax and certain state tax credits. As of December 31, 2017, excluding interest and penalties, there are $18,276 of net unrecognized tax benefits that, if recognized, would impact the Company’s annual effective tax rate. In 2017, the Company recorded a net benefit to income tax expense of $3,100, excluding interest and penalties, due to the release of income tax reserves related to the expiration of certain statutes of limitation. The Company accrues interest and, if applicable, penalties for any uncertain tax positions. Interest and penalties are classified as a component of income tax expense. As of December 31, 2017, 2016 and 2015, the Company had accrued interest on unrecognized tax benefits of approximately $327, $491 and $157, respectively. Over the next 12 months it is reasonably possible that the Company may recognize approximately $1,025 of previously net unrecognized tax benefits, excluding interest and penalties, related to federal, state and foreign tax positions as a result of the expiration of statutes of limitation. The U.S. statute of limitations remains open for tax years 2014 through present. The statute of limitations for the Company’s tax filings in other jurisdictions varies between fiscal years 2012 through the present. The Company also has certain federal credit carry-forwards and state tax loss and credit carry-forwards that are open to examination for tax years 2000 through the present. The Company is subject to examination by U.S. federal, state and foreign tax authorities. The U.S. Internal Revenue Service commenced an examination of the Company’s U.S. federal income tax filings for tax years 2015 and 2016 during the quarter ended September 30, 2017. A previous audit by the U.S. Internal Revenue Service was effectively settled during the quarter ended December 31, 2015 upon the Company’s acceptance of the income tax examination changes. On a quarterly basis, the Company evaluates both positive and negative evidence that affects the realizability of net deferred tax assets and assesses the need for a valuation allowance. The future benefit to be derived from its deferred tax assets is dependent upon its ability to generate sufficient future taxable income to realize the assets. During 2017, the Company increased its valuation allowance by $1,102, primarily related to certain state tax credits. During 2016, the Company increased its valuation allowance by $6,400 primarily related to the addition of historical valuation allowances for Newport and its subsidiaries which were included as a result of the acquisition in April 2016. During 2015, the Company decreased its valuation allowance by $20,636, primarily related to the expiration of U.S. capital loss carry-forwards. The Act, provided for a one-time transition tax on deemed mandatory repatriation of the post-1986 undistributed cumulative earnings and profits of our foreign subsidiaries (“transition tax”). The Company had approximately $560,000 of undistributed foreign earnings subject to the transition tax and recognized a provisional $27,610 of income tax expense, net of foreign tax credits in its consolidated statement of operations for the year ended December 31, 2017. The Company expects to pay the net additional taxes associated with the transition tax over an eight year period as permitted by the Act. No provision has been made for the deferred taxes related to certain remaining historical outside basis differences in the Company’s non-U.S. subsidiaries. The Company continues to assert indefinite reinvestment in these outside basis differences generated on or before December 31, 2017. Determination of the amount of unrecognized deferred tax liability on outside basis differences is not practicable because the amount of such liability, if any, is dependent upon circumstances existing and tax planning choices available when a transaction using outside basis occurs. The Company’s Israeli subsidiaries have elected to be treated under a preferential Israeli tax regime under which their taxable income is taxed at reduced tax rates. These reduced rates range anywhere between 7.5% and 16%. One of the Company’s Israeli subsidiaries effectively settled an examination for tax years 2012 and 2013 during the quarter ended June 30, 2017.

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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 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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