Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Consolidated Income Before Provision for Income Taxes

Consolidated income before provision for income taxes consists of the following for the years ended December 31, 2019, 2018 and 2017 (U.S. dollars in thousands):

	2019		2018			2017
U.S.	$	24,211	$	(67,087	)	$	1,135
Foreign		230,961		286,753			264,432
Total	$	255,172	$	219,666		$	265,567

Current and Deferred Taxes

The provision for current and deferred taxes for the years ended December 31, 2019, 2018 and 2017 consists of the following (U.S. dollars in thousands):

	2019			2018			2017
Current
Federal	$	—		$	—		$	(14,358	)
State		2,213			652			1,814
Foreign		79,694			116,303			104,688
		81,907			116,955			92,144
Deferred
Federal		(8,878	)		(17,836	)		45,593
State		(473	)		(1,974	)		(2,273	)
Foreign		9,063			634			666
		(288	)		(19,176	)		43,986
Provision for income taxes	$	81,619		$	97,779		$	136,130

Deferred Tax Assets and Liabilities

The principal components of deferred taxes are as follows (U.S. dollars in thousands):

	Year Ended December 31,
	2019			2018
Deferred tax assets:
Inventory differences	$	5,040		$	4,257
Foreign tax credit and other foreign benefits		69,820			62,521
Stock-based compensation		7,441			7,893
Accrued expenses not deductible until paid		35,374			40,509
Foreign currency exchange		163			1,023
Net operating losses		6,341			4,522
Capitalized research and development		18,716			11,988
Interest expense limitation – 163(j)		—			847
R&D credit carryforward		881			807
Other		37			339
Gross deferred tax assets		143,813			134,706
Deferred tax liabilities:
Foreign currency exchange		721			124
Foreign withholding taxes		20,986			21,524
Intangibles step-up		4,958			5,763
Overhead allocation to inventory		3,611			2,857
Amortization of intangibles		15,393			15,812
Other		1,063			833
Gross deferred tax liabilities		46,732			46,913
Valuation allowance		(77,042	)		(68,697	)
Deferred taxes, net	$	20,039		$	19,096

Deferred Tax Asset Valuation Adjustments

The deferred tax asset valuation adjustments for the years ended December 31, 2019, 2018 and 2017 are as follows (U.S. dollars in thousands):

	Year Ended December 31,
	2019			2018			2017
Balance at the beginning of period	$	68,697		$	56,906		$	9,137
Additions charged to cost and expenses		10,913	⁽¹⁾		27,902	⁽⁴⁾		53,983	⁽⁶⁾
Decreases		(3,343	)⁽²⁾		(16,215	)⁽⁵⁾		(6,400	)⁽⁷⁾
Adjustments		775	⁽³⁾		104	⁽³⁾		186	⁽³⁾
Balance at the end of the period	$	77,042		$	68,697		$	56,906

(1)	Increase in valuation is due primarily to $9.8 million that was recorded on the foreign tax credit carryforward. The additional amount is due to net operating losses in foreign markets.

(2)	The decrease was due primarily to the utilization of foreign tax credits, and expiration of foreign net operating losses.

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

(4)	Increase in valuation is due primarily to the $27.2 million that was recorded on the foreign tax credit carryforward. The additional amount is due to net operating losses in foreign markets

(5)	The decrease was due primarily to the utilization of foreign tax credits. Decrease is due primarily to the write-off of Brazil deferred tax assets, which had no impact to the income statement, as a valuation allowance had been previously recorded against the asset.

(6)	Increase in valuation allowance is due primarily to the $52.0 million that was recorded on the foreign tax credit carryforward. The additional amount is due to net operating losses in foreign markets.

(7)	Decrease is due primarily to the write-off of Brazil deferred tax assets, which had no impact to the income statement, as a valuation allowance had been previously recorded against the asset.

Deferred Taxes, Net on a Jurisdiction Basis

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

	Year Ended December 31,
	2019		2018
Net noncurrent deferred tax assets	$	30,780	$	37,332
Net noncurrent deferred tax liabilities		10,741		18,236
Deferred taxes, net	$	20,039	$	19,096

Reconciliation of Statutory to Effective Tax Rate

The actual tax rate for the years ended December 31, 2019, 2018 and 2017 compared to the statutory U.S. Federal tax rate is as follows:

	Year Ended December 31,
	2019			2018			2017
Income taxes at statutory rate		21.00	%		21.00	%		35.00	%
Indefinite reinvestment		—			(2.73	)%		2.75	%
Excess tax benefit from equity award		0.02	%		(1.41	)%		(2.38	)%
Non-U.S. income taxed at different rates		3.09	%		7.37	%		—
Foreign withholding taxes		4.10	%		7.68	%		—
Change in reserve for uncertain tax positions		1.07	%		3.68	%		—
Non-deductible expenses		—			—			0.17	%
Controlled foreign corporation losses		—			—			(0.13	)%
Valuation allowance recognized foreign tax credit & others		2.56	%		5.54	%		19.59	%
Write-off outside basis DTL		—			—			(2.89	)%
Revaluation of deferred taxes		—			1.61	%		(1.28	)%
Foreign-Derived Intangible Income (FDII)		(0.70	)%		—			—
Other		0.85	%		1.77	%		0.43	%
		31.99	%		44.51	%		51.26	%