Note 9 - Income Taxes

Income taxes are estimated for each of the jurisdictions in which the Company operates. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. Realization of net deferred tax assets is dependent on future taxable income. At September 30, 2017, the Company’s U.S. deferred tax assets are fully offset by a valuation allowance since the Company cannot conclude that it is more likely than not that these future benefits will be realized.

At the end of each interim reporting period, the effective tax rate is aligned with expectations for the full year. This estimate is used to determine the income tax provision on a year-to-date basis and may change in subsequent interim periods. If necessary, the year-to-date tax benefit for interim period losses is limited to the amount that could be recognizable at the end of the fiscal year. Income (loss) before income taxes and income tax expense (benefit) for the three and nine months ended September 30, 2017 and 2016 were as follows:

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
	(in thousands)
Income (loss) before income taxes	$	(23,674	)	$	(68,462	)	$	(64,146	)	$	(114,535	)
Income tax expense (benefit)	$	(1,790	)	$	1,136		$	(24,969	)	$	2,677

The net income tax benefit for the three months ended September 30, 2017 was comprised of a net benefit of $2.2 million related to the Company’s U.S. operations, and a net tax expense of $0.4 million related to the Company’s non-U.S. operations. The net income tax benefit for the nine months ended September 30, 2017 was comprised of a net benefit of $21.6 million and $3.4 million related to the Company’s U.S. and non-U.S. operations, respectively.

The net income tax benefit from the Company’s U.S. operations was primarily attributable to a tax benefit of $2.2 million and $23.5 million for losses incurred during the three and nine months ended September 30, 2017, respectively. Under the intraperiod tax allocation rules, the deferred tax liability created upon the issuance of the Convertible Senior Notes and recorded through Additional Paid-in Capital is treated as a source of income, which enables the Company to recognize a benefit for the U.S. loss before income taxes through operations during fiscal 2017. The tax benefit related to the issuance of the Convertible Senior Notes will not recur in future years. This benefit was partially offset by a deferred provision of approximately $1.9 million related to tax amortization on indefinite-lived intangible assets for the nine months ended September 30, 2017.

The net income tax benefit of $3.4 million for the nine months ended September 30, 2017, from the Company’s non-U.S. operations was primarily attributable to the Company’s determination in the first quarter of 2017 that it was more likely than not that it will meet the requirements of an existing foreign tax incentive agreement. As a result, the Company remeasured this uncertain tax position and recognized a $6.3 million benefit during the first quarter, which is comprised of a reversal of a $4.9 million tax liability established in previous periods and the recognition of a deferred tax benefit of $1.4 million related to certain foreign net operating losses generated in prior years that are now determined to be realizable. This benefit was partially offset by a current year tax expense of approximately $3.1 million attributed to the profitable non-U.S. operations, of which approximately $0.4 million was recorded during the three months ended September 30, 2017.

For the three and nine months ended September 30, 2016, the Company did not provide a current tax benefit on U.S. pre-tax losses since the Company could not conclude that it is more likely than not that the benefits would be realized. The tax expense is primarily related to indefinite-lived intangible assets that are amortized for tax purposes but not for financial reporting purposes, as well as taxes attributed to the profitable non-U.S. operations. The deferred tax liability created by the tax deductible expense cannot be used to offset existing deferred tax assets.