v2.4.1.9

Income Taxes | 12 Months Ended
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Dec. 31, 2014
Income Tax Disclosure [Abstract] |
Income Taxes |
NOTE 10. | Income Taxes
The Company’s geographical breakdown of income before income taxes is as follows:
|  | Year Ended December 31,
|  | 2014 |  | 2013 |  | 2012
|  | (in thousands)
Domestic |  | $ | 7,384 |  |  | $ | 947 |  |  | $ | 1,656 |
Foreign |  | 1,229 |  |  | 1,094 |  |  | 923 |
Income before income taxes |  | $ | 8,613 |  |  | $ | 2,041 |  |  | $ | 2,579 |
The (benefit from) provision for income taxes consists of the following:
|  | Year Ended December 31,
|  | 2014 |  | 2013 |  | 2012
|  | (in thousands)
Current |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | (40 | ) |  | $ | (18 | )
State |  | 317 |  |  | 154 |  |  | 202 |
Foreign |  | 651 |  |  | 452 |  |  | 147 |
Total current provision |  | 968 |  |  | 566 |  |  | 331 |
Deferred |  |  |  |  |  |
Federal |  | $ | (22,184 | ) |  | $ | 6 |  |  | $ | 27 |
State |  | (433 | ) |  | — |  |  | — |
Foreign |  | 18 |  |  | (72 | ) |  | — |
Total deferred provision (benefit) |  | (22,599 | ) |  | (66 | ) |  | 27 |
Total (benefit from) provision for income taxes |  | $ | (21,631 | ) |  | $ | 500 |  |  | $ | 358 |
The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:
|  | Year Ended December 31,
|  | 2014 |  | 2013 |  | 2012
Federal statutory rate |  | 35.0 | % |  | 34.0 | % |  | 34.0 | %
State taxes |  | 1.4 |  |  | 5.1 |  |  | 5.5 |
Stock-based compensation |  | 1.3 |  |  | 9.1 |  |  | 22.9 |
Foreign source income |  | 3.9 |  |  | 1.9 |  |  | (3.5 | )
Change in valuation allowance |  | (270.5 | ) |  | (28.4 | ) |  | (47.9 | )
Incremental federal rate benefit previously not recognized |  | (7.0 | ) |  | — |  |  | — |
Federal and state research and development credit |  | (11.3 | ) |  | — |  |  | — |
Other |  | (3.9 | ) |  | 2.8 |  |  | 2.9 |
(Benefit from) provision for income taxes |  | (251.1 | )% |  | 24.5 | % |  | 13.9 | %
Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of the Company’s deferred tax assets and liabilities are as follows:
|  | December 31,
|  | 2014 |  | 2013
|  | (in thousands)
Deferred tax assets |  |  |  |
Net operating loss carryforwards |  | $ | 12,849 |  |  | $ | 18,895 |
Research and development credit carryforwards |  | 6,392 |  |  | 5,189 |
Accrued liabilities |  | 583 |  |  | 581 |
Deferred revenues |  | 3,291 |  |  | 3,188 |
Deferred rent |  | 191 |  |  | 210 |
Intangible assets |  | 401 |  |  | 440 |
Stock-based compensation |  | 4,149 |  |  | 1,714 |
Other |  | 903 |  |  | 521 |
Gross deferred tax assets |  | 28,759 |  |  | 30,738 |
Valuation allowance |  | (3,079 | ) |  | (27,181 | )
Net deferred tax assets |  | 25,680 |  |  | 3,557 |
Deferred tax liabilities |  |  |  |
Fixed assets |  | (3,039 | ) |  | (3,483 | )
Intangible assets |  | (2 | ) |  | (34 | )
Total deferred tax liabilities |  | (3,041 | ) |  | (3,517 | )
Net deferred tax assets |  | $ | 22,639 |  |  | $ | 40 |
Current and non-current deferred tax assets and liabilities included in the consolidated balance sheets are recorded as follows:
|  | December 31,
|  | 2014 |  | 2013
|  | (in thousands)
Current deferred tax assets |  | $ | 8,520 |  |  | $ | 114 |
Current deferred tax liabilities |  | — |  |  | — |
Noncurrent deferred tax assets |  | 14,119 |  |  | 72 |
Noncurrent deferred tax liabilities |  | — |  |  | (146 | )
Net deferred tax assets |  | $ | 22,639 |  |  | $ | 40 |
Realization of deferred tax assets is dependent upon future earnings, if any, and the timing and amount of such assets are uncertain. Prior to the fourth quarter of 2014, the Company had provided a valuation allowance for its U.S. federal and state deferred tax assets that it believed were not more likely than not realizable. Management determined that the objective and verifiable negative evidence, such as relatively low U.S. operating income and uncertainty of sustaining or growing future operating profits, continued to outweigh positive evidence that would be necessary to reduce the valuation allowance. In the fourth quarter of 2014, the Company recorded a $23.7 million tax benefit for the recognition of its U.S. federal and certain state deferred tax assets, primarily due to the increased and expected sustainable profitability in its U.S. operations. In reaching this conclusion, management considered the Company's increasing realized profitability in the fourth quarter of 2014, forecasted future profitability, its ability to better absorb uncertainties in future profits, and the cumulative effect of changes in the current macro-economic environment surrounding the IT security industry, which ultimately resulted in increased demand for its solutions. The Company believes it is more likely than not that its California deferred tax assets will not be realized because the income attributed to California is not expected to be sufficient to recognize these deferred tax assets. Accordingly, the Company continues to record the valuation allowance of $3.1 million as of December 31, 2014 for its California deferred tax assets During the year ended December 31, 2013, the valuation allowance had increased by $0.9 million to $27.2 million. At December 31, 2014, the Company had federal and state net operating loss carryforwards of approximately $56.7 million and $10.5 million respectively, available to reduce federal and state taxable income. The excess tax benefits included in net operating loss carryforwards but not reflected in deferred tax assets for federal and state are $21.4 million and $1.7 million, respectively. The Company’s federal net operating losses expire in the years 2021 to 2034, and its state net operating losses expire from 2015 to 2034. Utilization of the Company’s net operating loss carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of the net operating loss carryforwards before utilization. As of December 31, 2014, the Company had federal and state research and development credits of $5.0 million and $5.2 million, respectively. Federal research and development credits expire in the years 2022 to 2034. State research and development credits do not expire. U.S. income taxes were not provided on undistributed earnings from investments in non-U.S. subsidiaries as the Company intends to continue to reinvest the earnings of these foreign subsidiaries indefinitely. The Company’s share of undistributed earnings of foreign subsidiaries that could be subject to additional U.S. income tax if remitted was approximately $6.8 million and $8.5 million as of December 31, 2014 and 2013, respectively. Determination of the amount of unrecognized deferred tax liability for temporary differences related to investments in these non-U.S. subsidiaries that are essentially permanent in duration is not practicable. The evaluation of a tax position is a two-step process. The first step requires the Company to determine whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position. The second step requires the Company to recognize in the financial statement each tax position that meets the more likely than not criteria, measured at the amount of benefit that has a greater than fifty percent likelihood of being realized. A reconciliation of the Company’s unrecognized tax benefits is as follows:
|  | Year Ended December 31,
|  | 2014 |  | 2013 |  | 2012
|  | (in thousands)
Unrecognized tax benefits beginning balance |  | $ | 3,255 |  |  | $ | 2,647 |  |  | $ | 2,792 |
Gross increase for tax positions of prior years |  | — |  |  | 241 |  |  | — |
Gross decrease for tax positions of prior years |  | (127 | ) |  | — |  |  | (46 | )
Gross increase for tax positions of current year |  | 332 |  |  | 446 |  |  | 140 |
Settlements |  | — |  |  | — |  |  | (106 | )
Lapse of statute of limitations |  | (130 | ) |  | (79 | ) |  | (133 | )
Total unrecognized tax benefits |  | $ | 3,330 |  |  | $ | 3,255 |  |  | $ | 2,647 |
The unrecognized tax benefits, if recognized, would impact the income tax provision by $2.1 million, $1.0 million and $1.0 million as of December 31, 2014, 2013 and 2012, respectively. The Company has elected to include interest and penalties as a component of income tax expense. The amounts were not material for 2014, 2013 and 2012. The Company files income tax returns in the United States, including various state jurisdictions. The Company’s subsidiaries file tax returns in various foreign jurisdictions. The tax years 2009 to 2014 remain open to examination by the major taxing jurisdictions in which the Company is subject to tax, with the exception of France which remains open to examination for the 2012 through 2014 tax years only. As of December 31, 2014, the Company was not under examination by the Internal Revenue Service or any state tax jurisdictions. A one-year retroactive extension of the research credit from January 1, 2014 through December 31, 2014 was signed into law on December 19, 2014 in accordance with the Tax Increase Prevention Act of 2014. On January 2, 2013, the American Taxpayer Relief Act of 2012 (H.R. 8) was signed into law which retroactively extended the federal research and development credit from January 1, 2012 through December 31, 2013.

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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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