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Income Taxes | 12 Months Ended
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Dec. 31, 2013
Income Taxes [Abstract] |
Income Taxes |
Note 9—Income Taxes
Income tax expense (benefit) based on income before income taxes consists of:
|  | Year Ended December 31,
(in thousands) |  | 2013 |  | 2012 |  | 2011
Current: |  |  |  |  |  |
| U.S. Federal | $ | (358) | $ | 776 | $ | 75
| State and local |  | 152 |  | 640 |  | 86
| Foreign |  | 11,010 |  | 8,352 |  | 7,003
|  |  | 10,804 |  | 9,768 |  | 7,164
Deferred: |  |  |  |  |  |
| U.S. Federal |  | (11,069) |  | 9,914 |  | (16,963)
| State and local |  | 1,437 |  | 1,560 |  | 442
| Foreign |  | 3,846 |  | (2,410) |  | (1,470)
|  |  | (5,786) |  | 9,064 |  | (17,991)
|  | $ | 5,018 | $ | 18,832 | $ | (10,827)
Worldwide income before income taxes consisted of the following:
|  | Year Ended December 31,
(in thousands) |  | 2013 |  | 2012 |  | 2011
United States | $ | 19,093 | $ | 27,538 | $ | 5,405
Foreign |  | 97,084 |  | 47,901 |  | 35,727
| $ | 116,177 | $ | 75,439 | $ | 41,132
Income tax expense (benefit) differed from the amounts computed by applying the U.S. Federal statutory income tax rate to income before income taxes as a result of the following:
|  |  | Year Ended December 31,
(in thousands) |  | 2013 |  | 2012 |  | 2011
Tax at statutory rate | $ | 40,662 | $ | 26,404 | $ | 14,396
State taxes, net of federal tax effect |  | 1,033 |  | 2,012 |  | 343
Effect of foreign operations and tax incentives |  | (19,138) |  | (11,710) |  | (12,442)
Change in valuation allowance |  | (17,880) |  | (44) |  | (23,674)
Thailand reserve for uncertain tax benefits |  | — |  | — |  | 7,056
Settlement of foreign tax audits |  | — |  | — |  | (2,710)
Intercompany transactions |  | — |  | — |  | 2,801
Losses in foreign jurisdictions for which no |  |  |  |  |  |
| benefit has been provided |  | 1,013 |  | 927 |  | 3,068
American Taxpayer Relief Act of 2012 |  | (844) |  | — |  | —
Other |  | 172 |  | 1,243 |  | 335
Total income tax expense (benefit) | $ | 5,018 | $ | 18,832 | $ | (10,827)
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:
|  |  | December 31,
(in thousands) |  | 2013 |  | 2012
Deferred tax assets: |  |  |  |
Carrying value of inventories | $ | 5,882 | $ | 2,786
Accrued liabilities and allowances deductible for tax purposes |  |  |  |
| on a cash basis |  | 5,742 |  | 8,956
Goodwill |  | 13,346 |  | 10,526
Stock-based compensation |  | 7,169 |  | 8,251
Net operating loss carryforwards |  | 40,915 |  | 39,670
Tax credit carryforwards |  | 5,970 |  | 5,848
Other |  | 7,394 |  | 7,564
|  |  | 86,418 |  | 83,601
Less: valuation allowance |  | (30,312) |  | (41,858)
Net deferred tax assets |  | 56,106 |  | 41,743
Deferred tax liabilities: |  |  |  |
Plant and equipment, due to differences in depreciation |  | (5,063) |  | (3,887)
Other |  | (7,956) |  | (1,188)
Gross deferred tax liability |  | (13,019) |  | (5,075)
Net deferred tax asset | $ | 43,087 | $ | 36,668
Recorded as: |  |  |  |
Current deferred tax assets | $ | 11,302 | $ | 8,889
Non-current deferred tax assets |  | 33,856 |  | 29,535
Non-current deferred tax liabilities |  | (2,071) |  | (1,756)
Net deferred tax asset | $ | 43,087 | $ | 36,668
The net change in the total valuation allowance for the years ended December 31, 2013, 2012 and 2011 was a decrease of $11.5 million, $0.7 million and $19.3 million, respectively. 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, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences, net of the existing valuation allowances as of December 31, 2013. During 2013 and 2011, the Company evaluated the recoverability of its deferred tax assets using the criteria described above and concluded that the Company's projected future taxable income in the U.S. is sufficient to utilize additional net operating loss carryforwards and other deferred tax assets. As a result, d uring 2013 and 2011, the Company reduced its valuation allowan ce by $17.5 million and $19.1 million, respectively. In addition, the Company established valuation allowances totaling $4.6 million for acquired deferred tax assets during 2013. As of December 31, 2013, the Company had $79.3 million in U.S. Federal operating loss carryforwards which will expire from 2022 to 2031, state operating loss carry forwards of approximately $93.0 million which will expire from 2017 to 2031, foreign operating loss carr yforwards of approximately $34.8 million with indefinite carryforward periods, and foreign operating loss car r yforwards of approximately $7.2 million which will expi re at varying dates through 2022. The utilization of these net operating loss carryforwards is limited to the future operations of the Company in the tax jurisdictions in which such carryforwards arose. The Company has U.S. federal tax credit carryforwards of $4.3 million which will expire at varying dates through 2031. The Company has state tax credit carryforwards of $1.6 million which will expire at varying dates through 2027. Cumulative undistributed earnings of certain foreign subsidiarie s amounted to approximately $631 million as of December 31, 2013. The Company considers earnings from foreign subsidiaries to be indefinitely reinvested and, accordingly, no provision for U.S. federal and state income taxes has been made for these earnings. Upon distribution of foreign subsidiary earnings in the form of dividends or otherwise, such distributed earnings would be reportable for U.S. income tax purposes (subject to adjustment for foreign tax credits). Determination of the amount of any unrecognized deferred tax liability on these undistr ibuted earnings is not practicable. The Company has been granted certain tax incentives, including tax holidays, for its subsidiaries in M alaysia and Thailand that will expire at various dates, unless extended or otherwise renegotiated, through 2015 and 2026, respectively, and are subject to certain conditions with which the Company expects to comply. The net impact of these tax incentives was to lower income tax expense for the years ended December 31, 2013, 2012, and 2011 by approximately $8.8 million (approximatel y $0.16 per diluted share), $8.0 million (approximatel y $0.14 per diluted share) and $10.5 million (approximately $0.18 per diluted share), respectively, as follows:
|  | Year Ended December 31,
(in thousands) |  | 2013 |  | 2012 |  | 2011
China | $ | — | $ | 2,449 | $ | 1,474
Malaysia |  | 1,559 |  | 992 |  | —
Thailand |  | 7,283 |  | 4,594 |  | 9,036
| $ | 8,842 | $ | 8,035 | $ | 10,510
The Company's Chinese subsidiary had a tax incenti ve that expired in 2012 and filed for a new tax incentive in 2013. The Company must determine whether it is “more-likely-than-not” that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Once it is determined that a position meets the more-likely-than-not recognition threshold, the position is measured to determine the amount of benefit to recognize in the financial statements. As of December 31, 2013, the total amount of the reserve for uncertain tax benefits including interest and penalties is $21.4 million. A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows:
|  |  | December 31,
(in thousands) |  | 2013 |  | 2012 |  | 2011
Balance as of January 1 | $ | 18,070 | $ | 18,091 | $ | 14,759
Additions related to prior year tax positions |  | 104 |  | 141 |  | 7,056
Decreases related to prior year tax positions |  | — |  | (162) |  | (3,724)
Balance as of December 31 | $ | 18,174 | $ | 18,070 | $ | 18,091
The increase in the total amount of unrecognized tax benefits reserve during 2011 is primarily the result of recording an income tax reserve against an income tax receivable that the Company had previously recorded for a subsidiary in Thailand offset by a decrease in the unrecognized tax benefits reserve for a settlement of income tax au dits outside the United States. The reserve is classified as a current or long-term liability in the consolidated balance sheet based on the Company's expectation of when the items will be settled. The Company records interest expense and penalties accrued in relation to uncertain income tax benefits as a component of current income tax expense. The Company did not incur any interest and penalties during the years ended December 31, 2013 and 2012. The total amount of interest and penalties included in income tax expense during the year ended December 31, 2011 was $(0.2) million. The amount of accrued potential interest and penalties on unrecognized tax b enefits included in the reserve as of December 31, 2013 is $1.6 million and $1.6 million, respectively. A subsidiary of the Company in Thailan d has filed for a refund of $8.4 million of previously paid income taxes applicable to the years 2004 and 2005, which is included in other assets. The Thailand tax authorities have conducted an initial examination of the applicable refund filings. During 2011, the Company recorded a reserve for uncertain benefits of $7.1 million against this refund claim. During the fourth quarter of 2012, t he Company received official notification that the tax authorities have rejected its refund claim. The Company has filed an appeal of the rejected refund claim with the tax authorities and is presently awaiting their decision. The Company and its subsidiaries in Brazil, China, Ireland, Luxembourg, Malaysia, Mexico, the Netherlands, Romania, Singapore, Thailand and the United States remain open to examination by the various local taxing authorities, in total o r in part, for fiscal years 2004 to 2013. The Company is subject to examination by tax authorities for varying periods in various U.S. and foreign tax jurisdictions. During the course of such examinations disputes occur as to matters of fact and/or law. Also, in most tax jurisdictions the passage of time without examination will result in the expiration of applicable statutes of limitations thereby precluding the taxing authority from conducting an examination of the tax period(s) for which such statute of limitation has expired. The Company believes that it has adequately provided for its tax liabilities.

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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 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: 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 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 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 Reference 6: 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 + Details
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