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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Note 11 – Income Taxes A summary of the components of the provision for income taxes for the years ended December 31, 2017, 2016 and 2015 is as follows:
(In thousands) |  | 2017 |  |  | 2016 |  |  | 2015 |
Current |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 466 |  |  | $ | 12,733 |  |  | $ | 7,504 |
State |  |  | (150 | ) |  |  | 1,141 |  |  |  | 279 |
International |  |  | 6,458 |  |  |  | 477 |  |  |  | (29 | )
Total Current |  |  | 6,774 |  |  |  | 14,351 |  |  |  | 7,754 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 8,024 |  |  |  | 647 |  |  |  | (585 | )
State |  |  | 1,882 |  |  |  | 73 |  |  |  | (66 | )
International |  |  | 4,167 |  |  |  | (3,405 | ) |  |  | (41 | )
Total Deferred |  |  | 14,073 |  |  |  | (2,685 | ) |  |  | (692 | )
Total Provision for Income Taxes |  | $ | 20,847 |  |  | $ | 11,666 |  |  | $ | 7,062 |
Our effective income tax rate differs from the federal statutory rate due to the following:
|  | 2017 |  |  | 2016 |  |  | 2015 |
Tax provision computed at the federal statutory rate |  |  | 35.00 | % |  |  | 35.00 | % |  |  | 35.00 | %
State income tax provision, net of federal benefit |  |  | 2.17 |  |  |  | 3.93 |  |  |  | 4.86 |
Federal research credits |  |  | (11.88 | ) |  |  | (8.15 | ) |  |  | (12.55 | )
Foreign taxes |  |  | (2.27 | ) |  |  | (0.34 | ) |  |  | 2.10 |
Tax-exempt income |  |  | (0.75 | ) |  |  | (0.53 | ) |  |  | (1.94 | )
State tax incentives |  |  | (2.71 | ) |  |  | (2.77 | ) |  |  | (5.04 | )
Stock-based compensation |  |  | 1.43 |  |  |  | 2.53 |  |  |  | 6.91 |
Domestic production activity deduction |  |  | (1.13 | ) |  |  | (2.23 | ) |  |  | (3.17 | )
Bargain purchase |  |  | — |  |  |  | (2.64 | ) |  |  | — |
Impact of U.S. tax reform |  |  | 26.70 |  |  |  | — |  |  |  | — |
Other, net |  |  | 0.09 |  |  |  | 0.08 |  |  |  | 1.30 |
Effective Tax Rate |  |  | 46.65 | % |  |  | 24.88 | % |  |  | 27.47 | %
Income before provision for income taxes for the years ended December 31, 2017, 2016 and 2015 is as follows:
(In thousands) |  | 2017 |  |  | 2016 |  |  | 2015 |
U.S. entities |  | $ | 26,552 |  |  | $ | 54,077 |  |  | $ | 27,400 |
International entities |  |  | 18,135 |  |  |  | (7,182 | ) |  |  | (1,692 | )
Total |  | $ | 44,687 |  |  | $ | 46,895 |  |  | $ | 25,708 |
Income before provision for income taxes for international entities reflects income based on statutory transfer pricing agreements. This amount does not correlate to consolidated international revenues, many of which occur from our U.S. entity. Deferred income taxes on the balance sheet result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes. The principal components of our current and non-current deferred taxes are as follows:
(In thousands) |  | 2017 |  |  | 2016 |
Deferred tax assets |  |  |  |  |  |  |  |
Inventory |  | $ | 7,545 |  |  | $ | 12,020 |
Accrued expenses |  |  | 3,103 |  |  |  | 5,551 |
Investments |  |  | — |  |  |  | 1,062 |
Deferred compensation |  |  | 5,204 |  |  |  | 5,751 |
Stock-based compensation |  |  | 2,988 |  |  |  | 4,724 |
Uncertain tax positions related to state taxes and related interest |  |  | 370 |  |  |  | 762 |
Pensions |  |  | 4,727 |  |  |  | 4,273 |
Foreign losses |  |  | 3,091 |  |  |  | 6,486 |
State losses and credit carry-forwards |  |  | 3,854 |  |  |  | 4,021 |
Federal loss and research carry-forwards |  |  | 3,058 |  |  |  | 5,886 |
Valuation allowance |  |  | (6,006 | ) |  |  | (6,149 | )
Total Deferred Tax Assets |  |  | 27,934 |  |  |  | 44,387 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Property, plant and equipment |  |  | (3,553 | ) |  |  | (4,433 | )
Intellectual property |  |  | (663 | ) |  |  | (1,918 | )
Investments |  |  | (290 | ) |  |  | — |
Total Deferred Tax Liabilities |  |  | (4,506 | ) |  |  | (6,351 | )
Net Deferred Tax Assets |  | $ | 23,428 |  |  | $ | 38,036 |
On December 22, 2017, the Tax Cuts and Jobs Act (the Act) was signed into law. As a result of the Act, we have recognized an estimated expense of $11.9 million in the fourth quarter of 2017, of which $9.2 million related to the write-down of deferred tax assets and $2.7 million related to tax on unrepatriated foreign earnings. We have calculated our best estimate of the impact of the Act in our year-end income tax provision, in accordance with Staff Accounting Bulletin No. 118, which was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed to finalize the accounting for certain income tax effects of the Act. Additional work is necessary to do a more detailed analysis of historical foreign earnings, as well as the full impact relating to the write-down of deferred tax assets. Any subsequent adjustments to these amounts will be recorded as income tax expense in the quarter the analysis is complete. At December 31, 2017 and 2016, non-current deferred taxes related to our investments and our defined benefit pension plan reflect deferred taxes on the net unrealized gains on available-for-sale investments and deferred taxes on unrealized losses in our pension plan. The net change in non-current deferred taxes associated with these items, a deferred tax benefit of $1.7 million and $1.5 million in 2017 and 2016, respectively, is recorded as an adjustment to other comprehensive income, presented in the Consolidated Statements of Comprehensive Income. Based upon our results of operations in 2017 and expected profitability in future years in a certain international jurisdiction, we concluded that it is more likely than not certain foreign deferred tax assets will be realized. As of December 31, 2017, the remaining valuation allowance primarily relates to deferred tax assets related to state credit carry-forwards from tax credits in excess of our annual tax liability to an individual state where we do not generate sufficient state income to offset the credit and net operating losses in foreign jurisdictions. We believe it is more likely than not that we will not realize the full benefits of the deferred tax assets arising from these losses and credits, and accordingly, we have provided a valuation allowance against these deferred tax assets. The deferred tax assets for foreign and domestic carry-forwards, unamortized research and development costs, and state credit carry-forwards of $10.0 million will expire between 2018 and 2030. The loss carry-forwards were acquired through acquisitions in 2009 and 2011. We will continue to assess the realization of our deferred tax assets and related valuation allowances. The net change in our valuation allowance from December 31, 2016 to December 31, 2017 was $(0.1) million. As of December 31, 2017 and 2016, respectively, our cash and cash equivalents were $86.4 million and $79.9 million and short-term investments were $16.1 million and $43.2 million, which provided an available short-term liquidity of $102.6 million and $123.1 million. Of these amounts, our foreign subsidiaries held cash of $56.8 million and $42.1 million, respectively, representing approximately 55.4% and 34.2% of available short-term liquidity, which is used to fund on-going liquidity needs of these subsidiaries. We intend to permanently reinvest these funds outside the U.S. and our current business plans do not indicate a need to repatriate to fund domestic operations. However, if these funds were repatriated to the U.S. or used for U.S. operations, certain amounts could be subject to tax. Due to the timing and circumstances of repatriation of such earnings, if any, it is not practical to determine the amount of funds subject to unrecognized deferred tax liability. During 2017 and 2016, we recorded no income tax benefit or expense for stock options exercised as an adjustment to equity. In 2015, we recorded an income tax expense of $(40) thousand as an adjustment to equity. This is calculated on the difference between the exercise price of stock option exercises and the market price of the underlying common stock upon exercise. The change in the unrecognized income tax benefits for the years ended December 31, 2017, 2016 and 2015 is reconciled below:
(In thousands) |  | 2017 |  |  | 2016 |  |  | 2015 |
Balance at beginning of period |  | $ | 2,226 |  |  | $ | 2,537 |  |  | $ | 3,334 |
Increases for tax position related to: |  |  |  |  |  |  |  |  |  |  |  |
Prior years |  |  | 465 |  |  |  | 95 |  |  |  | — |
Current year |  |  | 285 |  |  |  | 428 |  |  |  | 280 |
Decreases for tax positions related to: |  |  |  |  |  |  |  |  |  |  |  |
Prior years |  |  | (14 | ) |  |  | — |  |  |  | (29 | )
Settlements with taxing authorities |  |  | — |  |  |  | — |  |  |  | (103 | )
Expiration of applicable statute of limitations |  |  | (596 | ) |  |  | (834 | ) |  |  | (945 | )
Balance at end of period |  | $ | 2,366 |  |  | $ | 2,226 |  |  | $ | 2,537 |
As of December 31, 2017, 2016, and 2015, our total liability for unrecognized tax benefits was $2.4 million, $2.2 million, and $2.5 million, respectively, of which $2.2 million, $1.7 million, and $1.8 million, respectively, would reduce our effective tax rate if we were successful in upholding all of the uncertain positions and recognized the amounts recorded. We classify interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense. As of December 31, 2017, 2016 and 2015, the balances of accrued interest and penalties were $0.8 million, $0.8 million and $0.9 million, respectively. We do not anticipate a single tax position generating a significant increase or decrease in our liability for unrecognized tax benefits within 12 months of this reporting date. We file income tax returns in the U.S. federal and various state jurisdictions and several foreign jurisdictions. We are not currently under audit by the Internal Revenue Service. Generally, we are not subject to changes in income taxes by any taxing jurisdiction for the years prior to 2013.

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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 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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