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Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Taxes [Abstract] |
Income Taxes | 14. Income Taxes Consolidated income before provision for income taxes consists of the following for the years ended December 31, 2014, 2015 and 2016 (U.S. dollars in thousands):
|  | 2014 |  |  | 2015 |  |  | 2016 |
U.S. |  | $ | 184,476 |  |  | $ | 134,473 |  |  | $ | (19,119 | )
Foreign |  |  | 114,031 |  |  |  | 77,486 |  |  |  | 231,958 |
Total |  | $ | 298,507 |  |  | $ | 211,959 |  |  | $ | 212,839 |
The provision for current and deferred taxes for the years ended December 31, 2014, 2015 and 2016 consists of the following (U.S. dollars in thousands):
|  | 2014 |  |  | 2015 |  |  | 2016 |
Current |  |  |  |  |  |  |  |  |
Federal |  | $ | 37,402 |  |  | $ | 6,328 |  |  | $ | ─ |
State |  |  | 2,095 |  |  |  | 1,483 |  |  |  | (718 | )
Foreign |  |  | 48,904 |  |  |  | 50,403 |  |  |  | 70,652 |
|  |  | 88,401 |  |  |  | 58,214 |  |  |  | 69,934 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (380 | ) |  |  | 16,556 |  |  |  | (27,171 | )
State |  |  | 444 |  |  |  | (674 | ) |  |  | 1,104 |
Foreign |  |  | 20,866 |  |  |  | 4,817 |  |  |  | 25,886 |
|  |  | 20,930 |  |  |  | 20,699 |  |  |  | (181 | )
Provision for income taxes |  | $ | 109,331 |  |  | $ | 78,913 |  |  | $ | 69,753 |
The Company's foreign taxes paid are high relative to foreign operating income and the Company's U.S. taxes paid are low relative to U.S. operating income due largely to the flow of funds among the Company's Subsidiaries around the world. As payments for services, management fees, license arrangements and royalties are made from the Company's foreign affiliates to other company affiliates or its corporate headquarters, these payments often incur withholding and other forms of tax that are generally creditable for U.S. tax purposes. Therefore, these payments lead to increased foreign effective tax rates and lower U.S. effective tax rates. Variations occur in the Company's foreign and U.S. effective tax rates from year to year depending on several factors. These factors include the impact of global transfer prices, the timing and level of remittances from foreign affiliates, profits and losses in various markets, the valuation of deferred tax assets or liabilities, or changes in tax laws, regulations, accounting principles, or interpretations thereof. The principal components of deferred taxes are as follows (U.S. dollars in thousands):
|  | Year Ended December 31, |
|  | 2015 |  |  | 2016 |
Deferred tax assets: |  |  |  |  |  |
Inventory differences |  | $ | 5,222 |  |  | $ | 2,521 |
Foreign tax credit and other foreign benefits |  |  | 86,729 |  |  |  | 145,169 |
Stock-based compensation |  |  | 13,842 |  |  |  | 11,470 |
Accrued expenses not deductible until paid |  |  | 46,597 |  |  |  | 32,796 |
Foreign currency exchange |  |  | 8,976 |  |  |  | 4,826 |
Net operating losses |  |  | 10,994 |  |  |  | 9,584 |
Capitalized research and development |  |  | 1,632 |  |  |  | 358 |
Exchange gains and losses |  |  | 55,643 |  |  | ─ |
Other |  |  | 964 |  |  |  | 1,063 |
Gross deferred tax assets |  |  | 230,599 |  |  |  | 207,787 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Foreign currency exchange |  | ─ |  |  |  | 105 |
Intangibles step-up |  |  | 13,607 |  |  |  | 12,107 |
Overhead allocation to inventory |  |  | 5,101 |  |  |  | 4,820 |
Amortization of intangibles |  |  | 18,733 |  |  |  | 19,091 |
Foreign outside basis in controlled foreign corporation |  |  | 84,434 |  |  |  | 106,846 |
Other |  |  | 35,257 |  |  |  | 20,572 |
Gross deferred tax liabilities |  |  | 157,132 |  |  |  | 163,541 |
Valuation allowance |  |  | (49,271 | ) |  |  | (9,137 | )
Deferred taxes, net |  | $ | 24,196 |  |  | $ | 35,109 |
At December 31, 2016, the Company had foreign operating loss carryforwards of $31.3 million for tax purposes, which will be available to offset future taxable income. If not used, $9.8 million of carryforwards will expire between 2017 and 2026, while $21.5 million do not expire. A valuation allowance has been placed on foreign operating loss carryforwards of $29.8 million. In addition, the company had foreign tax credit carryforwards of $55.7 million which will expire between 2025 and 2026. The Company uses the tax law ordering approach when determining when excess tax benefits have been realized. The valuation allowance primarily represents amounts for foreign operating loss carryforwards and unrealized foreign exchange losses for which it is more likely than not some portion or all of the deferred tax asset will not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary difference, projected future taxable income, tax planning strategies and recent financial operations. When the Company determines that there is sufficient taxable income to utilize the net operating losses, the valuation will be released which would reduce the provision for income taxes. The deferred tax asset valuation adjustments for the years ended December 31, 2014, 2015 and 2016 are as follows (U.S. dollars in thousands):
|  | Year Ended December 31, |
|  | 2014 |  |  | 2015 |  |  | 2016 |
Balance at the beginning of period |  | $ | 10,803 |  |  | $ | 35,999 |  |  | $ | 49,271 |
Additions charged to cost and expenses |  |  | 28,687 |  |  |  | 12,948 |  |  |  | 692 |
Decreases |  |  | (3,546 | )(1) |  |  | (2,943 | )(1) |  |  | (40,442 | )(4)
Adjustments |  |  | 55 | (2) |  |  | 3,267 | (2) |  |  | (384 | )(2)
Balance at the end of the period |  | $ | 35,999 | (3) |  | $ | 49,271 | (3) |  | $ | 9,137 |
| (1) | Decreases in valuation allowance due to lapse in statute of limitation of the net operating losses carryforward which had no impact to the income statement.
| (2) | Represents the net currency effects of translating valuation allowances at current rates of exchange.
| (3) | The increase was due primarily to the deferred tax assets created by the unrealized loss in Venezuela for which the Company set up a full valuation allowance.
| (4) | Decrease in valuation allowance due to lapse in statute of limitation of the net operating losses carryforward and due to the write off of Venezuelan deferred tax assets, which had no impact to the income statement.
The components of deferred taxes, net on a jurisdiction basis are as follows (U.S. dollars in thousands):
|  | Year Ended December 31, |
|  | 2015 |  |  | 2016 |
Net current deferred tax assets |  | $ | ─ |  |  | $ | ─ |
Net noncurrent deferred tax assets |  |  | 40,373 |  |  |  | 35,752 |
Total net deferred tax assets |  |  | 40,373 |  |  |  | 35,752 |
Net current deferred tax liabilities |  | ─ |  |  | ─ |
Net noncurrent deferred tax liabilities |  |  | 16,177 |  |  |  | 643 |
Total net deferred tax liabilities |  |  | 16,177 |  |  |  | 643 |
Deferred taxes, net |  | $ | 24,196 |  |  | $ | 35,109 |
The Company is subject to regular audits by federal, state and foreign tax authorities. These audits may result in proposed assessments that may result in additional tax liabilities. The actual tax rate for the years ended December 31, 2014, 2015 and 2016 compared to the statutory U.S. Federal tax rate is as follows:
|  | Year Ended December 31, |
|  | 2014 |  |  | 2015 |  |  | 2016 |
Income taxes at statutory rate |  |  | 35.00 | % |  |  | 35.00 | % |  |  | 35.00 | %
Foreign tax rate differential |  | ─ |  |  |  | .92 |  |  |  | (1.98 | )
Non-deductible expenses |  |  | 0.12 |  |  |  | 0.09 |  |  |  | 0.11 |
Controlled foreign corporation losses |  |  | 1.48 |  |  |  | 1.09 |  |  |  | (2.63 | )
Section 987 implementation |  | ─ |  |  | ─ |  |  |  | 2.69 |
Other |  |  | 0.03 |  |  |  | 0.13 |  |  |  | (0.42 | )
|  |  | 36.63 | % |  |  | 37.23 | % |  |  | 32.77 | %
The effective tax rate for 2015 was impacted largely due to the lower than anticipated profits in China caused by a charge to inventory. Consequently, a deferred tax asset associated with China could not be recognized, thereby impacting the annual effective tax rate. The year-over-year decrease in the effective tax rate for 2016 was due to a benefit for the deferred tax asset previously not recognized by China in 2015 being recognized in 2016, and other tax benefits being recognized due to ceasing business operations in Venezuela. These benefits were partially offset by a change in tax law that was enacted in December 2016 related to the taxation of foreign currency translation gains or losses arising from qualified business units. The cumulative amount of undistributed earnings of the Company's non-U.S. Subsidiaries held for indefinite reinvestment is approximately $50.0 million, $70.0 million and $70.0 million at December 31, 2014, 2015 and 2016, respectively. If this amount were repatriated to the United States, the amount of incremental taxes would be approximately $7.6 million.

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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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