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Income Taxes | 12 Months Ended
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Dec. 31, 2014
Income Taxes [Abstract] |
Income Taxes |
Note 9—Income Taxes
Income tax expense (benefit) based on income before income taxes consisted of the following:
|  | Year Ended December 31,
(in thousands) |  | 2014 |  | 2013 |  | 2012
Current: |  |  |  |  |  |
| U.S. Federal | $ | (87) | $ | (358) | $ | 776
| State and local |  | 822 |  | 152 |  | 640
| Foreign |  | 4,646 |  | 11,010 |  | 8,352
|  |  | 5,381 |  | 10,804 |  | 9,768
Deferred: |  |  |  |  |  |
| U.S. Federal |  | 8,999 |  | (11,069) |  | 9,914
| State and local |  | 1,663 |  | 1,437 |  | 1,560
| Foreign |  | 1,365 |  | 3,846 |  | (2,410)
|  |  | 12,027 |  | (5,786) |  | 9,064
|  | $ | 17,408 | $ | 5,018 | $ | 18,832
Worldwide income before income taxes consisted of the following:
|  | Year Ended December 31,
(in thousands) |  | 2014 |  | 2013 |  | 2012
United States | $ | 24,260 | $ | 19,093 | $ | 27,538
Foreign |  | 75,590 |  | 97,084 |  | 47,901
| $ | 99,850 | $ | 116,177 | $ | 75,439
Income tax expense 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 f ollowing:
|  |  | Year Ended December 31,
(in thousands) |  | 2014 |  | 2013 |  | 2012
Tax at statutory rate | $ | 34,947 | $ | 40,662 | $ | 26,404
State taxes, net of federal tax effect |  | 1,615 |  | 1,033 |  | 2,012
Effect of foreign operations and tax incentives |  | (24,737) |  | (19,138) |  | (11,710)
Change in valuation allowance |  | (118) |  | (17,880) |  | (44)
Chinese retroactive tax incentive |  | (1,227) |  | — |  | —
Losses in foreign jurisdictions for which no |  |  |  |  |  |
| benefit has been provided |  | 5,812 |  | 1,013 |  | 927
American Taxpayer Relief Act of 2012 |  | — |  | (844) |  | —
Other |  | 1,116 |  | 172 |  | 1,243
Total income tax expense | $ | 17,408 | $ | 5,018 | $ | 18,832
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) |  | 2014 |  | 2013
Deferred tax assets: |  |  |  |
Carrying value of inventories | $ | 4,772 | $ | 6,241
Accrued liabilities and allowances deductible for tax purposes |  |  |  |
| on a cash basis |  | 5,620 |  | 5,383
Goodwill |  | 8,433 |  | 13,346
Stock-based compensation |  | 6,583 |  | 7,169
Net operating loss carryforwards |  | 40,217 |  | 40,915
Tax credit carryforwards |  | 7,148 |  | 5,970
Other |  | 8,977 |  | 7,394
|  |  | 81,750 |  | 86,418
Less: valuation allowance |  | (36,682) |  | (30,312)
Net deferred tax assets |  | 45,068 |  | 56,106
Deferred tax liabilities: |  |  |  |
Plant and equipment, due to differences in depreciation |  | (5,402) |  | (5,063)
Intangible assets, due to differences in amortization |  | (6,102) |  | (6,117)
Other |  | (2,151) |  | (1,839)
Gross deferred tax liability |  | (13,655) |  | (13,019)
Net deferred tax asset | $ | 31,413 | $ | 43,087
Recorded as: |  |  |  |
Current deferred tax assets | $ | 8,502 | $ | 11,302
Non-current deferred tax assets |  | 25,017 |  | 33,856
Non-current deferred tax liabilities |  | (2,106) |  | (2,071)
Net deferred tax asset | $ | 31,413 | $ | 43,087
The net change in the total valuation allowance for 2014, 2013 and 2012 was a n increase (decrease) of $6.4 million, $(11.5) million and $(0.7) 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, 2014. During 2013, 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, the Company reduced its valuation allowan ce by $17.5 million. In addition, the Company established valuation allowances totaling $4.6 million for acquired deferred tax assets during 2013. As of December 31, 2014, the Company had $73.6 million in U.S. Federal operating loss carryforwards which will expire from 2022 to 20 34; state operating loss carry forwards of approximately $84.4 million which will expire from 2017 to 2031; foreign operating loss carr yforwards of approximately $31.0 million with indefinite carryforward periods; and foreign operating loss car r yforwards of approximately $14.4 million which will expi re at varying dates through 20 24. 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 $5.5 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 $717 million as of December 31, 2014. 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 China, Malaysia and Thailand that will expire at various dates, unless extended or otherwise renegotiated, through 2015 in China, 2016 in Malaysia and 2026 in Thailand, and are subject to certain conditions with which the Company expects to comply. The Company's Chinese subsidiary had a tax incentive that expired at the end of 2012. During the first quarter of 2014, this tax incentive was extended until 2015 and was retroactively applied to the 2013 calendar year. The tax adjustment for the retroactive income tax incentive for 2013 totaling $1.2 million was recorded as of March 31, 2014. The net impact of these tax incentives was to lower income tax expense for 2014, 2013, and 2012 by approximately $12.7 million (approximately $0.23 per diluted share), $8.8 million (approximatel y $0.16 per diluted share) and $8.0 million (approximately $0.14 per diluted share), respectively, as follows:
|  | Year Ended December 31,
(in thousands) |  | 2014 |  | 2013 |  | 2012
China | $ | 2,800 | $ | — | $ | 2,449
Malaysia |  | 2,299 |  | 1,559 |  | 992
Thailand |  | 7,622 |  | 7,283 |  | 4,594
| $ | 12,721 | $ | 8,842 | $ | 8,035
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, 2014, the total amount of the reserve for uncertain tax benefits including interest and penalties is $18.0 million. A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows:
|  |  | December 31,
(in thousands) |  | 2014 |  | 2013 |  | 2012
Balance as of January 1 | $ | 18,174 | $ | 18,070 | $ | 18,091
Additions related to current year tax positions |  | 968 |  | — |  | —
Additions related to prior year tax positions |  | — |  | 104 |  | 141
Decreases related to prior year tax positions |  | (4,386) |  | — |  | (162)
Balance as of December 31 | $ | 14,756 | $ | 18,174 | $ | 18,070
The de crease in the total amount of unrecognized tax benefits reserve during 2014 wa s primarily the result of a decrease in the unreco gnized tax benefits reserve a s a result of the disposal of the Tianjin sub sidiary. 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 amount of accrued potential interest and penalties, respectively, on unrecognized tax b enefits included in the reserve as of December 31, 2014 is $1.7 million and $1.6 million. The total amount of interest and penalties included in income tax expense during 2014 was $0.1 million. The Company did not incur any interest and penalties in 2013 or 2012. 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 2014. The Company is subject to examination by tax authorities for varying periods in various U.S. and foreign tax jurisdictions. In the second quarter of 2014, the Internal Revenue Service (IRS) initiated a federal income tax audit of the calendar year 2011 for the Com pany and its U.S. s ubsidiaries. During the fourth quarter of 2014, the IRS determined that no adjustments were necessary for the Company and its U.S. subsidiaries. Currently, the Company does not have any ongoing IRS income tax audits. During the course of such examinations, disputes may occur as to matters of fact 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 ex amination 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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