XML 33 R17.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Note 10. Income Taxes The Company’s income before income tax provision was subject to taxes in the following jurisdictions for the following periods (in thousands):
| Years Ended December 31,
| 2017 |  | 2016(1) |  | 2015
United States | $ | 50,706 |  |  | $ | 38,268 |  |  | $ | 6,864 |
Foreign | 17,349 |  |  | 20,125 |  |  | 13,199 |
| $ | 68,055 |  |  | $ | 58,393 |  |  | $ | 20,063 |
The expense (benefit) for income taxes is comprised of (in thousands):
| Years Ended December 31,
| 2017 |  | 2016(2) |  | 2015
Current tax provision: |  |  |  |  |
Federal | $ | 610 |  |  | $ | 541 |  |  | $ | 271 |
State | 1,259 |  |  | 543 |  |  | 431 |
Foreign | 6,135 |  |  | 7,289 |  |  | 4,393 |
| 8,004 |  |  | 8,373 |  |  | 5,095 |
Deferred tax expense (benefit): |  |  |  |  |
Federal | 20,746 |  |  | (129,405 | ) |  | (41 | )
State | (1,127 | ) |  | (10,693 | ) |  | 113 |
Foreign | (1,235 | ) |  | (836 | ) |  | 328 |
| 18,384 |  |  | (140,934 | ) |  | 400 |
Income tax provision | $ | 26,388 |  |  | $ | (132,561 | ) |  | $ | 5,495 |
(1) | Income before income taxes in 2016 includes a gain of $17,662,000 that was recognized in connection with the sale of preferred shares of the Company's investment in Topgolf. See Note 7 for further discussion.
(2) | The income tax benefit for 2016 includes the reversal of a significant portion of the valuation allowance on the Company's deferred tax assets in the U.S. See further discussion below.
On December 22, 2017, the Tax Act was enacted into legislation, which includes a broad range of provisions affecting businesses. The Tax Act significantly revises how companies compute their U.S corporate tax liability by, among other provisions, reducing the corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017, implementing a territorial tax system, and requiring a mandatory one-time tax on U.S. owned undistributed foreign earnings and profits known as the toll charge or transition tax. Pursuant to the SEC Staff Accounting Bulletin ("SAB") No. 118, "Income Tax Accounting Implications of the Tax Cuts and Jobs Act" ("SAB 118"), a company may select among one of three scenarios to reflect the impact of the Tax Act in its financial statements within a measurement period. Those scenarios are (i) a final estimate which effectively closes the measurement period; (ii) a reasonable estimate leaving the measurement period open for future revisions; and (iii) no estimate as the law is still being analyzed in which case a company continues to apply its accounting on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. SAB 118 allows for the reporting provisional of amounts for certain income tax effects in scenarios (ii) and (iii). The measurement period begins in the reporting period that includes the Tax Act’s enactment date and ends when an entity has obtained, prepared, and analyzed the information that was needed in order to complete the accounting requirements under ASC Topic 740. The Company was able to provide a reasonable estimate for the revaluation of deferred taxes and the effects of the toll charge on undistributed foreign earnings and profits, with the Company's measurement period open for future revisions. As such, the Company recorded a provisional tax expense in the amount of $11,174,000 related to the revaluation of deferred taxes, and a provisional tax benefit in the amount of $3,638,000 for the toll charge on the deemed repatriation on earnings and profits of U.S.-owned foreign subsidiaries, which generated foreign tax credits in excess of the tax expense recognized on the deemed repatriation. The Company is still evaluating various provisions included in the Tax Act and has therefore not provided a final estimate. These provisions include, but are not limited to, the global intangible low-taxed income (GILTI) provisions, the foreign derived intangible income (FDII) provisions, and the changes to the deductibility of interest. These provisions will be effective for the Company beginning on January 1, 2018, and may materially impact the Company’s effective tax rate in future years. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2017 and 2016 are as follows (in thousands):
| December 31,
| 2017 |  | 2016
Deferred tax assets: |  |  |
Reserves and allowances not currently deductible for tax purposes | $ | 12,783 |  |  | $ | 15,506 |
Basis difference related to fixed assets | 5,946 |  |  | 9,697 |
Compensation and benefits | 7,807 |  |  | 9,273 |
Basis difference for inventory valuation | 1,612 |  |  | 2,100 |
Compensatory stock options and rights | 3,869 |  |  | 5,715 |
Deferred revenue and other | 175 |  |  | 226 |
Operating loss carryforwards | 21,799 |  |  | 75,110 |
Tax credit carryforwards | 62,668 |  |  | 32,730 |
Basis difference related to intangible assets with a definite life | 7,061 |  |  | 13,993 |
Other | 634 |  |  | 389 |
Total deferred tax assets | 124,354 |  |  | 164,739 |
Valuation allowance for deferred tax assets | (11,114 | ) |  | (16,515 | )
Deferred tax assets, net of valuation allowance | $ | 113,240 |  |  | $ | 148,224 |
Deferred tax liabilities: |  |  |
Prepaid expenses | (773 | ) |  | (1,082 | )
Basis difference related to intangible assets with an indefinite life | (22,891 | ) |  | (34,031 | )
Total deferred tax liabilities | (23,664 | ) |  | (35,113 | )
Net deferred tax assets | $ | 89,576 |  |  | $ | 113,111 |
Net deferred tax assets (liabilities) are shown on the accompanying consolidated balance sheets as follows: |  |  |
Non-current deferred tax assets | $ | 91,398 |  |  | $ | 114,707 |
Non-current deferred tax liabilities | (1,822 | ) |  | (1,596 | )
Net deferred tax assets | $ | 89,576 |  |  | $ | 113,111 |
The net change in net deferred taxes in 2017 of $23,535,000 is comprised of the utilization of net operating losses through profitable operations and the revaluation of the deferred tax assets as a result of the Tax Act. Pursuant to the Tax Act, the Company revalued its gross deferred tax assets from 35% to 21% consistent with the corporate tax rate effective January 1, 2018. The provisional net tax impact of this revaluation was a reduction in net deferred tax assets of $11,174,000. Deferred tax assets and liabilities result from temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are anticipated to be in effect at the time the differences are expected to reverse. The realization of the deferred tax assets, including loss and credit carry forwards, is subject to the Company generating sufficient taxable income during the periods in which the temporary differences become realizable. In accordance with the applicable accounting rules, the Company maintains a valuation allowance for a deferred tax asset when it is deemed to be more likely than not that some or all of the deferred tax assets will not be realized. In evaluating whether a valuation allowance is required under such rules, the Company considers all available positive and negative evidence, including prior operating results, the nature and reason for any losses, its forecast of future taxable income, and the dates on which any deferred tax assets are expected to expire. These assumptions require a significant amount of judgment, including estimates of future taxable income. These estimates are based on the Company’s best judgment at the time made based on current and projected circumstances and conditions. In 2011, the Company established a valuation allowance against its U.S. deferred tax assets. During the fourth quarter of 2016, the Company evaluated all available positive and negative evidence, including the Company's improved profitability in 2015 and 2016, combined with future projections of profitability. As a result, the Company determined that the majority of its U.S. deferred tax assets were more likely than not to be realized and reversed a significant portion of the valuation allowance against those deferred tax assets accordingly. The remaining valuation allowance on the Company's U.S. deferred tax assets as of December 31, 2017 and 2016 relate primarily to state net operating loss carryforwards and credits the Company estimates it may not be able to utilize in future periods. With respect to non-U.S. entities, there continues to be sufficient positive evidence to conclude that realization of its deferred tax assets is more likely than not under applicable accounting rules, and no significant allowances have been established. At December 31, 2017, the Company had federal and state income tax credit carryforwards of $56,285,000 and $15,499,000, respectively, which will expire at various dates beginning in 2021. Such credit carryforwards expire as follows (in thousands):
U.S. foreign tax credit | $ | 46,639 |  |  | 2021 - 2037
U.S. research tax credit | $ | 9,623 |  |  | 2031 - 2037
U.S. business tax credits | $ | 23 |  |  | 2031 - 2037
State investment tax credits | $ | 858 |  |  | Do not expire
State research tax credits | $ | 14,641 |  |  | Do not expire
The Company has recorded a deferred tax asset reflecting the benefit of operating loss carryforwards. The net operating losses expire as follows (in thousands):
U.S. loss carryforwards | $ | 63,493 |  |  | 2032 - 2035
State loss carryforwards | $ | 124,466 |  |  | 2018 - 2037
The Company’s ability to utilize the losses and credits to offset future taxable income may be deferred or limited significantly if the Company were to experience an “ownership change” as defined in section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). In general, an ownership change will occur if there is a cumulative change in ownership of the Company’s stock by “5-percent shareholders” (as defined in the Code) that exceeds 50 percentage points over a rolling three-year period. The Company determined that no ownership change has occurred for purposes of Section 382 for the period ended December 31, 2017. A reconciliation of the effective tax rate on income or loss and the statutory tax rate is as follows:
| Years Ended December 31,
| 2017 |  | 2016 |  | 2015
Statutory U.S. tax rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State income taxes, net of U.S. tax benefit | 2.6 | % |  | 3.1 | % |  | 3.5 | %
Federal and State tax credits, net of U.S. tax benefit | (4.1 | )% |  | (5.0 | )% |  | (11.5 | )%
Foreign income taxed at other than U.S. statutory rate | (0.2 | )% |  | 1.8 | % |  | (2.4 | )%
Effect of foreign rate changes | 0.2 | % |  | 0.5 | % |  | 0.9 | %
Foreign tax credit | (1.3 | )% |  | (11.3 | )% |  | (12.0 | )%
Basis differences of intangibles with an indefinite life | 0.1 | % |  | 0.1 | % |  | 0.1 | %
Change in deferred tax valuation allowance | (1.9 | )% |  | (262.4 | )% |  | 0.3 | %
Accrual for interest and income taxes related to uncertain tax positions | 2.2 | % |  | 2.9 | % |  | (0.3 | )%
Income (loss) from flowthrough entities | 1.0 | % |  | (0.2 | )% |  | (2.0 | )%
Meals and entertainment | 1.1 | % |  | 1.5 | % |  | 3.4 | %
Group loss relief | (0.6 | )% |  | (1.6 | )% |  | (3.7 | )%
Stock option compensation | (2.0 | )% |  | 0.2 | % |  | (1.9 | )%
Foreign dividends and earnings inclusion | 0.7 | % |  | 9.9 | % |  | 7.1 | %
Foreign tax withholding | 0.9 | % |  | 0.6 | % |  | 1.4 | %
Executive compensation limitation | 0.5 | % |  | 0.7 | % |  | 4.3 | %
Intra-entity asset transfers | (6.3 | )% |  | — | % |  | — | %
Enactment of the Tax Cuts and Jobs Act | 11.1 | % |  | — | % |  | — | %
Other | (0.2 | )% |  | (2.8 | )% |  | 5.2 | %
Effective tax rate | 38.8 | % |  | (227.0 | )% |  | 27.4 | %
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
| 2017 |  | 2016 |  | 2015
Balance at January 1 | $ | 8,256 |  |  | $ | 7,090 |  |  | $ | 6,559 |
Additions based on tax positions related to the current year | 1,061 |  |  | 969 |  |  | 1,120 |
Additions for tax positions of prior years | 233 |  |  | 542 |  |  | 132 |
Reductions for tax positions of prior years | (192 | ) |  | (80 | ) |  | (255 | )
Settlement of tax audits | (33 | ) |  | — |  |  | — |
Reductions due to lapsed statute of limitations | (25 | ) |  | (265 | ) |  | (466 | )
Balance at December 31 | $ | 9,300 |  |  | $ | 8,256 |  |  | $ | 7,090 |
As of December 31, 2017, the gross liability for income taxes associated with uncertain tax benefits was $9,300,000. This liability could be reduced by $1,360,000 of offsetting tax benefits associated with the correlative effects of potential transfer pricing adjustments, which was recorded as a long-term income tax receivable, as well as $6,317,000 of deferred taxes. The net amount of $1,623,000, if recognized, would affect the Company’s financial statements and favorably affect the Company’s effective income tax rate. The Company does not expect changes to the unrecognized tax benefits in the next 12 months to have a material impact on its results of operations or its financial position. The Company recognizes interest and/or penalties related to income tax matters in income tax expense. The Company recognized a tax expense of approximately $301,000 and $258,000 for the years ended December 31, 2017 and 2016, respectively, and tax benefits of approximately $2,000 for the year ended December 31, 2015, related to interest and penalties in the provision for income taxes. As of December 31, 2017 and 2016, the gross amount of accrued interest and penalties included in income taxes payable in the accompanying consolidated balance sheets was $1,618,000 and $1,317,000, respectively. The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is generally no longer subject to income tax examinations by tax authorities in its major jurisdictions as follows:
Major Tax Jurisdiction | Years No Longer Subject to Audit
U.S. federal | 2010 and prior
California (U.S.) | 2008 and prior
Canada | 2009 and prior
Japan | 2010 and prior
South Korea | 2011 and prior
United Kingdom | 2013 and prior
As of December 31, 2017, the Company had $118,700,000 of undistributed foreign earnings and profits. Pursuant to the Tax Act, the Company’s undistributed foreign earnings and profits were deemed repatriated as of December 31, 2017. As a result, the Company utilized $72,800,000 of net operating losses, which decreased deferred tax assets by approximately $25,500,000 and generated foreign tax credits of $29,100,000, which increased deferred tax assets by $29,100,000 and resulted in a net tax benefit of $3,600,000 or a 5.2% benefit to the tax rate. The Company has not provided deferred tax liabilities for foreign withholding taxes and certain state income taxes on the undistributed earnings and profits from certain non-U.S. subsidiaries that will be permanently reinvested outside the United States. Upon the distribution of foreign earnings and profits, certain foreign countries impose withholding taxes, subject to certain limitations, for use as credits against the Company’s U.S. tax liability, if any. If the foreign earnings and profits were distributed, the Company would need to accrue an additional income tax liability. However, the Company may also be allowed a credit against substantially all the Company’s U.S. tax liability for the taxes paid in foreign jurisdictions. The Company expects the net impact on the Company’s U.S. tax liability to be insignificant.

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://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=65882285&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=65882285&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=65882285&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=65882285&loc=d3e32537-109319 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration