Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Consolidated Income Before Provision for Income Taxes

Consolidated income before provision for income taxes consists of the following for the years ended December 31, 2013, 2014 and 2015 (U.S. dollars in thousands):

	2013		2014		2015

U.S.	$	307,994	$	184,476	$	134,473
Foreign		248,946		114,031		77,486
Total	$	556,940	$	298,507	$	211,959

Provisions for Current and Deferred Taxes

NU SKIN ENTERPRISES, INC.

Notes to Consolidated Financial Statements

The provision for current and deferred taxes for the years ended December 31, 2013, 2014 and 2015 consists of the following (U.S. dollars in thousands):

	2013			2014			2015
Current
Federal	$	81,871		$	37,402		$	6,328
State		361			2,095			1,483
Foreign		148,310			48,904			50,403
		230,542			88,401			58,214
Deferred
Federal		(2,831	)		(380	)		16,556
State		551			444			(674	)
Foreign		(36,210	)		20,866			4,817
		(38,490	)		20,930			20,699
Provision for income taxes	$	192,052		$	109,331		$	78,913

Principal Components of Deferred Taxes

	Year Ended December 31,
	2014			2015
Deferred tax assets:
Inventory differences	$	12,362		$	5,222
Foreign tax credit and other foreign benefits		116,603			86,729
Stock-based compensation		17,211			13,842
Accrued expenses not deductible until paid		48,189			46,597
Foreign currency exchange		10,774			8,976
Net operating losses		17,530			10,994
Capitalized research and development		3,362			1,632
Exchange gains and losses		41,542			55,643
Other		841			964
Gross deferred tax assets		268,414			230,599
Deferred tax liabilities:
Intangibles step-up		15,106			13,607
Overhead allocation to inventory		10,781			5,101
Amortization of intangibles		18,374			18,733
Foreign outside basis in controlled foreign corporation		100,016			84,434
Other		48,187			35,257
Gross deferred tax liabilities		192,464			157,132
Valuation allowance		(35,999	)		(49,271	)
Deferred taxes, net	$	39,951		$	24,196

Deferred Tax Asset Valuation Adjustments

NU SKIN ENTERPRISES, INC.

Notes to Consolidated Financial Statements

The deferred tax asset valuation adjustments for the years ended December 31, 2013, 2014 and 2015 are as follows (U.S. dollars in thousands):

	Year Ended December 31,
	2013			2014			2015

Balance at the beginning of period	$	10,522		$	10,803		$	35,999
Additions charged to cost and expenses		278			28,687			12,948
Decreases		(165	)⁽¹⁾		(3,546	)⁽¹⁾		(2,943	)⁽¹⁾
Adjustments		168	⁽²⁾		55	⁽²⁾		3,267	⁽²⁾
Balance at the end of the period	$	10,803		$	35,999	⁽³⁾	$	49,271	⁽³⁾

⁽¹⁾

Decreases in valuation allowance due to lapse in statute of limitation of the net operating losses carryforward which had no impact to the income statement.

⁽²⁾

Represents the net currency effects of translating valuation allowances at current rates of exchange.

⁽³⁾

The increase was due primarily to the deferred tax assets created by the unrealized loss in Venezuela for which the Company set up a full valuation allowance.

The components of deferred taxes, net on a jurisdiction basis are as follows (U.S. dollars in thousands):

Components of Deferred Taxes, Net

	Year Ended December 31,
	2014		2015
Net current deferred tax assets	$	40,840	$	─
Net noncurrent deferred tax assets		15,128		40,373
Total net deferred tax assets		55,968		40,373

Net current deferred tax liabilities	─		─
Net noncurrent deferred tax liabilities		16,017		16,177
Total net deferred tax liabilities		16,017		16,177
Deferred taxes, net	$	39,951	$	24,196

Reconciliation of Actual to Statutory U.S. Federal Tax Rate

The actual tax rate for the years ended December 31, 2013, 2014 and 2015 compared to the statutory U.S. Federal tax rate is as follows:

	Year Ended December 31,
	2013			2014			2015

Income taxes at statutory rate		35.00	%		35.00	%		35.00	%
Foreign tax rate differential		(0.76	)	─				.92
Non-deductible expenses		0.12			0.12			0.09
Controlled foreign corporation losses	─				1.48			1.09
Other		0.12			0.03			0.13
		34.48	%		36.63	%		37.23	%