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Income Taxes
12 Months Ended
Dec. 31, 2015
Income Tax Disclosure [Abstract]  
Income Taxes

(11) Income Taxes

The following table presents the United States (“U.S.”) and foreign components of earnings before income taxes and the related income tax expense (in thousands):

Earnings before income taxes:

 

     Years Ended December 31,  
     2015      2014      2013  

United States

   $ 90,575       $ 89,679       $ 95,481   

Foreign

     28,601         34,693         19,043   
  

 

 

    

 

 

    

 

 

 
   $ 119,176       $ 124,372       $ 114,524   
  

 

 

    

 

 

    

 

 

 

Income tax expense:

 

     Years Ended December 31,  
     2015      2014      2013  

Current:

        

U.S. Federal

   $ 24,369       $ 27,332       $ 27,782   

U.S. State and local

     2,705         3,242         2,662   

Foreign

     11,077         14,320         9,614   
  

 

 

    

 

 

    

 

 

 
     38,151         44,894         40,058   
  

 

 

    

 

 

    

 

 

 

Deferred:

        

U.S. Federal

     5,104         4,541         4,039   

U.S. State and local

     602         330         921   

Foreign

     (532      (1,077      (1,515
  

 

 

    

 

 

    

 

 

 
     5,174         3,794         3,445   
  

 

 

    

 

 

    

 

 

 
   $ 43,325       $ 48,688       $ 43,503   
  

 

 

    

 

 

    

 

 

 

The following schedule reconciles the differences between the U.S. federal income taxes at the U.S. statutory rate and our income tax expense (dollars in thousands):

 

     2015     2014     2013  

Statutory federal income tax rate

   $ 41,712        35.0   $ 43,530        35.0   $ 40,083        35.0

State income tax expense, net of federal income tax benefit

     3,180        2.7        3,416        2.8        3,662        3.2   

Audits and adjustments, net

     (886     (0.7     (186     (0.2     (1,730     (1.5

Change in valuation allowances

     2,944        2.5        6,471        5.2        4,160        3.6   

Foreign income taxed at different rates

     (5,729     (4.8     (5,309     (4.3     (2,665     (2.3

Non-deductible compensation

     474        0.4        404        0.3        275        0.2   

Other, net

     1,630        1.3        362        0.3        (282     (0.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effective tax rate

   $ 43,325        36.4   $ 48,688        39.1   $ 43,503        38.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

For foreign entities not treated as branches for U.S. tax purposes, we do not provide for U.S. income taxes on the undistributed earnings of these subsidiaries as these earnings are reinvested and, in the opinion of management, will continue to be reinvested indefinitely outside of the United States. The undistributed earnings of foreign subsidiaries that are deemed to be indefinitely invested outside of the United States were approximately $88,888,000 at December 31, 2015. It is not practicable to determine the unrecognized deferred tax liability on those earnings.

 

The significant components of deferred tax assets and liabilities are as follows (in thousands):

 

     December 31,  
     2015         2014   
  

 

 

    

 

 

 

Deferred tax assets:

     

Goodwill and other intangibles

   $ 42,281       $ 53,869   

Net operating losses

     17,433         17,439   

Foreign tax credits

     12,972         13,106   

Accruals

     7,423         7,311   

Accounts receivable

     3,749         6,206   

Stock-based compensation

     3,558         3,137   

Inventories

     2,667         2,216   

Deferred revenue

     351         321   

Other

     2,391         1,307   
  

 

 

    

 

 

 

Gross deferred tax assets

     92,825         104,912   

Valuation allowances

     (28,750      (28,709
  

 

 

    

 

 

 

Total deferred tax assets

     64,075         76,203   
  

 

 

    

 

 

 

Deferred tax liabilities:

     

Property and equipment

     (1,102      (4,933

Prepaid expenses

     (226      (205
  

 

 

    

 

 

 

Total deferred tax liabilities

     (1,328      (5,138
  

 

 

    

 

 

 

Net deferred tax assets

   $ 62,747       $ 71,065   
  

 

 

    

 

 

 

The net non-current deferred tax assets and liabilities are as follows (in thousands):

 

     December 31,  
     2015         2014   
  

 

 

    

 

 

 

Net non-current deferred tax assets

   $ 62,986       $ 71,720   

Net non-current deferred tax liabilities

     (239      (655
  

 

 

    

 

 

 

Net deferred tax assets

   $ 62,747       $ 71,065   
  

 

 

    

 

 

 

As of December 31, 2015, we have U.S. federal net operating loss carryforwards (“NOLs”) of $485,000 that will expire between 2032 and 2035 and deferred tax assets related to U.S. state NOLs of $620,000 that will expire between 2016 and 2030. We also have NOLs from various non-U.S. jurisdictions of $61,537,000. While the majority of the non-U.S. NOLs have no expiration date, $3,001,000 will expire between 2016 and 2022.

On the basis of currently available information, we have provided valuation allowances for certain of our deferred tax assets where we believe it is more likely than not that the related tax benefits will not be realized. At December 31, 2015 and 2014, our valuation allowances totaled $28,750,000 and $28,709,000, respectively, representing non-U.S. NOLs, foreign depreciation allowances and foreign tax credits. We expect to fully utilize the federal NOLs within the next three years.

We believe it is more likely than not that forecasted income, including income that may be generated as a result of prudent and feasible tax planning strategies, together with the tax effects of deferred tax liabilities, will be sufficient to fully recover our remaining deferred tax assets. In the future, if we determine that realization of the remaining deferred tax assets and the availability of certain previously paid taxes to be refunded are not more likely than not, we will need to increase our valuation allowances and record additional income tax expense.

 

The following table summarizes the change in the valuation allowance (in thousands):

 

     December 31,  
     2015      2014  

Valuation allowances at beginning of year

   $ 28,709       $ 24,508   

Increase in income tax expense

     2,944         6,471   

Foreign currency translation adjustments

     (1,743      (2,270

Other

     (1,160      —     
  

 

 

    

 

 

 

Valuation allowances at end of year

   $ 28,750       $ 28,709   
  

 

 

    

 

 

 

Various taxing jurisdictions are examining our tax returns for certain tax years. Although the outcome of tax audits cannot be predicted with certainty, management believes the ultimate resolution of these examinations will not result in a material adverse effect to our financial position, results of operations or cash flows.

As of December 31, 2015 and 2014, we had approximately $3,335,000 and $4,306,000, respectively, of unrecognized tax benefits. Of these amounts, approximately $296,000 and $336,000, respectively, related to accrued interest. A reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding interest, is as follows (in thousands):

 

Balance at December 31, 2014

   $ 3,970   

Additions for tax positions in prior periods

     53   

Additions for tax positions in current period

     483   

Subtractions due to foreign currency translation

     (70

Subtractions due to audit settlements and statute expirations

     (1,397
  

 

 

 

Balance at December 31, 2015

   $ 3,039   
  

 

 

 

In the future, if recognized, the liability associated with uncertain tax positions would affect our effective tax rate. We do not believe there will be any changes over the next 12 months that would have a material effect on our effective tax rate.

Several of our subsidiaries are currently under audit for tax years 2006 through 2014. Although the timing of the resolutions and/or closures of audits is highly uncertain, it is reasonably possible that the examination phase of these audits may be concluded within the next 12 months which could significantly increase or decrease the balance of our gross unrecognized tax benefits. However, based on the status of the various examinations in multiple jurisdictions, an estimate of the range of reasonably possible outcomes cannot be made at this time, but the estimated effect on our income tax expense and net earnings is not expected to be significant.

We, including our subsidiaries, file income tax returns in the U.S. federal jurisdiction and many state and local and non-U.S. jurisdictions. In the United States, federal income tax returns for 2012, 2013, 2014 and 2015 remain open to examination. For U.S. state and local taxes as well as in non-U.S. jurisdictions, the statute of limitations generally varies between three and ten years.