XML 33 R18.htm IDEA: XBRL DOCUMENT
v3.10.0.1

PROVISION FOR INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2018
Income Tax Disclosure [Abstract] |
PROVISION FOR INCOME TAXES [Text Block] | PROVISION (BENEFIT) FOR INCOME TAXES: U.S. Tax Reform The Tax Cuts and Jobs Act (Tax Act) was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. The SEC staff issued Staff Accounting Bulletin 118 (SAB 118), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. The Company completed the accounting for the effects of enactment of the Tax Act as of December 22, 2018. The Company has completed the accounting for the transition effects of the Tax Act under ASC 740, which includes the recognition of the one-time transition tax of $34.1 million before utilization of net operating losses and credits; $6.7 million after utilization. The difference between the provisional transition tax estimate recorded at December 31, 2017, and the final amount was included in 2018 as a component of income tax expense. Although the Tax Act generally eliminates U.S. federal income tax on dividends from foreign subsidiaries of domestic corporations, it creates a new requirement that global intangible low-taxed income (GILTI) earned by foreign subsidiaries must be included in the current gross income of the foreign subsidiaries’ U.S. shareholder. GILTI is defined as the excess of the shareholder’s “net subsidiaries tested income” over the net deemed tangible income return. In 2018 the Company recognized $6.3 million of GILTI income tax before credits. Under GILTI tax rules the Company must make an accounting policy election to either (1) recognize taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factor such amount into the Company’s measure of its deferred taxes (the “deferred method”). The Company elected the deferred method and will recognize deferred taxes when basis differences exist that are expected to affect the amount of the GILTI inclusion upon reversal. The Company considered the current structure, operations and expectation that the Company will continue to pay incremental U.S. tax on GILTI in the foreseeable future when electing the deferred method. Upon election the Company set up a GILTI deferred tax asset for basis differences with future effects on GILTI taxes, which resulted in a tax benefit of $2.3 million in 2018. Income Taxes The Company accounts for income taxes under the provisions of ASC 740, Income Taxes. Under the provisions of ASC 740, deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, utilizing the tax rates that are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. U.S. and foreign components of income before income taxes were:
| Year Ended December 31,
(in thousands) | 2018 |  | 2017 |  | 2016
U.S. operations | $ | (6,529 | ) |  | $ | (6,944 | ) |  | $ | (477 | )
Foreign operations | 66,293 |  |  | 67,243 |  |  | 50,429 |
Total pretax income | $ | 59,764 |  |  | $ | 60,299 |  |  | $ | 49,952 |
The components of the provision (benefit) for income taxes are as follows:
| Year Ended December 31,
(in thousands) | 2018 |  | 2017 |  | 2016
Current provision (benefit): |  |  |  |  |
Federal | $ | (6,382 | ) |  | $ | 35,311 |  |  | $ | — |
State | 4 |  |  | 4 |  |  | — |
Foreign | 938 |  |  | 1,483 |  |  | 1,638 |
| (5,440 | ) |  | 36,798 |  |  | 1,638 |
Deferred provision (benefit): |  |  |  |  |
Federal | (4,593 | ) |  | (3,640 | ) |  | (175 | )
State | — |  |  | — |  |  | (27 | )
Foreign | (187 | ) |  | (468 | ) |  | (382 | )
| (4,780 | ) |  | (4,108 | ) |  | (584 | )
Total | $ | (10,220 | ) |  | $ | 32,690 |  |  | $ | 1,054 |
The provision (benefit) for income taxes differs from the amount that would result by applying the applicable federal income tax rate to income before income taxes, as follows:
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
Provision (benefit) computed at Federal statutory rate | 21.0 | % |  | 35.0 | % |  | 35.0 | %
Business tax credits | (9.1 | ) |  | (5.7 | ) |  | (6.0 | )
Stock-based compensation | (2.2 | ) |  | (5.0 | ) |  | 2.2 |
Foreign income taxed at different rate | (25.0 | ) |  | (37.3 | ) |  | (33.1 | )
GILTI inclusion | 10.6 |  |  | — |  |  | — |
U.S. Tax Act - transition tax | (16.2 | ) |  | 54.1 |  |  | — |
U.S. Tax Act - deferred tax asset and liability adjustment | — |  |  | 8.1 |  |  | — |
Valuation allowance | 2.8 |  |  | 2.2 |  |  | 1.8 |
Other | 1.0 |  |  | 2.8 |  |  | 2.2 |
Total | (17.1 | )% |  | 54.2 | % |  | 2.1 | %
The Company’s effective tax rate is impacted by the geographic distribution of the world-wide earnings in lower tax jurisdictions and the federal R&D tax credit. Additionally, in 2018 the Company’s effective tax rate was favorably impacted by revisions to the Tax Act resulting in a $9.7 million income tax benefit. In 2017 our effective tax rate was also impacted by a $37.5 million charge resulting from the enactment of the Tax Act. The components of the net deferred income tax assets (liabilities) were as follows:
| December 31,
(in thousands) | 2018 |  | 2017
Deferred tax assets: |  |  |
Other reserves and accruals | $ | 3,695 |  |  | $ | 979 |
Tax credit carry-forwards | 18,052 |  |  | 10,442 |
Stock compensation | 3,050 |  |  | 4,064 |
Capital losses | 157 |  |  | 163 |
Net operating loss | 3,144 |  |  | 7,059 |
Valuation allowance | (19,955 | ) |  | (18,421 | )
| 8,143 |  |  | 4,286 |
Deferred tax liabilities: |  |  |
Depreciation | (1,423 | ) |  | (1,965 | )
Other | (30 | ) |  | (95 | )
| (1,453 | ) |  | (2,060 | )
Net deferred tax assets | $ | 6,690 |  |  | $ | 2,226 |
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities and projected future taxable income. In the event that the Company determines, based on available evidence and management judgment, that all or part of the net deferred tax assets will not be realized in the future, the Company would record a valuation allowance in the period the determination is made. In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with the Company’s expectations could have a material impact on its results of operations and financial position. As of December 31, 2018, the Company continues to maintain a valuation allowance primarily as a result of capital losses for federal purposes, and on its California, New Jersey and Canada deferred tax assets as the Company believes that it is not more likely than not that the deferred tax assets will be fully realized. As of December 31, 2018, the Company had approximately $7.2 million in federal research and development tax credit carry-forwards, which will start to expire in 2033, California research and development tax credit carry-forwards of approximately $24.3 million (there is no expiration of research and development tax credit carry-forwards for the state of California) and California net operating losses of $54.7 million which will begin to expire in 2032. As of December 31, 2018, the Company had Canadian scientific research and experimental development tax credit carry-forwards of approximately $2.6 million and New Jersey research and experimental development tax credit carry-forwards of approximately $0.9 million, which will start to expire in 2030 and 2026, respectively. As discussed above the Tax Act required a transition tax on previously untaxed accumulated and current foreign earnings. Correspondingly, all undistributed earnings were deemed to be taxed and distributions of the unremitted earnings will not have any significant U.S. federal income tax impact. We have not provided for any remaining tax effect, if any, of limited outside basis differences of our foreign subsidiaries based upon plans of future reinvestment. The determination of the future tax consequences of the remittance of these earnings is not practicable. Unrecognized Tax Benefits The Company applies the provisions of ASC 740-10, relating to accounting for uncertain income taxes. Reconciliation of the beginning and ending amount of unrecognized tax benefits:
(in thousands) | Unrecognized Tax Benefits
Unrecognized Tax Benefits Balance at January 1, 2016 | $ | 13,560 |
Gross Increase for Tax Positions of Current Year | 1,856 |
Gross Decrease for Tax Positions of Prior Years | (23 | )
Unrecognized Tax Benefits Balance at December 31, 2016 | 15,393 |
Gross Increase for Tax Positions of Current Year | 1,699 |
Gross Decrease for Tax Positions of Prior Years | (409 | )
Unrecognized Tax Benefits Balance at December 31, 2017 | 16,683 |
Gross Increase for Tax Positions of Current Year | 1,994 |
Gross Decrease for Tax Positions of Prior Years | (70 | )
Unrecognized Tax Benefits Balance at December 31, 2018 | $ | 18,607 |
The Company's total unrecognized tax benefits as of December 31, 2018, 2017 and 2016, were $18.6 million, $16.7 million and $15.4 million, respectively. An income tax benefit of $9.4 million, net of valuation allowance adjustments, would be recorded if these unrecognized tax benefits are recognized. The Company cannot reasonably estimate the amount of the unrecognized tax benefit that could be adjusted in the next twelve months. The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had accrued interest and penalties of $0.1 million as of both December 31, 2018, and December 31, 2017, which have been recorded in long-term income taxes payable in the accompanying consolidated balance sheets. As of December 31, 2018, the Company has concluded all U.S. federal income tax matters for the years through 2012. However, due to tax attributes, the IRS may calculate tax adjustments for subsequent years for positions taken prior to 2012. There are currently no pending income tax audits. On July 27, 2015, in Altera Corp. v. Commissioner, the U.S. Tax Court issued an opinion related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. A final decision was issued by the Tax Court in December 2015. In February 2016, the Commissioner appealed the Tax Court decision. On July 24, 2018, the U.S. Ninth Circuit Court of Appeals reversed the U.S. Tax Court’s decision Altera Corp. v. Commissioner; the reversal was subsequently withdrawn. The Company has reviewed this case and its impact and concluded that no adjustment to the consolidated financial statements is appropriate at this time. The Company will continue to monitor ongoing developments and potential impacts to the consolidated financial statements.

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