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Income Taxes | 12 Months Ended
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Dec. 31, 2015
Income Taxes [Abstract] |
Income Taxes | NOTE 15. INCOME TAXES Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company is subject to income taxes in certain foreign jurisdictions which creates deferred tax assets and liabilities in these jurisdictions. The Company has netted these deferred tax assets and deferred tax liabilities by jurisdiction. Deferred income tax assets are reviewed for recoverability and valuation allowances are provided when it is more likely than not that a deferred tax asset is not realizable in the future. Tax positions are recognized in the financial statements when it is more-likely-than-not that the position will be sustained upon examination by the tax authorities. As of December 31, 2015, the Company had $328 of uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company conducts its business globally. As a result, the Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions, and are subject to examination for the open tax years in the U.S. federal and state jurisdictions of 2012-2014 and in the foreign jurisdictions of 2005-2014. The Company’s foreign operations that are considered to be permanently reinvested have statutory tax rates of approximately 25%. The Company recognizes interest expense and penalties related to income tax matters in income tax expense. No significant amounts were recorded related to interest expense and penalties related to income tax matters by the Company during the years ended December 31, 2015, 2014, and 2013, respectively. Consolidated loss from continuing operations before income taxes consists of the following:
|  | Year Ended December 31,
|  | 2015 |  | 2014 |  | 2013
U.S. operations |  | $ | (32,419) |  | $ | (10,152) |  | $ | (6,335)
Foreign operations |  |  | (7,995) |  |  | (3,284) |  |  | (9,540)
Loss before income tax |  | $ | (40,414) |  | $ | (13,436) |  | $ | (15,875)
The components of the provision (benefit) for income taxes attributable to continuing operations consist of the following:
|  | Year Ended December 31,
|  | 2015 |  | 2014 |  | 2013
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | (3,791) |  | $ | - |  | $ | 24
State and local |  |  | (372) |  |  | (49) |  |  | 5
Foreign |  |  | 5 |  |  | 52 |  |  | 136
|  |  | (4,158) |  |  | 3 |  |  | 165
Deferred: |  |  |  |  |  |  |  |  |
Federal |  |  | 3,515 |  |  | (2,431) |  |  | (2,569)
State and local |  |  | 326 |  |  | (469) |  |  | (333)
Foreign |  |  | (849) |  |  | (1,082) |  |  | (2,463)
|  |  | 2,992 |  |  | (3,982) |  |  | (5,365)
Change in valuation allowance for deferred income taxes |  |  | 47,287 |  |  | 161 |  |  | -
|  |  | 50,279 |  |  | (3,821) |  |  | (5,365)
Income tax expense (benefit) |  | $ | 46,121 |  | $ | (3,818) |  | $ | (5,200)
The allocation of income tax expense (benefit) was as follows:
|  | Year Ended December 31,
|  | 2015 |  | 2014 |  | 2013
Continuing operations |  | $ | 46,121 |  | $ | (3,818) |  | $ | (5,200)
Discontinued operations |  |  | 61 |  |  | 20,698 |  |  | 3,127
|  | $ | 46,182 |  | $ | 16,880 |  | $ | (2,073)
The following is a reconciliation of the statutory federal income tax rate to the effective rate reported in the Company’s financial statements:
|  | Year Ended December 31,
|  | 2015 |  | 2014 |  | 2013
Statutory income tax benefit |  | (34.0) | % |  | (34.0) | % |  | (34.0) | %
Increase (decrease) in income taxes resulting from: |  |  |  |  |  |  |  |  |
Foreign taxes |  | 1.4 |  |  | 0.6 |  |  | 4.2 |
State income taxes, net of federal income taxes |  | 0.3 |  |  | (1.7) |  |  | (0.7) |
Income tax credits |  | (3.3) |  |  | (0.9) |  |  | (3.7) |
Incentive stock options |  | 0.5 |  |  | 0.4 |  |  | 0.9 |
Change in effective state rate |  | 0.1 |  |  | 1.0 |  |  | - |
Foreign sourced unearned income |  | - |  |  | 1.7 |  |  | - |
Undistributed earnings of foreign subsidiaries |  | 8.4 |  |  | 3.5 |  |  | - |
Impairment of goodwill |  | 24.8 |  |  | - |  |  | - |
Other |  | (1.1) |  |  | (0.2) |  |  | 0.5 |
Change in valuation allowance |  | 117.0 |  |  | 1.2 |  |  | - |
Income tax expense (benefit) |  | 114.1 | % |  | (28.4) | % |  | (32.8) | %
Deferred income tax assets and liabilities are determined based on the difference between the financial reporting carrying amounts and tax bases of existing assets and liabilities and operating loss and tax credit carryforwards. Significant components of the Company’s existing deferred income tax assets and liabilities as of December 31, 2015 and 2014 are as follows:
|  | December 31,
|  | 2015 |  | 2014
Deferred tax assets: |  |  |  |  |  |
Net operating loss, capital loss amount and research & experimentation credit carryforwards |  | $ | 65,400 |  | $ | 64,782
Non-cash compensation |  |  | 2,435 |  |  | 2,441
Accrued liabilities |  |  | 523 |  |  | 1,891
Reserves and other |  |  | 2,686 |  |  | 2,762
Intangibles |  |  | 244 |  |  | 281
|  |  | 71,288 |  |  | 72,157
Valuation allowance |  |  | (62,915) |  |  | (15,628)
Net deferred tax assets |  |  | 8,373 |  |  | 56,529
Deferred tax liabilities: |  |  |  |  |  |
Depreciation |  |  | (1,021) |  |  | (910)
Discount on notes |  |  | (951) |  |  | (1,501)
Intangibles |  |  | (11,654) |  |  | (12,136)
Other |  |  | (3,716) |  |  | (1,622)
|  |  | (17,342) |  |  | (16,169)
Total |  | $ | (8,969) |  | $ | 40,360
As of December 31, 2015, the Company’s gross deferred tax asset was $71,288. The Company has recorded a valuation allowance of $6 2,915, resulting in a net deferred tax asset of $8,373, before deferred tax liabilities of $17,342. The Company has provided a valuation allowance against a portion of the net deferred tax assets as of December 31, 2015, because the ultimate realization of those assets does not meet the more likely than not criteria. The majority of the Company’s deferred tax assets consist of net operating loss carryforwards for federal tax purposes. If a change in control were to occur, these could be limited under Section 382 of the Internal Revenue Code of 1986 (“Code”), as amended. In assessing the realizability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and net operating loss and credit carryforwards expire. The estimates and judgments associated with the Company’s valuation allowance on deferred tax assets are considered critical due to the amount of deferred tax assets recorded by the Company on its consolidated balance sheet and the judgment required in determining the Company’s future taxable income. The need for a valuation allowance is reassessed at each reporting period. During the year ended December 31, 2015, the Company recorded an increase to its valuation allowance of $47,287. Certain events and circumstances as explained below transpired during the third quarter of the year ended December 31, 2015, which caused the Company to conclude that the realization of some portion of its deferred tax assets does not satisfy the more-likely-than-not threshold. The POC Disposition removed a substantial portion of the Company’s projected future taxable income. Additionally, during the year ended December 31, 2015, the Company made the decision to scale back its apparel initiative and announced a realignment of resources. The totality of these events and circumstances impedes management’s ability to forecast future long-term taxable income to the extent that it does not meet the more-likely-than-not threshold. The net change in the valuation allowance for deferred income tax assets was $47,287, ($1,023), and ($533) during the years ended December 31, 2015, 2014, and 2013, respectively. A roll forward of our valuation allowance for deferred income tax assets for the years ended December 31, 2015, 2014, and 2013 is as follows:
|  | Balance at Beginning of Year |  | Charged to Costs and Expenses |  | Other Adjustments (a) |  | Balance at End of Year
2013 |  | $ | 17,184 |  | $ | - |  | $ | (533) |  | $ | 16,651
2014 |  |  | 16,651 |  |  | 161 |  |  | (1,184) |  |  | 15,628
2015 |  | $ | 15,628 |  | $ | 47,287 |  | $ | - |  | $ | 62,915
| (a) |  | During the years ended December 31, 2014 and 2013, the decrease in valuation allowance is due to the expiration of state NOL’s that had a full valuation allowance.
As of December 31, 2015, the Company had net operating loss, research and experimentation credit and alternative minimum tax credit carryforwards for U.S. federal income tax purposes of $166,206 ($294 relates to excess tax benefits related to share based payment compensation, which will not be realized until an income tax payable exist s), $1,408 and $56, re spectively. The Company believes its U.S. Federal net operating loss (“NOL”) will substantially offset its future U.S. Federal income taxes, excluding the amount subject to U.S. Federal Alternative Minimum Tax (“AMT”). AMT is calculated as 20% of AMT income. For purposes of AMT, a maximum of 90% of income is offset by available NOLs. The majority of the Company’s pre-tax income is currently earned and expected to be earned in the U.S., or taxed in the U.S. as Subpart F. income and will be offset with the NOL. NOLs available to offset taxable income, subject to compliance with Section 382 of the Code, begin to expire based upon the following schedule:
Net Operating Loss Carryforward Expiration Dates
December 31, 2015
Expiration Dates December 31, |  | Net Operating Loss Amount
2021 |  | $ | 32,408
2022 |  |  | 115,000
2023 |  |  | 5,712
2024 |  |  | 3,566
2025 and beyond |  |  | 9,520
Total |  |  | 166,206
Excess stock based payment tax deductions |  |  | (294)
After limitations |  | $ | 165,912

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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=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
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