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INCOME TAXES | 12 Months Ended
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Dec. 31, 2013
INCOME TAXES |
INCOME TAXES | NOTE 9: INCOME TAXES Income from before provision for income taxes are taxed under the following jurisdictions:
Year Ended December 31, |  | 2013 |  | 2012 |  | 2011 |
Domestic |  | $ | 6,111 |  | $ | 17,625 |  | $ | 2,338 |
Foreign |  | 19,542 |  | 17,871 |  | 19,674 |
Total |  | $ | 25,653 |  | $ | 35,496 |  | $ | 22,012 |
Components of the provision (benefit) for income taxes for each of the three years in the period ended December 31, 2013 are as follows:
Year Ended December 31, |  | 2013 |  | 2012 |  | 2011 |
Current: |  |  |  |  |  |  |
Federal |  | $ | (773 | ) | $ | 1,901 |  | $ | 4,094 |
State |  | 399 |  | 248 |  | 961 |
Foreign |  | 7,326 |  | 3,835 |  | 4,429 |
Subtotal |  | 6,952 |  | 5,984 |  | 9,484 |
Deferred: |  |  |  |  |  |  |
Federal |  | 1,654 |  | 2,303 |  | (4,408 | )
State |  | 186 |  | 1,207 |  | (719 | )
Foreign |  | (748 | ) | 622 |  | 54 |
Subtotal |  | 1,092 |  | 4,132 |  | (5,073 | )
Total provision for income taxes |  | $ | 8,044 |  | $ | 10,116 |  | $ | 4,411 |
The provision for income taxes, as a percentage of income before provision for income taxes, differs from the statutory U.S. federal income tax rate due to the following:
Year Ended December 31, |  | 2013 |  | 2012 |  | 2011 |
Statutory U.S. federal income tax rate |  | 35.0 | % | 35.0 | % | 35.0 | %
State income taxes, net of U.S. federal income tax benefit |  | 1.4 |  | 2.7 |  | 0.7 |
U.S. tax impact of foreign operations |  | (15.9 | ) | (2.1 | ) | (20.3 | )
Valuation allowance change |  | 9.3 |  | (3.9 | ) | (0.3 | )
Unrecognized tax benefits |  | 8.4 |  | 0.4 |  | 8.2 |
Domestic manufacturing deduction |  | (1.3 | ) | (0.4 | ) | (1.1 | )
Nondeductible foreign expenses |  | (4.4 | ) | (0.9 | ) | (1.3 | )
Other |  | (1.1 | ) | (2.3 | ) | (0.9 | )
Effective income tax rate |  | 31.4 | % | 28.5 | % | 20.0 | %
Pretax earnings of a foreign subsidiary or affiliate are subject to U.S. taxation when effectively repatriated. The Company does not intend to reinvest undistributed earnings indefinitely in the Company’s foreign subsidiaries. Adjustments relating to the U.S. impact of foreign operations decreased the effective tax rate by 15.9 percentage points in 2013, decreased the effective tax rate by 2.1 percentage points in 2012 and decreased the effective tax rate by 20.3 percentage points in 2011. Included were adjustments for dividends received from foreign subsidiaries, adjustments for foreign tax credits, foreign tax rate differentials and adjustments relating to the unremitted earnings calculations under applicable U.S. GAAP. The components of this calculation were:
Components of U.S. tax impact of foreign operations |  | 2013 |  | 2012 |  | 2011 |
Dividends received from foreign subsidiaries |  | 29.2 | % | 4.5 | % | 26.2 | %
Foreign tax credits |  | (34.1 | ) | (4.0 | ) | (33.1 | )
Foreign tax rate differentials |  | (10.6 | ) | (2.3 | ) | (5.2 | )
Unremitted earnings |  | (0.4 | ) | (0.3 | ) | (8.2 | )
Total |  | (15.9 | )% | (2.1 | )% | (20.3 | )%
The significant components of the deferred tax assets (liabilities) are as follows:
As of December 31, |  | 2013 |  | 2012 |
Inventory |  | $ | 1,502 |  | $ | 1,718 |
Accrued liabilities |  | 4,380 |  | 3,464 |
Impaired investments |  | — |  | 727 |
Deferred compensation |  | 364 |  | 483 |
Equity-based compensation |  | 2,993 |  | 2,592 |
Intangibles assets |  | 389 |  | 2,308 |
Bad debts |  | 225 |  | 49 |
Net operating losses |  | 5,593 |  | 4,152 |
Foreign tax and withholding credits |  | 4,066 |  | 4,406 |
Non-income tax accruals |  | 397 |  | 452 |
Health insurance accruals |  | 184 |  | 186 |
Undistributed foreign earnings |  | 4,008 |  | 2,704 |
Other deferred tax assets |  | 2,260 |  | 2,357 |
Capital loss carryforward |  | 721 |  | — |
Valuation allowance |  | (11,340 | ) | (8,149 | )
Total deferred tax assets |  | 15,742 |  | 17,449 |
Other deferred tax liabilities |  | (231 | ) | (720 | )
Total deferred tax liabilities |  | (231 | ) | (720 | )
Total deferred taxes, net |  | $ | 15,511 |  | $ | 16,729 |
The components of deferred tax assets (liabilities), net are as follows:
As of December 31, |  | 2013 |  | 2012 |
Net current deferred tax assets |  | $ | 5,711 |  | $ | 5,307 |
Net non-current deferred tax assets |  | 9,928 |  | 11,516 |
Total net deferred tax assets |  | 15,639 |  | 16,823 |
Net current deferred tax liabilities |  | (2 | ) | (1 | )
Net non-current deferred tax liabilities |  | (126 | ) | (93 | )
Total net deferred tax liabilities |  | (128 | ) | (94 | )
Total deferred taxes, net |  | $ | 15,511 |  | $ | 16,729 |
Net current deferred tax liabilities are included in accrued liabilities and net non-current deferred tax liabilities are included in other liabilities in the consolidated balance sheets. Management has provided a valuation allowance of $11,340 and $8,149 as of December 31, 2013 and 2012, respectively, for certain deferred tax assets, including foreign net operating losses, for which management cannot conclude it is more likely than not that they will be realized. The Company reviewed its tax positions and increased its valuation allowance by approximately $3,191 in 2013 primarily due to a domestic increase of $1,965 and a foreign increase of $1,226. At December 31, 2013, foreign subsidiaries had unused operating loss carryovers for tax purposes of approximately $5,593. The net operating losses will expire at various dates from 2014 through 2023. For financial reporting purposes, the release of these valuation allowances would reduce income tax expenses. At December 31, 2013, the Company had approximately $4,066 of foreign tax and withholding credits, most of which expire in 2020. The Company is subject to regular audits by federal, state and foreign tax authorities. These audits may result in additional tax liabilities. The Company believes it has appropriately provided for income taxes for all years. Several factors drive the calculation of its tax reserves. Some of these factors include: (i) the expiration of various statutes of limitations; (ii) changes in tax law and regulations; (iii) the issuance of tax rulings; and (iv) settlements with tax authorities. Changes in any of these factors may result in adjustments to the Company’s reserves, which would impact its reported financial results. The Company’s U.S. federal income tax returns for 2009 through 2012 are open to examination for federal tax purposes. The Company has several foreign tax jurisdictions that have open tax years from 2006 through 2012. The Internal Revenue Service (“IRS”) is currently conducting an audit of the Company’s U.S. federal income tax returns for the 2009 through 2011 tax years. The total outstanding balance for liabilities related to unrecognized tax benefits at December 31, 2013 and 2012 was $12,402 and $10,571, respectively, all of which would favorably impact the effective tax rate if recognized. Included in these amounts is approximately $1,352 and $1,052, respectively, of interest and penalties. The Company increased interest and penalties approximately $300 and decreased interest and penalties approximately $408 for the years ended December 31, 2013 and 2012, respectively. The Company accounts for interest expense and penalties for unrecognized tax benefits as part of its income tax provision. During the years ended December 31, 2013, 2012 and 2011, the Company added approximately $2,656, $3,471 and $2,379, respectively, to its liability for unrecognized tax benefits. Included in these amounts are approximately $300, $339 and $491 for the years ended December 31, 2013, 2012 and 2011, respectively, related to interest expense and penalties. In addition, the Company recorded a benefit related to the lapse of applicable statute of limitations of approximately $323, $2,815 and $1,728 for the years ended December 31, 2013, 2012 and 2011, respectively, all of which favorably impacted the Company’s effective tax rate. A reconciliation of the beginning and ending amount of liabilities associated with uncertain tax benefits, excluding interest and penalties, is as follows for the years:
Year Ended December 31, |  | 2013 |  | 2012 |  | 2011 |
Unrecognized tax benefits, opening balance |  | $ | 9,519 |  | $ | 8,966 |  | $ | 15,058 |
Settlement of liability reclassified as income tax payable |  | (10 | ) | — |  | (4,479 | )
Payments on liability |  | — |  | (15 | ) | (2,590 | )
Tax positions taken in a prior period |  |  |  |  |  |  |
Gross increases |  | — |  | 1,120 |  | 541 |
Gross decreases |  | (184 | ) | (504 | ) | — |
Tax positions taken in the current period |  |  |  |  |  |  |
Gross increases |  | 2,356 |  | 2,011 |  | 1,347 |
Gross decreases |  | — |  | — |  | — |
Lapse of applicable statute of limitations |  | (323 | ) | (2,068 | ) | (914 | )
Currency translation adjustments |  | (308 | ) | 9 |  | 3 |
Unrecognized tax benefits, ending balance |  | $ | 11,050 |  | $ | 9,519 |  | $ | 8,966 |
The Company anticipates that unrecognized tax benefits will increase approximately $1,200 to $1,700 within the next twelve months due to additional transactions related to commissions and transfer pricing. The Company believes that it is reasonably possible that unrecognized tax benefits will decrease approximately $0 to $500 within the next twelve months due to the close of audits or the expiration of statutes of limitations in various foreign jurisdictions. Although the Company believes its estimates are reasonable, the Company can make no assurance that the final tax outcome of these matters will not be different from that which it has reflected in its historical income tax provisions and accruals. Such differences could have a material impact on the Company’s income tax provision and operating results in the period in which the Company makes such determination. In September 2013, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued final regulations addressing the acquisition, production and improvement of tangible property, and also proposed regulations addressing the disposition of property. These regulations replace previously issued temporary regulations and are effective for tax years beginning January 1, 2014. The Company is in the process of analyzing the impact of these new regulations but does not believe they will have a material impact on the Company’s consolidated financial statements.

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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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