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INCOME TAXES | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income before income taxes consisted of the following:
| Years Ended December 31,
| 2016 |  | 2015 |  | 2014
| (In thousands)
United States operations | $ | 51,351 |  |  | $ | 37,450 |  |  | $ | 21,349 |
Foreign operations | 39,055 |  |  | 23,221 |  |  | 24,217 |
Total | $ | 90,406 |  |  | $ | 60,671 |  |  | $ | 45,566 |
A reconciliation of the U.S. Federal statutory rate to the Company’s effective tax rate is as follows:
| Years Ended December 31,
| 2016 |  | 2015 |  | 2014
Federal statutory rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Increase (decrease) in income taxes resulting from: |  |  |  |  |
State income taxes, net of federal tax benefit | (0.2 | )% |  | 1.3 | % |  | 5.6 | %
Foreign operations | (10.0 | )% |  | (12.5 | )% |  | (16.7 | )%
Spine valuation allowance | — | % |  | 61.1 | % |  | — | %
Excess tax benefits from stock compensation | (3.9 | )% |  | — | % |  | — | %
Charitable contributions | (0.4 | )% |  | (1.0 | )% |  | (2.7 | )%
Domestic production activities deduction | (2.6 | )% |  | (2.4 | )% |  | (2.7 | )%
Intercompany profit in inventory | 1.0 | % |  | 3.1 | % |  | (0.4 | )%
Nondeductible facilitative costs | 0.2 | % |  | 3.1 | % |  | 1.1 | %
Changes in valuation allowances | 0.4 | % |  | 0.3 | % |  | 2.1 | %
Uncertain tax positions | (0.3 | )% |  | 0.2 | % |  | (3.4 | )%
Research and development credit | (1.2 | )% |  | (1.9 | )% |  | (1.8 | )%
Return to provision | (1.5 | )% |  | 1.7 | % |  | 1.4 | %
Other | 1.0 | % |  | 0.7 | % |  | 2.8 | %
Effective tax rate | 17.5 | % |  | 88.7 | % |  | 20.3 | %
The effective tax rate decreased by 71.2% in 2016 compared with 2015 primarily due to recording a valuation allowance against net deferred tax assets for the SeaSpine spin-off during 2015. The Company recorded an income tax benefit of $3.8 million in the current year for excess tax benefits from early adoption of the new share-based compensation accounting guidance (ASU 2016-09), an income tax benefit of $1.4 million relating to the filing of tax returns and an income tax benefit of $0.5 million for Federal research credit study. During 2016, the Company's foreign operations generated a $0.8 million increase in income tax expense as a result of, among other factors, the geographic and business mix of taxable earnings and losses. The 2016 foreign effective tax rate is 12.7%, an increase of approximately 2.1% over the rate in 2015. 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 2015, the Company's foreign operations generated a $2.3 million decrease in income tax expense when compared with 2014, 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 2015 foreign effective tax rate is 10.6%, a decrease of approximately 5.7% over the rate in 2014. 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 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. As of December 31, 2016, the Company has not provided deferred U.S. income taxes or foreign withholding taxes on temporary differences of approximately $301.3 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 $42.5 million at December 31, 2016. 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,
| 2016 |  | 2015 |  | 2014
| (In thousands)
Current: |  |  |  |  |
Federal | $ | 13,700 |  |  | $ | 46,665 |  |  | $ | 10,330 |
State | 2,503 |  |  | 2,301 |  |  | 2,124 |
Foreign | 6,113 |  |  | 5,205 |  |  | 3,666 |
Total current | $ | 22,316 |  |  | $ | 54,171 |  |  | $ | 16,120 |
Deferred: |  |  |  |  |
Federal | (3,400 | ) |  | 1,282 |  |  | (5,524 | )
State | (1,751 | ) |  | (394 | ) |  | 695 |
Foreign | (1,323 | ) |  | (1,239 | ) |  | (2,020 | )
Total deferred | $ | (6,474 | ) |  | $ | (351 | ) |  | $ | (6,849 | )
Provision for income taxes | $ | 15,842 |  |  | $ | 53,820 |  |  | $ | 9,271 |
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,
| 2016 |  | 2015
| (In thousands)
Assets: |  |  |
Doubtful accounts | $ | 2,344 |  |  | $ | 1,943 |
Inventory related items | 30,074 |  |  | 24,417 |
Tax credits | 1,040 |  |  | 3,137 |
Accrued vacation | 3,264 |  |  | 2,713 |
Accrued bonus | 7,842 |  |  | 7,555 |
Stock compensation | 16,031 |  |  | 16,222 |
Deferred revenue | 2,345 |  |  | 767 |
Net operating loss carryforwards | 14,855 |  |  | 17,548 |
Federal & state tax credits | — |  |  | 6,227 |
Others | 1,435 |  |  | 1,952 |
Total deferred tax assets | 79,230 |  |  | 82,481 |
Less valuation allowance | (3,604 | ) |  | (4,887 | )
Deferred tax assets after valuation allowance | $ | 75,626 |  |  | $ | 77,594 |
Liabilities: |  |  |
Intangible and fixed assets | (216,779 | ) |  | (225,328 | )
Others | (853 | ) |  | (225 | )
Total deferred tax liabilities | $ | (217,632 | ) |  | $ | (225,553 | )
Total net deferred tax liabilities | $ | (142,006 | ) |  | $ | (147,959 | )
At December 31, 2016, the Company had net operating loss carryforwards of $28.5 million for federal income tax purposes, $24.2 million for foreign income tax purposes and $14.0 million for state income tax purposes to offset future taxable income. The federal net operating loss carryforwards expire through 2032, $2.5 million of the foreign net operating loss carryforwards expire through 2025 with the remaining $21.7 million having an indefinite carry forward period. The state net operating loss carryforwards expire through 2036. A valuation allowance of $3.6 million, $4.9 million and $6.8 million is recorded against the Company’s gross deferred tax assets of $79.2 million, $82.5 million, and $91.1 million recorded at December 31, 2016, 2015 and 2014, 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. 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 $1.3 million, and $1.9 million in 2016 and 2015, respectively. The 2016 overall decrease in the valuation allowance was primarily due to a reduction of net operating losses in Germany from 2011 income tax audit. 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,
| 2016 |  | 2015 |  | 2014
| (In thousands)
Balance, beginning of year | $ | 1,085 |  |  | $ | 959 |  |  | $ | 3,040 |
Gross increases: |  |  |  |  |
Prior years' tax positions | 380 |  |  | 541 |  |  | 527 |
Gross decreases: |  |  |  |  |
Prior years' tax positions | (546 | ) |  | — |  |  | (286 | )
Settlements | — |  |  | — |  |  | (828 | )
Statute of limitations lapses | (131 | ) |  | (404 | ) |  | (1,494 | )
Other | (34 | ) |  | (11 | ) |  | — |
Balance, end of year | $ | 754 |  |  | $ | 1,085 |  |  | $ | 959 |
Approximately $0.8 million of the balance at December 31, 2016 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, 2016 is $0.7 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, 2016. The Company recognizes interest and penalties relating to uncertain tax positions in income tax expense. The Company recognized a minimal benefit for the years ended December 31, 2016 and 2015 and $0.2 million benefit for interest and penalties in the income statement during the year ended December 31, 2014. The Company had minimal interest and penalties accrued for the years ended December 31, 2016 and 2015 and $0.1 million of interest and penalties accrued for the year ended December 31, 2014. 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 2013. All significant state and local matters have been concluded through fiscal 2012. All significant foreign matters have been settled through fiscal 2012.

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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 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
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