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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes In 2019, 2018 and 2017, pre-tax income (loss) was attributed to the following jurisdictions:
| Year Ended December 31,
(In thousands) | 2019 |  | 2018 |  | 2017
Domestic operations | $ | (28,929 | ) |  | $ | (28,482 | ) |  | $ | (12,852 | )
Foreign operations | 39,331 |  |  | 54,648 |  |  | 20,140 |
Total | $ | 10,402 |  |  | $ | 26,166 |  |  | $ | 7,288 |
The provision for income taxes charged to operations was as follows:
| Year Ended December 31,
(In thousands) | 2019 |  | 2018 |  | 2017
Current tax expense: |  |  |  |  |
U.S. federal | $ | (188 | ) |  | $ | (1,074 | ) |  | $ | 3,406 |
State and local | 82 |  |  | 83 |  |  | 72 |
Foreign | 8,217 |  |  | 10,829 |  |  | 8,304 |
Total current | 8,111 |  |  | 9,838 |  |  | 11,782 |
Deferred tax (benefit) expense: |  |  |  |  |
U.S. federal | — |  |  | 3,961 |  |  | 9,495 |
State and local | — |  |  | 1,930 |  |  | (369 | )
Foreign | (1,339 | ) |  | (1,487 | ) |  | (3,297 | )
Total deferred | (1,339 | ) |  | 4,404 |  |  | 5,829 |
Total provision for income taxes | $ | 6,772 |  |  | $ | 14,242 |  |  | $ | 17,611 |
Net deferred tax assets were comprised of the following:
| December 31,
(In thousands) | 2019 |  | 2018
Deferred tax assets: |  |  |
Inventory reserves | $ | 2,887 |  |  | $ | 1,428 |
Capitalized research costs | — |  |  | 22 |
Capitalized inventory costs | 3,156 |  |  | 1,541 |
Net operating losses | 2,644 |  |  | 2,810 |
Acquired tangible assets | 71 |  |  | 1,204 |
Accrued liabilities | 4,070 |  |  | 1,090 |
Income tax credits | 11,800 |  |  | 10,020 |
Operating lease obligations | 7,878 |  |  | — |
Stock-based compensation | 4,018 |  |  | 3,181 |
Amortization of intangible assets | 2,169 |  |  | 1,135 |
Total deferred tax assets | 38,693 |  |  | 22,431 |
Deferred tax liabilities: |  |  |
Depreciation | 426 |  |  | 661 |
Allowance for doubtful accounts | (270 | ) |  | (739 | )
Right of use assets | (7,480 | ) |  | — |
Other | (3,866 | ) |  | (4,189 | )
Total deferred tax liabilities | (11,190 | ) |  | (4,267 | )
Net deferred tax assets before valuation allowance | 27,503 |  |  | 18,164 |
Less: Valuation allowance | (24,797 | ) |  | (17,261 | )
Net deferred tax assets | $ | 2,706 |  |  | $ | 903 |
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) | 2019 |  | 2018 |  | 2017
Tax provision at statutory U.S. rate | $ | 2,185 |  |  | $ | 5,495 |  |  | $ | 2,551 |
Increase (decrease) in tax provision resulting from: |  |  |  |  |
State and local taxes, net | (1,903 | ) |  | (1,792 | ) |  | (733 | )
Foreign tax rate differential | (1,810 | ) |  | (2,079 | ) |  | (296 | )
Foreign undistributed earnings, net of credits | 1,181 |  |  | 5,329 |  |  | 14,211 |
Nondeductible items | 1,236 |  |  | 1,197 |  |  | 891 |
Federal research and development credits | (884 | ) |  | (713 | ) |  | (620 | )
Non-territorial income | (1,806 | ) |  | (1,079 | ) |  | (1,517 | )
Withholding tax | 1,082 |  |  | 5,454 |  |  | 1,078 |
Uncertain tax positions | (294 | ) |  | (159 | ) |  | 1,344 |
Stock-based compensation | 262 |  |  | 213 |  |  | 479 |
Federal tax rate change | (412 | ) |  | 466 |  |  | 686 |
Valuation allowance | 7,524 |  |  | 8,057 |  |  | 149 |
Foreign permanent benefit | (856 | ) |  | (7,077 | ) |  | (451 | )
Provision to return | 584 |  |  | — |  |  | — |
Other | 683 |  |  | 930 |  |  | (161 | )
Tax provision | $ | 6,772 |  |  | $ | 14,242 |  |  | $ | 17,611 |
At December 31, 2019, we had federal and state Research and Experimentation ("R&E") income tax credit carryforwards of $1.5 million and $10.2 million, respectively. The federal R&E income tax credits begin expiring in 2038. The state R&E income tax credits do not have an expiration date. At December 31, 2019, we had state and foreign net operating loss carryforwards of $26.2 million and $3.3 million, respectively. The state and foreign carryforwards begin to expire in 2026 and 2023, respectively. At December 31, 2019, 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 carryback 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 our deferred tax assets, we established a valuation allowance against certain deferred tax assets. Our historic valuation allowance primarily relates to state R&E income tax credits generated during the prior years and current year. We had cumulative operating losses for the three years ended in 2019 for our U.S. operations and state operations and accordingly, have provided a full valuation allowance on our U.S. federal and state deferred tax assets of $5.8 million and $1.0 million, respectively, as we have determined that it is more likely than not that the tax benefits will not be realized in the future. Additionally, we recorded a valuation allowance of $0.3 million at December 31, 2019 related to certain deferred tax assets in our Argentina office due to sustained losses in that jurisdiction. 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 valuation allowance increased by $7.5 million and $8.5 million during the years ended December 31, 2019 and 2018, respectively. Uncertain Tax Positions At December 31, 2019 and 2018, we had unrecognized tax benefits of approximately $4.3 million and $4.6 million, respectively, including interest and penalties. In accordance with accounting guidance, we have elected to classify interest and penalties as components of tax expense. Interest and penalties were $0.2 million, $0.5 million, and $0.5 million for the years ended December 31, 2019, 2018 and 2017, 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) | 2019 |  | 2018 |  | 2017
Balance at beginning of period | $ | 4,040 |  |  | $ | 5,081 |  |  | $ | 3,622 |
Additions as a result of tax provisions taken during the current year | 473 |  |  | 702 |  |  | 1,489 |
Foreign currency translation | (100 | ) |  | (51 | ) |  | 90 |
Lapse in statute of limitations | (92 | ) |  | (80 | ) |  | (141 | )
Settlements | (227 | ) |  | (1,612 | ) |  | — |
Other | — |  |  | — |  |  | 21 |
Balance at end of period | $ | 4,094 |  |  | $ | 4,040 |  |  | $ | 5,081 |
Approximately $4.3 million, $4.3 million and $5.3 million of the total amount of unrecognized tax benefits at December 31, 2019, 2018 and 2017, respectively, if not for the state R&E 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 increase within the next twelve months. We anticipate a decrease in unrecognized tax benefits of approximately $0.2 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. As of December 31, 2019, the open statutes of limitations for our significant tax jurisdictions are as follows: federal for 2016 through 2018, state for 2015 through 2018, and non-U.S. for 2013 through 2018. U.S. Tax Cuts and Jobs Act The Tax Cuts and Jobs Act (the "Tax Act") was enacted in the U.S. on December 22, 2017. The Tax Act reduced the U.S. federal corporate income tax rate to 21% from 35%, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and created new taxes on certain foreign-sourced earnings. In 2017 and the first nine months of 2018, we recorded provisional amounts for certain enactment-date effects of the Tax Act by applying the guidance in SEC Staff Accounting Bulletin No. 118 because we had not yet completed our enactment-date accounting for these effects. In 2018 and 2017, we recorded tax expense related to the enactment-date effects of the Tax Act that included recording the one-time transition tax liability related to undistributed earnings of certain foreign subsidiaries that were not previously taxed, adjusting deferred tax assets and liabilities and recognizing the effects of provisionally electing to account for Global Intangible Low-Taxed Income ("GILTI") as a period cost. The changes to 2017 enactment-date provisional amounts decreased tax expense in 2018 by an insignificant amount. In 2019, federal and state tax authorities issued additional guidance related to transition tax, GILTI, deduction for foreign-derived intangible income and GILTI, tax treatment of qualified transportation fringe benefits, timing of income recognition, cost recovery and bonus depreciation, and business interest expense limitation. This guidance generally provided additional information related to the calculation of such items that became effective in 2017 and 2018. We reviewed and applied the guidance in the period such information was published. The application of the issued guidance in 2019 did not materially change our tax expense estimated in prior years. SAB 118 Measurement Period We applied the guidance in SAB 118 when accounting for the enactment-date effects of the Act in 2017 and throughout 2018. At December 31, 2017, we had not completed our accounting for all of the enactment-date income tax effects of the Tax Act under ASC 740, "Income Taxes," for the following aspects: remeasurement of deferred tax assets and liabilities, one-time transition tax, and tax on GILTI. At December 31, 2018, we had completed our accounting for all of the enactment-date income tax effects of the Tax Act. Transition Tax The one-time transition tax is based on our total post-1986 earnings and profits, the tax on which we previously deferred from U.S. income taxes under U.S. law. We recorded a provisional amount for our one-time transition tax liability for each of our foreign subsidiaries, resulting in a transition tax liability of $2.2 million at December 31, 2017. Upon further analyses of the Tax Act and Notices and regulations issued and proposed by the U.S. Department of the Treasury and the Internal Revenue Service, we finalized our calculations of the transition tax liability during 2018. We decreased our December 31, 2017 provisional amount by an immaterial amount, which is included as a component of income tax expense during the year ended December 31, 2018. We have elected to pay our transition tax over the eight-year period provided in the Tax Act. As of December 31, 2019, the remaining balance of our transition tax obligation was $1.1 million, which will be paid over the next five years. Deferred Tax Assets and Liabilities As of December 31, 2017, we remeasured certain deferred tax assets and liabilities based on the rates at which they were expected to reverse in the future (which was generally 21%), by recording a provisional amount of $2.3 million. Upon further analysis of certain aspects of the Tax Act and refinement of our calculations during the year ended December 31, 2018, we adjusted our provisional amount by $0.3 million, which is included as a component of income tax expense. GILTI The Tax Act subjects a U.S. shareholder to tax on GILTI earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, "Accounting for Global Intangible Low-Taxed Income," states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. Because we were evaluating the provision of GILTI as of December 31, 2017, we recorded no GILTI-related deferred amounts in 2017. We have elected to account for GILTI in the year the tax is incurred. Indefinite Reinvestment Assertion Beginning in 2018, the Tax Act generally provides a 100% federal deduction for dividends received from foreign subsidiaries. Nevertheless, companies must still apply the guidance of ASC Topic 740 to account for the tax consequences of outside basis differences and other tax impacts of their investments in non-U.S. subsidiaries, including potential foreign withholding taxes on distributions. Historically, the undistributed earnings of our foreign subsidiaries were considered to be indefinitely reinvested. Previously, no provision for U.S. federal and state income taxes or foreign withholding taxes had been provided on U.S. earnings. In 2018, we changed our assertion, and provided a $1.2 million deferred tax liability related to state tax and foreign tax withholding liabilities on future distributions. In 2019, the deferred tax liability related to state tax and foreign tax withholding liabilities on future distributions increased to $1.7 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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