XML 34 R21.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES As a result of the Tax Act, we recorded provisional estimates in accordance with SAB 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, during the year ended December 31, 2017 in relation to the revaluation of our net deferred tax assets at the lower U.S. corporate income tax rate and the additional tax expense associated with the deemed repatriation tax. During the year ended December 31, 2018, we recorded measurement period adjustments related to the provisional estimates. While we consider our accounting for the Tax Act to be complete, we continue to evaluate new guidance and legislation as it is issued. We have not changed our indefinite reinvestment assertion, and we have elected to account for the impact of global intangible low tax income based on the period cost method. The following table sets forth income before taxes and the expense for income taxes:
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
| (in thousands)
Income (loss) before taxes: |  |  |  |  |  |  |  |
U.S. | $ | 10,088 |  |  | $ | (34,406 | ) |  | $ | (55,617 | )
Foreign | 55,069 |  |  | 52,586 |  |  | 48,404 |
Total income (loss) before taxes | $ | 65,157 |  |  | $ | 18,180 |  |  | $ | (7,213 | )
Income tax expense: |  |  |  |  |  |  |  |
Current income taxes: |  |  |  |  |  |  |  |
U.S. federal | $ | 1,156 |  |  | $ | 1,383 |  |  | $ | 49 |
U.S. state | 246 |  |  | 127 |  |  | 126 |
Foreign | 12,359 |  |  | 9,525 |  |  | 9,494 |
Total current income taxes | 13,761 |  |  | 11,035 |  |  | 9,669 |
Deferred income taxes: |  |  |  |  |  |  |  |
U.S. federal | 276 |  |  | 1,300 |  |  | 263 |
U.S. state | — |  |  | — |  |  | — |
Foreign | 683 |  |  | (4,393 | ) |  | (651 | )
Total deferred income taxes | 959 |  |  | (3,093 | ) |  | (388 | )
Total income tax expense | $ | 14,720 |  |  | $ | 7,942 |  |  | $ | 9,281 |
The following table sets forth income reconciliations of the statutory federal income tax rate to actual rates based on income or loss before income taxes:
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
| (in thousands)
Income tax expense and rate attributable to: |  |  |  |  |  |  |  |  |  |  |
Federal | $ | 13,683 |  |  | 21.0 | % |  | $ | 6,363 |  |  | 35.0 | % |  | $ | (2,524 | ) |  | (35.0 | )%
State, net of federal benefit | 1,271 |  |  | 2.0 | % |  | 53 |  |  | 0.3 | % |  | (202 | ) |  | (2.8 | )%
Foreign differential | 7,630 |  |  | 11.6 | % |  | (11,768 | ) |  | (64.7 | )% |  | (12,624 | ) |  | (175.0 | )%
Enacted changes in tax law | 495 |  |  | 0.8 | % |  | 17,645 |  |  | 97.1 | % |  | — |  |  | — | %
GILTI, net | 3,443 |  |  | 5.3 | % |  | — |  |  | — | % |  | — |  |  | — | %
Non-deductible / non-taxable items | 3,602 |  |  | 5.5 | % |  | 6,006 |  |  | 33.0 | % |  | 2,694 |  |  | 37.4 | %
Change in valuation allowance | (5,304 | ) |  | (8.1 | )% |  | 24,400 |  |  | 134.2 | % |  | 16,041 |  |  | 222.4 | %
U.S. tax on foreign earnings | — |  |  | — | % |  | (32,427 | ) |  | (178.4 | )% |  | 23,130 |  |  | 320.6 | %
Foreign tax credits | (7,709 | ) |  | (11.9 | )% |  | (7,980 | ) |  | (43.9 | )% |  | (18,581 | ) |  | (257.6 | )%
Uncertain tax positions | (1,696 | ) |  | (2.6 | )% |  | 1,054 |  |  | 5.8 | % |  | 19 |  |  | 0.3 | %
Audit settlements | 183 |  |  | 0.3 | % |  | 354 |  |  | 1.9 | % |  | 253 |  |  | 3.5 | %
Share-based compensation | 764 |  |  | 1.2 | % |  | 882 |  |  | 4.9 | % |  | 2,120 |  |  | 29.4 | %
Deferred income tax account adjustments | (25 | ) |  | — | % |  | 2,679 |  |  | 14.7 | % |  | (842 | ) |  | (11.7 | )%
Other | (1,617 | ) |  | (2.5 | )% |  | 681 |  |  | 3.8 | % |  | (203 | ) |  | (2.8 | )%
Effective income tax expense and rate | $ | 14,720 |  |  | 22.6 | % |  | $ | 7,942 |  |  | 43.7 | % |  | $ | 9,281 |  |  | 128.7 | %
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We recorded a provisional adjustment to our U.S. deferred income taxes as of December 31, 2017 to reflect the reduction in the U.S. statutory tax rate from 35% to 21% resulting from the Tax Act. The following table sets forth deferred income tax assets and liabilities as of the date shown:
| December 31,
| 2018 |  | 2017
| (in thousands)
Non-current deferred tax assets: |  |  |  |  |
Share-based compensation expense | $ | 2,051 |  |  | $ | 2,940 |
Accruals, reserves, and other expenses | 18,734 |  |  | 20,728 |
Net operating loss | 37,727 |  |  | 42,956 |
Intangible assets | 1,363 |  |  | 1,620 |
Future uncertain tax position offset | 654 |  |  | 498 |
Unrealized loss on foreign currency | — |  |  | 119 |
Foreign tax credit | 66,321 |  |  | 67,655 |
Other | 2,957 |  |  | 2,792 |
Valuation allowance | (113,237 | ) |  | (119,494 | )
Total non-current deferred tax assets | $ | 16,570 |  |  | $ | 19,814 |
Non-current deferred tax liabilities: |  |  |  |  |
Intangible assets | $ | (164 | ) |  | $ | — |
Property and equipment | (7,332 | ) |  | (9,640 | )
Other | (411 | ) |  | — |
Total non-current deferred tax liabilities | $ | (7,907 | ) |  | $ | (9,640 | )
During 2018, valuation allowances on deferred tax assets that are not anticipated to be realized decreased by $6.3 million. The change in the valuation allowance includes $5.3 million related to income tax expense and $1.0 million which does not impact the tax provision because this amount reflects the impact of unrecorded tax attributes related to changes in cumulative translation adjustment. During 2017, additional valuation allowances of $28.6 million were recorded. The change in the 2017 valuation allowance includes $24.4 million related to income tax expense and $4.2 million which does not impact the tax provision because this amount reflects the cumulative impact of unrecorded tax attributes related to changes in cumulative translation adjustment. Our deferred tax valuation allowances are primarily the result of uncertainties regarding the future realization of recorded tax benefits on tax loss and credit carryforwards from operations in various jurisdictions. The measurement of deferred tax assets is reduced by a valuation allowance if, based upon available evidence, it is more likely than not that the deferred tax assets will not be realized. We have evaluated the realizability of our deferred tax assets in each jurisdiction by assessing the adequacy of expected taxable income, including the reversal of existing temporary differences, historical and projected operating results and the availability of prudent and feasible tax planning strategies. Based on this analysis, we have determined that the valuation allowances recorded in each period presented are appropriate. During 2018, we recorded additional tax loss carryforwards in certain foreign jurisdictions which aggregate to $8.5 million, primarily driven by operational losses recognized based on local statutory accounting requirements. As these carryforwards were generated in jurisdictions where we have historically had book losses or do not have strong future projections related to those operations, we concluded that it was more likely than not that the associated net operating losses would not be realized, and thus recorded a valuation allowance on the majority of the associated deferred tax assets. As of December 31, 2018, the Company maintained a valuation allowance of $113.2 million. The Company recorded deferred tax assets related to U.S. federal tax carryforwards, including foreign tax credits and net operating losses, which expire at various dates between 2023 and 2038 of $46.6 million and $48.6 million at December 31, 2018 and 2017, respectively. The Company recorded deferred tax assets related to U.S. state tax net operating loss carryforwards which expire at various dates between 2019 and 2038 of $11.1 million and $12.5 million at December 31, 2018 and 2017, respectively. The Company recorded deferred tax assets related to foreign tax carryforwards, including foreign tax credits and net operating losses, which expire starting in 2020 and those which do not expire of $47.7 million and $49.9 million as of December 31, 2018 and 2017, respectively. We annually receive cash from our foreign subsidiaries’ current year earnings. The transition tax in the Tax Act imposed a tax on undistributed and previously untaxed foreign earnings at various tax rates. This tax largely eliminated the differences between the financial reporting and income tax basis of foreign undistributed earnings. Furthermore, as of December 31, 2018, foreign withholding taxes have not been provided on unremitted earnings of subsidiaries operating outside of the U.S. as these amounts are considered to be indefinitely reinvested. The following table sets forth a reconciliation of the beginning and ending amount of unrecognized tax benefits:
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
| (in thousands)
Unrecognized tax benefit as of January 1 | $ | 6,204 |  |  | $ | 4,750 |  |  | $ | 4,957 |
Additions in tax positions in prior period | 250 |  |  | 683 |  |  | 646 |
Reductions in tax positions in prior period | (690 | ) |  | — |  |  | (634 | )
Additions in tax positions in current period | 461 |  |  | 966 |  |  | 245 |
Settlements | (621 | ) |  | (123 | ) |  | (238 | )
Lapse of statute of limitations | (1,045 | ) |  | (414 | ) |  | (196 | )
Cumulative foreign currency translation adjustment | (48 | ) |  | 342 |  |  | (30 | )
Unrecognized tax benefit as of December 31 | $ | 4,511 |  |  | $ | 6,204 |  |  | $ | 4,750 |
The Company recorded a net benefit of $1.7 million related to decreases in 2018 unrecognized tax benefits combined with amounts effectively settled under audit. Unrecognized tax benefits as of December 31, 2018 relate to tax years that are currently open under the statute of limitation. The primary impact of uncertain tax positions on the rate reconciliation includes audit settlements, net increases in position changes, and accrued interest expense. Interest and penalties related to income tax liabilities are included in ‘Income tax expense’ in the consolidated statements of operations. For the years ended December 31, 2018, 2017, and 2016, the Company recorded approximately $0.2 million, $0.2 million, and $0.2 million, respectively, of penalties and interest. During the year ended December 31, 2018, Crocs released $0.2 million of interest from settlements, lapse of statutes, and change in certainty. The cumulative accrued balance of penalties and interest was $0.6 million, $0.7 million, and $0.6 million, as of December 31, 2018, 2017, and 2016, respectively. Unrecognized tax benefits of $4.5 million, $6.2 million and $4.8 million as of December 31, 2018, 2017, and 2016, respectively, if recognized, would reduce the annual effective tax rate offset by deferred tax assets recorded for uncertain tax positions. The following table sets forth the tax years subject to examination for the major jurisdictions where we conduct business as of December 31, 2018:
The Netherlands | 2005 to 2018
Canada | 2011 to 2018
Japan | 2012 to 2018
China | 2008 to 2018
Singapore | 2014 to 2018
United States | 2010 to 2018
The Company is currently under audit in Japan and Taiwan. U.S. state tax returns are generally subject to examination for a period of three to five years after filing of the respective return. The state impact of any federal changes remains subject to examination by various state jurisdictions for a period up to two years after formal notification to the states. As such, U.S. state income tax returns for the Company are generally subject to examination for the years 2013 to 2018.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration