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Income Taxes | 12 Months Ended
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Dec. 31, 2015
Income Tax Disclosure [Abstract] |
Income Taxes | 13. Income Taxes Components of the Company’s income (loss) from continuing operations before income taxes are as follows (in thousands):
| Year Ended December 31, |
| 2015 |  |  | 2014 |  |  | 2013 |
Income (loss) from continuing operations before income taxes: |  |  |  |  |  |  |  |  |  |  |
Canadian | $ | (1,674 | ) |  | $ | (20,212 | ) |  | $ | (5,366 | )
U.S. |  | 23,298 |  |  |  | (9,661 | ) |  |  | 12,838 |
Other |  | 24,398 |  |  |  | 11,958 |  |  |  | 8,705 |
Total | $ | 46,022 |  |  | $ | (17,915 | ) |  | $ | 16,177 |
Components of the Company’s income tax provision (benefit) are as follows (in thousands):
| Year Ended December 31, |
| 2015 |  |  | 2014 |  |  | 2013 |
Current |  |  |  |  |  |  |  |  |  |  |
Canadian | $ | 96 |  |  | $ | 175 |  |  | $ | — |
U.S. |  | 8,136 |  |  |  | 3,615 |  |  |  | 1,662 |
Other |  | 3,854 |  |  |  | 1,940 |  |  |  | 652 |
|  | 12,086 |  |  |  | 5,730 |  |  |  | 2,314 |
Deferred |  |  |  |  |  |  |  |  |  |  |
Canadian |  | — |  |  |  | — |  |  |  | — |
U.S. |  | (3,239 | ) |  |  | (6,731 | ) |  |  | 2,206 |
Other |  | 1,547 |  |  |  | (5 | ) |  |  | 1,680 |
|  | (1,692 | ) |  |  | (6,736 | ) |  |  | 3,886 |
Total | $ | 10,394 |  |  | $ | (1,006 | ) |  | $ | 6,200 |
The Company is incorporated in Canada and therefore uses the Canadian statutory rate for income tax disclosure. The reconciliation of the statutory Canadian tax rate to the effective tax rate related to income before income taxes from continuing operations is as follows (in thousands, except percentage data):
| Year Ended December 31, |
| 2015 |  |  | 2014 |  |  | 2013 |
Statutory Canadian tax rate |  | 27.00 | % |  |  | 27.00 | % |  |  | 26.00 | %
Expected income tax provision at Canadian statutory tax rate | $ | 12,426 |  |  | $ | (4,837 | ) |  | $ | 4,206 |
International tax rate differences |  | 304 |  |  |  | (1,132 | ) |  |  | 156 |
State income taxes, net |  | 453 |  |  |  | (271 | ) |  |  | 148 |
Withholding and other taxes |  | 680 |  |  |  | 421 |  |  |  | 321 |
Permanent differences |  | 1,130 |  |  |  | 486 |  |  |  | 106 |
Section 199 deduction |  | (1,188 | ) |  |  | (574 | ) |  |  | — |
Change in valuation allowance |  | (612 | ) |  |  | 4,809 |  |  |  | (3,076 | )
Provision to return differences |  | (617 | ) |  |  | 962 |  |  |  | (312 | )
Tax credits |  | (990 | ) |  |  | (1,678 | ) |  |  | (938 | )
Net operating loss expirations |  | — |  |  |  | — |  |  |  | 4,538 |
Statutory tax rate change |  | 95 |  |  |  | (13 | ) |  |  | 354 |
Uncertain tax positions |  | 121 |  |  |  | 134 |  |  |  | 259 |
IRS audit |  | (748 | ) |  |  | 241 |  |  |  | 680 |
JK Lasers divestiture |  | (1,432 | ) |  |  | — |  |  |  | — |
Goodwill impairment |  | — |  |  |  | 330 |  |  |  | — |
Other |  | 772 |  |  |  | 116 |  |  |  | (242 | )
Reported income tax provision (benefit) | $ | 10,394 |  |  | $ | (1,006 | ) |  | $ | 6,200 |
Effective tax rate |  | 22.6 | % |  |  | 5.6 | % |  |  | 38.3 | %
Deferred income taxes result principally from temporary differences in the recognition of certain revenue and expense items and operating loss and tax credit carryforwards for financial and tax reporting purposes. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2015 and 2014 are as follows (in thousands):
| December 31, |
| 2015 |  |  | 2014 |
Deferred tax assets: |  |  |  |  |  |  |
Losses & IRC Section 163(j) carryforwards | $ | 9,985 |  |  | $ | 12,742 |
Compensation related deductions |  | 2,915 |  |  |  | 3,749 |
Tax credits |  | 2,409 |  |  |  | 3,502 |
Restructuring related liabilities |  | 294 |  |  |  | 64 |
Inventory |  | 4,415 |  |  |  | 4,495 |
Depreciation |  | 503 |  |  |  | 683 |
Amortization |  | 3,205 |  |  |  | — |
Warranty |  | 1,127 |  |  |  | 876 |
Other |  | 1,281 |  |  |  | 2,206 |
Total deferred tax assets |  | 26,134 |  |  |  | 28,317 |
Valuation allowance for deferred tax assets |  | (12,537 | ) |  |  | (14,495 | )
Net deferred tax assets | $ | 13,597 |  |  | $ | 13,822 |
Deferred tax liabilities: |  |  |  |  |  |  |
Equity investment | $ | (1,733 | ) |  | $ | (1,594 | )
Depreciation |  | — |  |  |  | (341 | )
Amortization |  | (2,791 | ) |  |  | (36 | )
Unrealized currency gain/loss |  | (1,292 | ) |  |  | (2,595 | )
Other |  | (345 | ) |  |  | (525 | )
Total deferred tax liabilities | $ | (6,161 | ) |  | $ | (5,091 | )
Net deferred income tax assets (liabilities) | $ | 7,436 |  |  | $ | 8,731 |
In determining its income tax provisions, the Company calculated deferred tax assets and liabilities for each separate jurisdiction. The Company then considered a number of factors, including positive and negative evidence related to the realization of its deferred tax assets, to determine whether a valuation allowance should be recognized with respect to its deferred tax assets. In 2015, the Company recorded valuation allowance of $0.8 million against its current year net operating losses in certain tax jurisdictions. Further, the Company released $0.8 million of valuation allowance recorded on certain U.S. state tax net operating losses and utilized $0.6 million of its U.S. capital loss carryforward against the current year net capital gain. In 2014, the Company recorded valuation allowance of $0.3 million against its current year net operating losses in certain tax jurisdictions and increased valuation allowance recorded on certain U.S. state tax net operating losses by $0.3 million and capital loss carryforwards by $0.4 million. In 2013, the Company adjusted a portion of its Canadian loss carryforward and the related valuation allowance of $4.8 million. The Company also recorded $1.3 million valuation allowances against its 2013 net operating losses in certain other tax jurisdictions and released valuation allowance of $0.3 million previously recorded on certain U.S. state tax credits. Additionally, the Company adjusted the carrying value of deferred tax assets on net operating losses and tax credits and their related valuation allowance in Canada and the U.K. as a result of changes in statutory tax rates amounting to $0.7 million in 2013. Valuation allowance continues to be provided on the remaining balances of the U.S. capital loss, certain U.S. state net operating loss and certain foreign tax attributes that the Company has determined that it is more likely than not that they will not be realized. In conjunction with the Company’s ongoing review of its actual results and anticipated future earnings, the Company continuously reassesses the possibility of releasing the valuation allowance currently in place on its deferred tax assets. As of December 31, 2015, the Company had net operating loss carryforwards of $4.9 million (tax effected) available to reduce future taxable income. Of this amount, approximately $1.6 million relates to the U.S. and expires through 2034; $2.4 million relates to Canada and expires starting in 2031; $0.7 million relates to the U.K. and can be carried forward indefinitely; and other countries of $0.2 million, which will start expiring in 2020. As of December 31, 2014, the Company had net operating loss carryforwards of $4.5 million (tax effected) available to reduce future taxable income. Of this amount, approximately $1.4 million relates to the U.S. and expires through 2033; $2.3 million relates to Canada and expires starting in 2015; and $0.8 million relates to the U.K. and can be carried forward indefinitely. As of December 31, 2015, the Company had tax credit carryforwards of approximately $2.4 million available to reduce income taxes in future years. Approximately $0.7 million relates to the U.S. state tax attributes, of which $0.6 million will expire through 2030 and $0.1 million can be carried forward indefinitely. The remaining $1.7 million tax credit carryforwards were related to Canada, of which $1.1 million expires through 2022 and $0.6 million can be carried forward indefinitely. As of December 31, 2014, the Company had tax credit carryforwards of approximately $4.2 million available to reduce income taxes in future years. Approximately $2.1 million relates to the U.S. tax attributes (both federal and state) and expires through 2034. The remaining $2.1 million relates to Canada, of which $0.8 million expires through 2021 and $1.3 million can be carried forward indefinitely. Income and foreign withholding taxes have not been recognized on the excess of the amount for financial reporting purposes over the tax basis of investments in foreign subsidiaries that are essentially permanent in nature. This amount becomes taxable upon a repatriation of assets from a subsidiary or a sale or liquidation of a subsidiary. The amount of undistributed earnings of foreign subsidiaries totaled $18.2 million as of December 31, 2015. The estimated unrecognized deferred income tax liabilities on this temporary difference is approximately $0.4 million. As of December 31, 2015, the Company’s total amount of gross unrecognized tax benefits was $5.5 million, of which $4.1 million would favorably affect its effective tax rate. Over the next twelve months, the Company may need to record up to $1.2 million of previously unrecognized tax benefits in the event of statute of limitations closures. The Company believes there are no other jurisdictions in which the outcome of unresolved issues or claims is likely to be material to its results of operations, financial position or cash flows. Furthermore, the Company believes it has adequately provided for all income tax uncertainties. As of December 31, 2014, the Company’s total amount of gross unrecognized tax benefits was $6.3 million, of which $4.1 million would favorably affect its effective tax rate, if recognized. As of December 31, 2013, the Company’s total amount of gross unrecognized tax benefits was $7.1 million, of which $4.9 million would favorably affect its effective tax rate, if recognized. The reconciliation of the total amounts of unrecognized tax benefits is as follows (in thousands):
Balance at December 31, 2012 | $ | 7,554 |
Additions based on tax positions related to the current year |  | 508 |
Additions for tax positions of prior years |  | 1,475 |
Reductions for tax positions of prior years |  | (1,888 | )
Reductions to tax positions resulting from a lapse of the applicable statute of limitations |  | (575 | )
Balance at December 31, 2013 |  | 7,074 |
Additions based on tax positions related to the current year |  | 1,180 |
Additions for tax positions of prior years |  | 2,601 |
Reductions for tax positions of prior years |  | (2,404 | )
Reductions to tax positions resulting from a lapse of the applicable statute of limitations |  | (2,177 | )
Balance at December 31, 2014 |  | 6,274 |
Additions based on tax positions related to the current year |  | 752 |
Additions for tax positions of prior years |  | 78 |
Reductions for tax positions of prior years |  | (626 | )
Reductions to tax positions resulting from a lapse of the applicable statute of limitations |  | (226 | )
Settlements with tax authorities |  | (762 | )
Balance at December 31, 2015 | $ | 5,490 |
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of each of December 31, 2015 and 2014, the Company had approximately $0.9 million of accrued interest and penalties related to uncertain tax positions. During the year ended December 31, 2015, the Company recognized less than $0.1 million of expense for an increase in interest and penalties related to uncertain tax positions. During the year ended December 31, 2014, the Company recognized approximately $0.3 million of expense for an increase in interest and penalties related to uncertain tax positions. The Company files income tax returns in Canada, the U.S., and various states and foreign jurisdictions. Generally, the Company is no longer subject to U.S. or foreign income tax examinations by tax authorities for the years before 2007. The Company’s income tax returns may be reviewed by tax authorities in the following countries for the following periods under the appropriate statute of limitations:
United States | 2009 - Present
Canada | 2010 - Present
United Kingdom | 2014 - Present
Germany | 2008 - Present
Netherlands | 2010 - Present
China | 2012 - Present
Japan | 2011 - Present

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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 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 2: 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 Reference 3: 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 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 + Details
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