Income Taxes:

The components of income tax expense (benefit) are as follows:



	Year Ended December 31,
	2016		2015		2014
Current:
Federal	$	6,084	$	1,012	$	(124	)
State	983		439		198
Foreign	838		3,425		1,812
	7,905		4,876		1,886
Deferred:
Federal	4,765		3,881		(4,285		)
State	184		71		54
Foreign	62		28		294
	5,011		3,980		(3,937		)
Total income tax expense (benefit)	$	12,916	$	8,856	$	(2,051	)

The income (loss) before tax are comprised of the following:



	Year Ended December 31,
	2016		2015		2014
Domestic operations	$	47,599	$	10,596	$	(11,985	)
Foreign operations	$	2,269	$	16,216	$	5,294

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. federal income tax rate of 35% for the years ended December 31, 2016, 2015 and 2014 to income before provision for income taxes as follows:



	Year Ended December 31,
	2016			2015			2014
Federal income tax provision at statutory rate	$	17,454		$	9,384		$	(2,342	)
State taxes, net of federal effect	822			370			21
Foreign taxes net of federal effect	(1,613		)	754			561
Domestic manufacturing benefit	(1,244		)	(553		)	—
Change in valuation allowance for deferred tax assets	—			(653		)	535
Research tax credit	(692		)	(694		)	(830		)
Deferred tax true-up	(1,644		)	(23		)	(36		)
Other	(167		)	271			40
Provision (benefit) for income taxes	$	12,916		$	8,856		$	(2,051	)
Effective tax rate	26		%	33		%	31		%

The income tax expense of $12,916 in 2016, was impacted by research and development credits, section 199 domestic manufacturing deduction, the foreign tax credit and deferred tax true-ups. The deferred tax true-up of $1,705 is related to a non-cash out of period tax benefit recorded by the Company as of December 31, 2016 related to deferred tax assets misstated from prior years. The recording of the tax benefit due to the out of period adjustment in 2016 was not considered material to the prior year or current year financial statements. The income tax expense of $8,856 in 2015, was impacted by an increase in the Company’s taxes accrued in foreign jurisdictions, partially offset by research and development credits, section 199 domestic manufacturing deduction and decrease in the Company’s valuation allowance. The income tax benefit of $2,051 in 2014, was impacted by an increase in the Company’s valuation allowance and taxes accrued in foreign jurisdictions, partially offset by research and development tax credit.

The Company’s future effective income tax rate depends on various factors, such as tax legislation, the geographic composition of our pre-tax income, the amount of our pre-tax income as business activities fluctuate, non-deductible expenses incurred in connection with acquisitions, research and development credits as a percentage of aggregate pre-tax income and the domestic manufacturing deduction.

Deferred tax assets and liabilities are comprised of the following:



	December 31,
	2016			2015
Research and development credit carryforward	$	3,784		$	6,647
Reserves and accruals not currently deductible	2,932			3,357
Deferred revenue	2,286			1,988
Domestic net operating loss carryforwards	1,049			1,302
Foreign net operating loss and credit carryforwards	4,362			4,347
Intangibles	11,002			11,614
Tax deductible transaction costs	199			260
Share-based compensation	2,249			3,396
Inventory obsolescence reserve	4,454			4,026
Depreciation	206			484
Other	633			87
Gross deferred tax assets	33,156			37,508
Valuation allowance for deferred tax assets	(1,924		)	(2,205		)
Deferred tax assets after valuation allowance	31,232			35,303
Gross deferred tax liabilities	(382		)	(330		)
Net deferred tax assets	$	30,850		$	34,973

At December 31, 2016 and 2015, the Company had valuation allowances of $1,924 and $2,205, respectively, on certain of the Company’s deferred tax assets to reflect the deferred tax assets at the net amount that is more likely than not to be realized.

In assessing the realizability of deferred tax assets, the Company uses a more likely than not standard. If it is determined that it is more-likely-than-not that deferred tax assets will not be realized, a valuation allowance must be established against the deferred tax assets. The ultimate realization of the assets is dependent on the generation of future taxable income during the periods in which the associated temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income and tax planning strategies when making this assessment. In making the determination that it is more likely than not that the Company’s deferred tax assets will be realized as of December 31, 2016, the Company relied primarily on projected future taxable income.

At December 31, 2016, the Company had federal, state and foreign net operating loss carryforwards of $747, $172 and $1,001, respectively. In addition, as of December 31, 2016 the Company had federal AMT carryforwards of $130. The federal, state and foreign net operating loss carryforwards expire on various dates through December 31, 2032, December 31, 2032 and December 31, 2025, respectively. At December 31, 2016, the Company had federal and state research & development credits and foreign tax credit carryforwards of $3,767, $1,459 and $3,330, respectively. The federal research & development credits are set to expire at various dates through December 31, 2036. The state research & development credits are set to expire at various dates through December 21, 2024. The foreign tax credit is set to expire at various dates through December 31, 2026.

A provision has not been made at December 31, 2016 for U.S. or additional foreign withholding taxes on approximately $6,958 of undistributed earnings of the Company’s foreign subsidiaries in Europe and Japan because it is the present intention of management to permanently reinvest these undistributed earnings. It is not practical to estimate the amount of tax that might be payable if some or all of such earnings were to be remitted.

The total amount of unrecognized tax benefits were as follows:



	December 31,
	2016			2015			2014
Unrecognized tax benefits, opening balance	$	5,236		$	5,292		$	5,706
Gross increases—tax positions in prior period	118			136			150
Gross decreases—tax positions in prior period	(735		)	(755		)	(892		)
Gross increases—current-period tax positions	208			563			328
Lapse of statute of limitations	—			—			—
Unrecognized tax benefits, ending balance	$	4,827		$	5,236		$	5,292

Included in the ending balance at December 31, 2016 and 2015 are unrecognized tax benefits of $4,275 and $4,613, respectively, which would be reflected as an adjustment to income tax expense if recognized. The year over year decrease from 2014 to 2016 is primarily due to the reversal of unrecognized tax benefits related to federal tax exposures. It is reasonably possible that certain amounts of unrecognized tax benefits may reverse in the next 12 months; however, the Company does not expect such reversals would have a significant impact on its results of operations or financial position.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the years ended December 31, 2016, 2015 and 2014, the Company recognized approximately $76, $71 and $60, respectively, in interest and penalties expense associated with uncertain tax positions. As of December 31, 2016 and 2015, the Company had accrued interest and penalties expense related to unrecognized tax benefits of $1,019 and $900, respectively.

The Company is subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions. The Company files U.S. federal, U.S. state and foreign tax returns. For U.S. federal purposes, the Company is generally no longer subject to tax examinations for years prior to 2012. For U.S. state tax returns, the Company is generally no longer subject to tax examinations for years prior to 2011. For foreign purposes, the Company is generally no longer subject to examination for tax periods 2011 and prior. Certain carryforward tax attributes generated in prior years remain subject to examination and adjustment. The Company believes that adequate amounts have been reserved for any adjustments that may ultimately result from any future examinations of these years.

In the normal course of business, the Company is subject to tax audits in various jurisdictions, and such jurisdictions may assess additional income or other taxes against it. Although the Company believes its tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from the Company’ s historical income tax provisions and accruals. The results of an audit or litigation could have a material adverse effect on the Company’ s results of operations or cash flows in the period or periods for which that determination is made.