XML 31 R18.htm IDEA: XBRL DOCUMENT
v3.3.1.900

INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2015
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income before income taxes consisted of the following:
| Years Ended December 31,
| 2015 |  | 2014 |  | 2013
| (In thousands)
United States operations | $ | 37,450 |  |  | $ | 21,349 |  |  | $ | 6,512 |
Foreign operations | 23,221 |  |  | 24,217 |  |  | 12,274 |
Total | $ | 60,671 |  |  | $ | 45,566 |  |  | $ | 18,786 |
A reconciliation of the U.S. Federal statutory rate to the Company’s effective tax rate is as follows:
| Years Ended December 31,
| 2015 |  | 2014 |  | 2013
Federal statutory rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Increase (decrease) in income taxes resulting from: |  |  |  |  |
State income taxes, net of federal tax benefit | 1.3 | % |  | 5.6 | % |  | 0.2 | %
Foreign operations | (12.5 | )% |  | (16.7 | )% |  | (27.2 | )%
Spine valuation allowance | 61.1 | % |  | — | % |  | — | %
Charitable contributions | (1.0 | )% |  | (2.7 | )% |  | (0.9 | )%
Domestic production activities deduction | (2.4 | )% |  | (2.7 | )% |  | — | %
Intercompany profit in inventory | 3.1 | % |  | (0.4 | )% |  | (1.4 | )%
Nondeductible facilitative costs | 3.1 | % |  | 1.1 | % |  | — | %
Changes in valuation allowances | 0.3 | % |  | 2.1 | % |  | 1.5 | %
Uncertain tax positions | 0.2 | % |  | (3.4 | )% |  | (13.8 | )%
Research and development credit | (1.9 | )% |  | (1.8 | )% |  | (5.7 | )%
Return to provision | 1.7 | % |  | 1.4 | % |  | (9.8 | )%
Other | 0.7 | % |  | 2.8 | % |  | 4.8 | %
Effective tax rate | 88.7 | % |  | 20.3 | % |  | (17.3 | )%
The effective tax rate increased by 68.4% in 2015 compared with 2014 primarily due to recording a valuation allowance against net deferred tax assets for the SeaSpine spin-off. The Company recorded an income tax benefit of $0.4 million in the current year for the release of tax contingency reserves as compared to $2.1 million in the prior year. This current year benefit was offset by the establishment of $0.5 million of new tax contingency positions during the year. During 2015, the Company's foreign operations generated a $2.3 million increase in income tax expense as a result of, among other factors, the geographic and business mix of taxable earnings and losses. The 2015 foreign effective tax rate is 10.6%, an increase of approximately 5.7% over the rate in 2014. The Company's foreign tax rate is primarily based upon statutory rates and is not related to a tax holiday or negotiated tax rate. During 2014, the Company's foreign operations generated a $1.2 million decrease in income tax expense as a result of, among other factors, the geographic and business mix of taxable earnings and losses and the re-establishment of an income tax benefit in France for half of the year related to intercompany interest. The 2014 foreign effective tax rate is 4.9%, a decrease of approximately 39.6% over the rate in 2013. The Company's foreign tax rate is primarily based upon statutory tax rates and is not related to a tax holiday or negotiated tax rate. During 2013, the Company's foreign operations generated a $1.0 million increase in income tax expense as a result of, among other factors, the geographic and business mix of taxable earnings and losses and the change of an income tax benefit in France as a result of a French tax law change that occurred on December 30, 2013. The 2013 foreign effective tax rate is 44.5%, an increase of approximately 33.4% over the rate in 2012. The Company's foreign tax rate is primarily based upon statutory tax rates and is not related to a tax holiday or negotiated tax rate. As of December 31, 2015, the Company has not provided deferred U.S. income taxes or foreign withholding taxes on temporary differences of approximately $261.3 million resulting from earnings for certain non-U.S. subsidiaries which are permanently reinvested outside the U.S. The unrecognized deferred tax liability associated with these temporary differences was estimated to be $37.9 million at December 31, 2015. Events that could trigger a need to repatriate foreign cash to the U.S. and generate a tax might include U.S. acquisitions, loans from a foreign subsidiary, or anticipated tax law changes that are considered unfavorable and would result in higher taxes on repatriations that occur after the change in tax law goes into effect. The provision for income taxes consisted of the following:
| Years Ended December 31,
| 2015 |  | 2014 |  | 2013
| (In thousands)
Current: |  |  |  |  |
Federal | $ | 46,665 |  |  | $ | 10,330 |  |  | $ | (2,931 | )
State | 2,301 |  |  | 2,124 |  |  | 399 |
Foreign | 5,205 |  |  | 3,666 |  |  | 632 |
Total current | $ | 54,171 |  |  | $ | 16,120 |  |  | $ | (1,900 | )
Deferred: |  |  |  |  |
Federal | 1,282 |  |  | (5,524 | ) |  | (2,409 | )
State | (394 | ) |  | 695 |  |  | (1,136 | )
Foreign | (1,239 | ) |  | (2,020 | ) |  | 2,204 |
Total deferred | $ | (351 | ) |  | $ | (6,849 | ) |  | $ | (1,341 | )
Provision (benefit) for income taxes | $ | 53,820 |  |  | $ | 9,271 |  |  | $ | (3,241 | )
The income tax effects of significant temporary differences that give rise to deferred tax assets and liabilities, shown before jurisdictional netting, are presented below:
| December 31,
| 2015 |  | 2014
| (In thousands)
Current assets: |  |  |
Doubtful accounts | $ | — |  |  | $ | 1,727 |
Inventory related items | — |  |  | 30,017 |
Tax credits | — |  |  | 3,156 |
Accrued vacation | — |  |  | 3,310 |
Accrued bonus | — |  |  | 5,596 |
Other | — |  |  | 2,694 |
Total current deferred tax assets | — |  |  | 46,500 |
Less valuation allowance | — |  |  | (528 | )
Current deferred tax assets after valuation allowance | $ | — |  |  | $ | 45,972 |
Current liabilities: |  |  |
Other | — |  |  | (483 | )
Total current deferred tax liabilities | $ | — |  |  | $ | (483 | )
Net current deferred tax assets | $ | — |  |  | $ | 45,489 |
| December 31,
| 2015 |  | 2014
| (In thousands)
Non-current assets: |  |  |
Doubtful accounts | $ | 1,943 |  |  | $ | — |
Inventory related items | 24,417 |  |  | — |
Tax credits | 3,137 |  |  | — |
Accrued vacation | 2,713 |  |  | — |
Accrued bonus | 7,555 |  |  | — |
Stock compensation | 16,222 |  |  | 14,840 |
Deferred revenue | 767 |  |  | 3 |
Net operating loss carryforwards | 17,548 |  |  | 17,899 |
Federal & state tax credits | 6,227 |  |  | 12,278 |
Other | 1,952 |  |  | (402 | )
Total non-current deferred tax assets | 82,481 |  |  | 44,618 |
Less valuation allowance | (4,887 | ) |  | (6,244 | )
Non-current deferred tax assets after valuation allowance | $ | 77,594 |  |  | $ | 38,374 |
Non-current liabilities: |  |  |
Intangible & fixed assets | (225,328 | ) |  | (148,714 | )
Other | (225 | ) |  | (665 | )
Total non-current deferred tax liabilities | $ | (225,553 | ) |  | $ | (149,379 | )
Net non-current deferred tax assets (liabilities) | $ | (147,959 | ) |  | $ | (111,005 | )
Total net deferred tax assets (liabilities) | $ | (147,959 | ) |  | $ | (65,516 | )
The Company has prospectively adopted Accounting Standards Update 2015-17 to classify all deferred tax assets and liabilities as non-current on the balance sheet. The Company has not retrospectively adjusted the balance sheet classification and presentation herein for the deferred tax assets and liabilities for years prior to 2015. At December 31, 2015, the Company had net operating loss carryforwards of $34.4 million for federal income tax purposes, $21.7 million for foreign income tax purposes and $14.2 million for state income tax purposes to offset future taxable income. The federal net operating loss carryforwards expire through 2032, $2.9 million of the foreign net operating loss carryforwards expire through 2021 with the remaining $18.8 million having an indefinite carry forward period. The state net operating loss carryforwards expire through 2032. Deferred tax assets relating to tax benefits of employee stock option grants have been reduced to reflect exercises in 2015. Some exercises have resulted in tax deductions in excess of previously recorded benefits based on the option value at the time of grant (“windfalls”). Although these additional tax benefits are reflected in net operating tax loss carryforwards the additional tax benefit associated with the windfall is not recognized until the deduction reduces taxes payable. Accordingly, since the tax benefit does not reduce our current taxes payable in 2013 due to net operating loss carryforwards, these “windfall” tax benefits are not reflected in our net operating losses in deferred tax assets for 2013. A valuation allowance of $4.9 million, $6.8 million and $7.3 million is recorded against the Company’s gross deferred tax assets of $82.5 million, $91.1 million, and $91.9 million recorded at December 31, 2015, 2014 and 2013, respectively. The valuation allowance relates to deferred tax assets for certain items that will be deductible for income tax purposes under very limited circumstances and for which the Company believes it is not more likely than not that it will realize the associated tax benefit. The Company does not anticipate additional income tax benefits through future reductions in the valuation allowance. However, in the event that the Company determines that it would be able to realize more or less than the recorded amount of net deferred tax assets, an adjustment to the deferred tax asset valuation allowance would be recorded in the period such a determination is made. The Company’s valuation allowance decreased by $1.9 million, and $0.5 million in 2015 and 2014, respectively. The 2015 overall decrease in the valuation allowance was primarily due to expiring net operating losses in the Netherlands which is offset by a reduction in the related deferred tax asset. A reconciliation of the beginning and ending amount of uncertain tax benefits is as follows:
| Years Ended December 31,
| 2015 |  | 2014 |  | 2013
| (In thousands)
Balance, beginning of year | $ | 959 |  |  | $ | 3,040 |  |  | $ | 5,874 |
Gross increases: |  |  |  |  |
Current year tax positions | — |  |  | — |  |  | 259 |
Prior years' tax positions | 541 |  |  | 527 |  |  | 546 |
Gross decreases: |  |  |  |  |
Prior years' tax positions | — |  |  | (286 | ) |  | (476 | )
Settlements | — |  |  | (828 | ) |  | — |
Statute of limitations lapses | (404 | ) |  | (1,494 | ) |  | (3,163 | )
Other | (11 | ) |  | — |  |  | — |
Balance, end of year | $ | 1,085 |  |  | $ | 959 |  |  | $ | 3,040 |
Approximately $1.1 million of the balance at December 31, 2015 relates to uncertain tax positions that, if recognized, would affect the annual effective tax rate. Included in the balance of uncertain tax positions at December 31, 2015 is $0.5 million related to tax positions for which it is reasonably possible that the total amounts could be reduced during the twelve months following December 31, 2015, as a result of expiring statutes of limitations. The Company recognizes interest and penalties relating to uncertain tax positions in income tax expense. The Company recognized a minimal benefit for the year ended December 31, 2015 and a $0.2 million benefit, and a $0.8 million benefit for interest and penalties in the income statement during the years ended December 31, 2014 and 2013, respectively. The Company had minimal interest and penalties accrued at December 31, 2015 and$0.1 million, and $0.4 million of interest and penalties accrued at December 31, 2014 and 2013, respectively. The Company files Federal income tax returns, as well as multiple state, local and foreign jurisdiction tax returns. The Company is no longer subject to examinations of its Federal income tax returns by the IRS through fiscal year 2011. All significant state and local matters have been concluded through fiscal 2011. All significant foreign matters have been settled through fiscal 2011.

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=6907707&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=6907707&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=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 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration