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Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Pre-tax income (loss) was attributed to the following jurisdictions:
| Year Ended December 31,
(In thousands) | 2016 |  | 2015 |  | 2014
Domestic operations | $ | 165 |  |  | $ | (6,857 | ) |  | $ | (2,793 | )
Foreign operations | 25,023 |  |  | 42,832 |  |  | 43,244 |
Total | $ | 25,188 |  |  | $ | 35,975 |  |  | $ | 40,451 |
The provision for income taxes charged to operations were as follows:
| Year Ended December 31,
(In thousands) | 2016 |  | 2015 |  | 2014
Current tax expense: |  |  |  |  |
U.S. federal | $ | 1,748 |  |  | $ | 2,726 |  |  | $ | 47 |
State and local | 374 |  |  | 189 |  |  | 49 |
Foreign | 4,150 |  |  | 9,028 |  |  | 8,127 |
Total current | 6,272 |  |  | 11,943 |  |  | 8,223 |
Deferred tax (benefit) expense: |  |  |  |  |
U.S. federal | (1,416 | ) |  | (4,588 | ) |  | (687 | )
State and local | (356 | ) |  | (87 | ) |  | 74 |
Foreign | 304 |  |  | (466 | ) |  | 307 |
Total deferred | (1,468 | ) |  | (5,141 | ) |  | (306 | )
Total provision for income taxes | $ | 4,804 |  |  | $ | 6,802 |  |  | $ | 7,917 |
Net deferred tax assets were comprised of the following:
| December 31,
(In thousands) | 2016 |  | 2015
Deferred tax assets: |  |  |
Inventory reserves | $ | 1,396 |  |  | $ | 1,228 |
Capitalized research costs | 44 |  |  | 52 |
Capitalized inventory costs | 704 |  |  | 926 |
Net operating losses | 485 |  |  | 582 |
Acquired intangible assets | 136 |  |  | 148 |
Accrued liabilities | 4,739 |  |  | 5,194 |
Income tax credits | 12,509 |  |  | 11,251 |
Stock-based compensation | 3,376 |  |  | 2,064 |
Total deferred tax assets | 23,389 |  |  | 21,445 |
Deferred tax liabilities: |  |  |
Depreciation | (2,924 | ) |  | (2,639 | )
Allowance for doubtful accounts | (241 | ) |  | (223 | )
Amortization of intangible assets | (780 | ) |  | (1,274 | )
Other | (1,479 | ) |  | (2,752 | )
Total deferred tax liabilities | (5,424 | ) |  | (6,888 | )
Net deferred tax assets before valuation allowance | 17,965 |  |  | 14,557 |
Less: Valuation allowance | (8,635 | ) |  | (6,678 | )
Net deferred tax assets | $ | 9,330 |  |  | $ | 7,879 |
The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pre-tax income from operations as a result of the following:
| Year Ended December 31,
(In thousands) | 2016 |  | 2015 |  | 2014
Tax provision at statutory U.S. rate | $ | 8,554 |  |  | $ | 12,232 |  |  | $ | 13,753 |
Increase (decrease) in tax provision resulting from: |  |  |  |  |
State and local taxes, net | (553 | ) |  | (554 | ) |  | (580 | )
Foreign tax rate differential | (3,244 | ) |  | (5,762 | ) |  | (7,150 | )
Nondeductible items | 839 |  |  | 874 |  |  | 1,093 |
Federal research and development credits | (710 | ) |  | (678 | ) |  | (842 | )
Change in deductibility of social insurance | 8 |  |  | 649 |  |  | 688 |
Valuation allowance | 1,598 |  |  | 621 |  |  | 661 |
Foreign permanent benefit | (2,110 | ) |  | (675 | ) |  | — |
Other | 422 |  |  | 95 |  |  | 294 |
Tax provision | $ | 4,804 |  |  | $ | 6,802 |  |  | $ | 7,917 |
At December 31, 2016, we had foreign tax credit carryforwards of approximately $1.7 million, and federal and state Research and Experimentation ("R&E") income tax credit carryforwards of approximately $3.0 million and $7.6 million, respectively. The foreign tax credits begin to expire in 2024. The federal R&E credits begin to expire in 2032. The state R&E income tax credits do not have an expiration date. At December 31, 2016, we had federal, state and foreign net operating loss carryforwards of $0.6 million, $2.1 million and $0.2 million, respectively. Included in our U.S. net operating loss deferred tax assets above is $3.5 million of unrealized gross deferred tax assets attributable to excess tax benefits associated with stock-based compensation that will impact stockholders' equity if and when such excess benefits are ultimately realized. The federal, state and foreign net operating loss carryforwards begin to expire during 2024, 2018 and 2021, respectively. Internal Revenue Code Section 382 places certain limitations on the annual amount of net operating loss carryforwards that may be utilized if certain changes to a company’s ownership occur. The annual federal limitation is approximately $0.6 million for 2016 and thereafter. At December 31, 2016, we assessed the realizability of our deferred tax assets by considering whether it is "more likely than not" some portion or all of the deferred 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. We considered taxable income in carry-back years, the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. Due to uncertainties surrounding the realization of some of the Company’s deferred tax assets, we established a valuation allowance against certain deferred tax assets. This valuation allowance primarily relates to state R&E income tax credits generated during prior years and the current year. Additionally, we recorded $1.0 million of valuation allowance during the year ended December 31, 2016 primarily against certain deferred tax assets associated with our Guangzhou factory as a result of the pending sale of this factory and related transition of manufacturing activities (see Note 13 for further details). If and when recognized, the tax benefits relating to any reversal of valuation allowance will be recorded as a reduction of income tax expense. The total valuation allowance increased by $2.0 million and $1.0 million during the years ended December 31, 2016 and 2015, respectively. During the years ended December 31, 2016 and 2015, we recognized an increase to paid-in capital and a decrease to income taxes payable of $2.0 million and $3.1 million related to the tax benefit from the exercise of non-qualified stock options and vesting of restricted stock under our stock-based incentive plans. The undistributed earnings of our foreign subsidiaries are considered to be indefinitely reinvested. Accordingly, no provision for U.S. federal and state income taxes or foreign withholding taxes has been provided on such undistributed earnings. Determination of the potential amount of unrecognized deferred U.S. income tax liability and foreign withholding taxes is not practicable because of the complexities associated with its hypothetical calculation; however, unrecognized foreign tax credits would be available to reduce some portion of the U.S. liability. During 2012, China's State Administration of Taxation issued Circular 15 which required us to reevaluate our foreign deferred tax assets relating to our Chinese subsidiaries. These subsidiaries have recorded a deferred tax asset for social insurance and housing funds with the intent of being able to deduct these expenses once such liabilities have been settled. Circular 15 stipulates that payments into the aforementioned funds must be made within five years of recording the initial accrual or the tax deduction for these expenses will be forfeited. At December 31, 2016, we evaluated fund payments made prior to the preceding five years and determined that none of our foreign deferred tax assets related to social insurance and housing would provide a future tax benefit due to the change in Chinese law. In adhering to the new law, we recorded increases to income tax expense of $0.6 million and $0.7 million for the years ended December 31, 2015 and 2014, respectively, relating to decreases in the deferred tax assets of our Chinese subsidiaries. Uncertain Tax Positions At December 31, 2016 and 2015, we had unrecognized tax benefits of approximately $3.9 million and $3.7 million, including interest and penalties, respectively. We classify interest and penalties as components of tax expense. Interest and penalties were $0.3 million, $0.2 million, and $0.2 million for the years ended December 31, 2016, 2015 and 2014, respectively. Interest and penalties are included in the unrecognized tax benefits. Changes to our gross unrecognized tax benefits were as follows:
| Year ended December 31,
(In thousands) | 2016 |  | 2015 |  | 2014
Balance at beginning of period | $ | 3,469 |  |  | $ | 3,486 |  |  | $ | 3,490 |
Additions as a result of tax provisions taken during the current year | 305 |  |  | 463 |  |  | 213 |
Subtractions as a result of tax provisions taken during the prior year | — |  |  | (161 | ) |  | (150 | )
Foreign currency translation | (93 | ) |  | (79 | ) |  | (8 | )
Lapse in statute of limitations | (67 | ) |  | (241 | ) |  | (59 | )
Settlements | — |  |  | — |  |  | — |
Other | 8 |  |  | 1 |  |  | — |
Balance at end of period | $ | 3,622 |  |  | $ | 3,469 |  |  | $ | 3,486 |
Approximately $3.6 million, $3.3 million and $3.2 million of the total amount of gross unrecognized tax benefits at December 31, 2016, 2015 and 2014, respectively, if not for the state Research and Experimentation income tax credit valuation allowance, would affect the annual effective tax rate, if recognized. We are unaware of any positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change within the next twelve months. We anticipate a decrease in gross unrecognized tax benefits of approximately $0.1 million within the next twelve months based on federal, state, and foreign statute expirations in various jurisdictions. We have classified uncertain tax positions as non-current income tax liabilities unless expected to be paid within one year. We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. At December 31, 2016, the open statutes of limitations for our significant tax jurisdictions are the following: federal are 2013 through 2015, state are 2012 through 2015 and foreign are 2010 through 2015.

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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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