Income Taxes

Components of income tax expense (benefit) are as follows:



	Year ended		Quarter ended (transition period)			Years ended
	3/31/2015		3/31/2014			12/31/2013			12/31/2012
Current:
Federal	$	35,459	$	(572	)	$	51,058		$	50,911
State	6,861		(4		)	6,252			6,482
Foreign	7,069		5,255			6,650			3,368
Total	49,389		4,679			63,960			60,761
Deferred:
Federal	8,234		1,669			(2,580		)	(6,083		)
State	624		(1		)	(209		)	414
Foreign	1,112		(4,404		)	(1,303		)	12
Total	9,970		(2,736		)	(4,092		)	(5,657		)
Income tax expense	$	59,359	$	1,943		$	59,868		$	55,104

Foreign income before income taxes was $95,850 during the year ended March 31, 2015. Foreign loss before income taxes was $3,631 during the quarter ended March 31, 2014. Foreign income before income taxes was $60,851 and $51,409 during the years ended December 31, 2013 and 2012, respectively.

Actual income taxes differed from that obtained by applying the statutory federal income tax rate to income before income taxes as follows:



	Year ended			Quarter ended (transition period)			Years ended
	3/31/2015			3/31/2014			12/31/2013			12/31/2012
Computed expected income taxes	$	77,399		$	(260	)	$	71,945		$	64,282
State income taxes, net of federal income tax benefit	3,564			90			4,435			3,562
Foreign rate differential	(25,535		)	1,904			(16,399		)	(12,908		)
Unrecognized tax benefits	3,566			—			—			—
Other	365			209			(113		)	168
	$	59,359		$	1,943		$	59,868		$	55,104

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are presented below:



	3/31/2015			3/31/2014			12/31/2013
Deferred tax assets (liabilities), current:
Uniform capitalization adjustment to inventory	$	4,040		$	4,114		$	5,492
Bad debt and other reserves	8,984			9,901			10,655
State taxes	482			(1,739		)	508
Prepaid expenses	(3,546		)	(2,217		)	(2,193		)
Accrued bonus	4,120			2,093			5,071
Foreign currency hedge	434			305			348
Net operating loss carry forwards	—			9,414			—
Other	(448		)	—			—
Total deferred tax assets, current	14,066			21,871			19,881
Deferred tax assets (liabilities), noncurrent:
Amortization and impairment of intangible assets	1,004			5,267			4,603
Depreciation of property and equipment	(6,148		)	(4,833		)	(6,034		)
Share-based compensation	12,044			10,638			11,226
Foreign currency translation	720			382			667
Deferred rent	4,885			4,290			4,028
Acquisition costs	764			756			755
Other	1,327			128			—
Net operating loss carry forwards	421			434			506
Total deferred tax assets, noncurrent	15,017			17,062			15,751
Net deferred tax assets	$	29,083		$	38,933		$	35,632

In order to fully realize the deferred tax assets, the Company will need to generate future taxable income of approximately $76,000. The deferred tax assets are primarily related to the Company's domestic operations. The change in net deferred tax assets between March 31, 2015 and March 31, 2014 includes approximately $100 attributable to OCI. The change in net deferred tax assets between March 31, 2014 and December 31, 2013 includes approximately $800 attributable to goodwill, partially offset by approximately $200 attributable to OCI. Domestic taxable income for the year ended March 31, 2015, the quarter ended March 31, 2014 and the years ended December 31, 2013 and 2012 was $91,017, $0, $151,204 and $141,660, respectively. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets and, accordingly, no valuation allowance was recorded in fiscal years 2015, 2013 and 2012.

As of March 31, 2015, withholding and US taxes have not been provided on approximately $362,000 of unremitted earnings of non-US subsidiaries because the earnings are expected to be reinvested outside of the US indefinitely. Repatriation of all foreign earnings would result in approximately $118,000 of US income tax. Such earnings would become taxable upon the sale or liquidation of these subsidiaries or upon the remittance of dividends. As of March 31, 2015, the Company had approximately $132,000 of cash and cash equivalents outside the US that would be subject to additional income taxes if they were to be repatriated. If the Company were to repatriate foreign cash, the Company would record the US tax liability net of any foreign income taxes previously paid on this cash. The Company has no plans to repatriate any of its foreign cash. For fiscal year 2015, the Company generated approximately 25.0% of its pre-tax earnings from a country which does not impose a corporate income tax.

When tax returns are filed, some positions taken are subject to uncertainty about the merits of the position taken or the amount that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which the Company believes it is more likely than not that the position will be sustained upon examination. Tax positions that meet the more likely than not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement. The portion of the benefits that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

A reconciliation of the beginning and ending amounts of total unrecognized tax benefits is as follows:



Balance at January 1, 2013	$	—
Gross change related to current and prior years' tax positions	—
Balance, December 31, 2013	$	—
Gross change related to current and prior years' tax positions	—
Balance, March 31, 2014	$	—
Gross increase related to current year tax positions	1,293
Gross increase related to prior year tax positions	3,374
Balance, March 31, 2015	$	4,667

The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of March 31, 2015 was $3,566. It is reasonably possible that approximately $300 of unrecognized tax benefits will be settled within the next 12 months. As of March 31, 2015, interest and potential penalties of $1,246 were accrued in the consolidated balance sheets resulting from tax positions that are subject to examination. As of March 31, 2014 and December 31, 2013, interest and potential penalties of $349 and $360, respectively, were accrued in the consolidated balance sheets resulting from outstanding state liabilities as a result of resolved Federal examinations.

The Company files income tax returns in the US federal jurisdiction and various state, local, and foreign jurisdictions. With few exceptions, the Company is no longer subject to US federal, state, local, or non-US income tax examinations by tax authorities for years before 2009.

Although the Company believes its tax estimates are reasonable and prepares its tax filings in accordance with all applicable tax laws, the final determination with respect to any tax audits, and any related litigation, could be materially different from the Company's estimates or from its historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on operating results or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, or interest assessments.

The Company has on-going income tax examinations under various state and foreign tax jurisdictions. It is the opinion of management that these audits and inquiries will not have a material impact on the Company's consolidated financial statements.