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Income Taxes | 12 Months Ended
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Dec. 31, 2014
Income Tax Disclosure [Abstract] |
Income Taxes | 12. Income Taxes Income tax benefit (provisions) from continuing operations consisted of the following:
|  | Years Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
|  | (In thousands) |
Income (loss) from continuing operations before benefit (provision) for income taxes |  | $ | 6,319 |  |  | $ | 3,672 |  |  | $ | (6,558) |
Benefit (provision) for income taxes |  |  | (2,196 | ) |  |  | 36,483 |  |  |  | (792 | )
Effective tax rate |  |  | 34.8 | % |  |  | (993.5 | )% |  |  | (12.1 | )%
The 2014 provision for income tax resulted primarily from the decrease in deferred tax assets and foreign withholding tax expense. The 2013 benefit for income tax resulted primarily from the partial release of our valuation allowance. The 2012 provision for income tax resulted primarily from foreign withholding tax expense. The Company reported pre-tax book income (loss) from continuing operations of:
|  | Years Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
|  | (In thousands) |
Domestic |  | $ | 5,867 |  |  | $ | 3,349 |  |  | $ | (2,175 | )
Foreign |  |  | 452 |  |  |  | 323 |  |  |  | (4,383 | )
Total |  | $ | 6,319 |  |  | $ | 3,672 |  |  | $ | (6,558) |
The benefit (provision) for income taxes from continuing operations consisted of the following:
|  | Years Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
|  | (In thousands) |
Current: |  |  |  |  |  |  |  |  |  |  |  |
United States federal |  | $ | (218 | ) |  | $ | (300 | ) |  | $ | 91 |
Foreign |  |  | (12 | ) |  |  | (12 | ) |  |  | (902 | )
State and local |  |  | (75 | ) |  |  | (55 | ) |  |  | 19 |
Total current |  | $ | (305) |  |  | $ | (367 | ) |  | $ | (792 | )
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
United States federal |  |  | (2,137 | ) |  |  | 36,190 |  |  |  | 0 |
Foreign |  |  | 0 |  |  |  | 660 |  |  |  | 0 |
State and local |  |  | 246 |  |  |  | 0 |  |  |  | 0 |
Total deferred |  |  | (1,891 | ) |  |  | 36,850 |  |  |  | 0 |
|  | $ | (2,196) |  |  | $ | 36,483 |  |  | $ | (792 | )
In 2014, 2013, and 2012 the Company’s income tax payable was not decreased by the tax benefit related to stock options. The Company includes only the direct tax effects of employee stock incentive plans in calculating this benefit, which is recorded to additional paid-in capital. Deferred tax assets and liabilities are recognized for the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, tax losses, and credit carryforwards. Significant components of the net deferred tax assets and liabilities consisted of:
|  | December 31, |
|  | 2014 |  |  | 2013 |
|  | (In thousands) |
Deferred tax assets: |  |  |  |
Net operating loss carryforwards |  | $ | 20,627 |  |  | $ | 23,652 |
State income taxes |  |  | 1 |  |  |  | 1 |
Deferred revenue |  |  | 4,723 |  |  |  | 3,588 |
Research and development and other credits |  |  | 8,898 |  |  |  | 8,201 |
Reserves and accruals recognized in different periods |  |  | 4,803 |  |  |  | 4,994 |
Basis difference in investment |  |  | 968 |  |  |  | 967 |
Capitalized R&D expenses |  |  | 1,576 |  |  |  | 1,535 |
Depreciation and amortization |  |  | 783 |  |  |  | 887 |
Other |  |  | 80 |  |  |  | 120 |
Total deferred tax assets |  |  | 42,459 |  |  |  | 43,945 |
Valuation allowance |  |  | (7,663 | ) |  |  | (7,095 | )
Net deferred tax assets |  | $ | 34,796 |  |  | $ | 36,850 |
The Company accounts for deferred taxes under ASC Topic 740, “Income Taxes” (“ASC 740”) which involves weighing positive and negative evidence concerning the realizability of the Company’s deferred tax assets in each jurisdiction. As of December 31, 2014, based on its assessment of the realizability of its deferred tax assets, the Company maintains a partial valuation allowance against certain of its U.S. Federal, state, and foreign deferred tax assets in each jurisdiction. The valuation allowance increased by $568,000. As of December 31, 2014, the net operating loss carryforwards for federal and state income tax purposes were approximately $57.6 million and $52.3 million, respectively. The federal net operating losses expire between 2028 and 2033 and the state net operating losses begin to expire in 2028. $9.1 million of the Company’s net operating losses are associated with excess benefits related to stock compensation, when realized the amount will be an increase to additional paid in capital. As of December 31, 2014, the Company had federal and state tax credit carryforwards of approximately $9.2 million and $1.1 million, respectively, available to offset future taxable income. The federal credit carryforwards will expire between 2018 and 2034 and the California tax credits will carryforward indefinitely. In addition, as of December 31, 2014, the Company has Canadian research and development credit carryforwards of $1.6 million, which will expire at various dates through 2034. These operating losses and credit carryforwards have not been reviewed by the relevant tax authorities and could be subject to adjustment upon examinations. Section 382 of the Internal Revenue Code (“IRC Section 382”) imposes limitations on a corporation’s ability to utilize its net operating losses and credit carryforwards if it experiences an “ownership change” as defined by IRC Section 382. Utilization of a portion of the Company’s federal net operating loss carryforward was limited in accordance with IRC Section 382, due to an ownership change that occurred during 1999. This limitation has fully lapsed as of December 31, 2010. As of December 31, 2014, the Company conducted an IRC Section 382 analysis with respect to its net operating loss and credit carryforwards and determined there was no limitation. There can be no assurance that future issuances of the Company’s securities will not trigger limitations under IRC Section 382 which could limit utilization of these tax attributes. For purposes of the reconciliation between the benefit (provision) for income taxes at the statutory rate and the effective tax rate, a national U.S. 35% rate is applied as follows:
|  | 2014 |  |  | 2013 |  |  | 2012 |
Federal statutory tax rate |  |  | 35.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
State taxes, net of federal benefit |  |  | 0.0 | % |  |  | 0.1 | % |  |  | 2.3 | %
Foreign withholding |  |  | 3.5 | % |  |  | 8.2 | % |  |  | (13.0 | )%
Stock compensation expense |  |  | 3.8 | % |  |  | 2.5 | % |  |  | (2.6 | )%
Meals & entertainment |  |  | 0.1 | % |  |  | 0.3 | % |  |  | (0.2 | )%
Foreign rate differential |  |  | (1.1 | )% |  |  | (1.7 | )% |  |  | (2.8 | )%
Prior year true-up items |  |  | (0.2 | )% |  |  | 0.1 | % |  |  | 0.1 | %
Tax reserves |  |  | 0.8 | % |  |  | 1.3 | % |  |  | (0.1 | )%
Benefit of discontinued operations |  |  | 0.0 | % |  |  | 0.0 | % |  |  | 1.5 | %
Credits |  |  | (5.7 | )% |  |  | (11.0 | )% |  |  | 13.0 | %
Other |  |  | (1.4 | )% |  |  | 0.0 | % |  |  | 0.3 | %
Valuation allowance |  |  | 0.0 | % |  |  | (1028.3 | )% |  |  | (45.6 | )%
Effective tax rate |  |  | 34.8 | % |  |  | (993.5 | )% |  |  | (12.1 | )%
Undistributed earnings of the Company’s foreign subsidiaries are considered to be indefinitely reinvested and accordingly, no provision for federal and state income taxes has been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to various foreign countries. The Company maintains liabilities for uncertain tax positions. These liabilities involve considerable judgment and estimation and are continuously monitored by management based on the best information available, including changes in tax regulations, the outcome of relevant court cases, and other information. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
|  | 2014 Unrecognized Tax Benefits |  |  | 2013 Unrecognized Tax Benefits |  |  | 2012 Unrecognized Tax Benefits |
|  | (In thousands) |
Balance at beginning of year |  | $ | 1,634 |  |  | $ | 628 |  |  | $ | 628 |
Gross increases for tax positions of prior years |  |  | 0 |  |  |  | 896 |  |  |  | 0 |
Gross decreases for tax positions of prior years |  |  | (4 | ) |  |  | 0 |  |  |  | 0 |
Gross increases for tax positions of current year |  |  | 114 |  |  |  | 110 |  |  |  | 0 |
Settlements |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Lapse of statute of limitations |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Balance at end of year |  | $ | 1,744 |  |  | $ | 1,634 |  |  | $ | 628 |
In July 2013, the FASB ratified ASU 2013-11, “Presenting an Unrecognized Tax Benefit (“UTB”) When a Net Operating Loss Carryforward Exists” (“ASU 2013-11”). ASU 2013-02 provides that an UTB, or a portion thereof, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional income taxes that would result from disallowance of a tax position, or the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, then the unrecognized tax benefit should be presented as a liability. ASU 2013-11 was effective for reporting periods beginning after December 15, 2013, and may be applied retrospectively. The impact was not significant on the Company’s condensed consolidated results of operations and financial condition. The unrecognized tax benefits relate primarily to federal and state research and development credits. The Company’s policy is to account for interest and penalties related to uncertain tax positions as a component of income tax expense. As of December 31, 2014, the Company accrued interest or penalties related to uncertain tax positions in the amount of $73,000. The Company expects to release reserves and record a tax benefit due to the expiration of statutes of limitations during the next 12 months. As of December 31, 2014, the total amount of unrecognized tax benefits that would affect the Company’s effective tax rate, if recognized, is $272,000. Because the Company has net operating loss and credit carryforwards, there are open statutes of limitations in which federal, state and foreign taxing authorities may examine the Company’s tax returns for all years from 1998 through the current period.

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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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