Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Provision for income taxes reflected in the accompanying consolidated statements of operations are comprised of the following (in thousands):



	Year ended December 31,
	2016			2017			2018
Federal	$	1,549		$	550		$	(1,475	)
State and local	652			51			62
Foreign	1,637			2,256			4,154
Total Current	3,838			2,857			2,741
APIC	548			—			—
Deferred	(259		)	(1,251		)	210
Total	$	4,127		$	1,606		$	2,951

Components of Deferred Tax Assets (Liabilities)

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



	December 31,
	2017			2018
Net deferred tax assets/(liabilities):
Reserve for sales allowances and possible losses	$	611		$	478
Accrued expenses	1,375			938
Prepaid royalties	13,631			2,659
Accrued royalties	1,864			5,973
Inventory	6,146			10,751
State income taxes	26			19
Property and equipment	4,257			2,635
Original issue discount interest	(2,131		)	—
Goodwill and intangibles	15,782			11,542
Share-based compensation	578			773
Undistributed foreign earnings	(2,524		)	(2,121		)
Interest limitation	—			2,210
Federal and state net operating loss carryforwards	14,091			46,759
Credit carryforwards	35,195			1,121
Other	22			(633		)
Gross	88,923			83,104
Valuation allowance	(89,706		)	(84,097		)
Total net deferred tax liabilities	$	(783	)	$	(993	)	*

*As of December 31, 2018, a deferred tax asset of $438 was reported as other long term assets in the consolidated balance sheets and $1,431 was reported as the deferred income tax liability, net in the consolidated balance sheets.

Significant Differences in Tax at Statutory and Effective Rates

The following reconciliation shows the significant differences in the tax at statutory and effective rates:



	Year ended December 31,
	2016		2017		2018
Federal income tax expense	35.0	%	35.0	%	21.0	%
State income tax expense, net of federal tax effect	(3.6	)	5.0		9.7
Effect of differences in U.S. and foreign statutory rates	(53.7	)	1.9		2.0
Uncertain tax positions	3.4		—		(0.8	)
Earn-out adjustments	—		—		—
Provision to return	4.5		(0.7	)	(40.6	)
Non-deductible expenses	8.9		(48.0	)	(16.9	)
Other	0.6		(0.2	)	(0.6	)
Foreign deemed dividend	262.2		—		—
Foreign tax credit	(126.1	)	20.3		—
Undistributed foreign earnings	906.5		57.3		4.5
Effect of change in federal statutory rate	—		(23.0	)	—
Valuation allowance	(960.9	)	(49.6	)	14.2
	76.8	%	(2.0	)%	(7.5	)%

Income (Loss) Before Provision for Income Tax

The components of income (loss) before provision for income taxes are as follows (in thousands):



	Year ended December 31,
	2016			2017			2018
Domestic	$	(7,760	)	$	(85,288	)	$	(58,693	)
Foreign	13,136			3,866			19,219
	$	5,376		$	(81,422	)	$	(39,474	)

Effective Tax Rate

The following table provides further information of UTPs that would affect the effective tax rate, if recognized, as of December 31, 2018 (in millions):



Balance, December 31, 2015	$	2.2
Current year additions	0.1
Current year reduction due to lapse of applicable statute of limitations	—
Balance, December 31, 2016	2.3
Current year additions	0.1
Current year reduction due to lapse of applicable statute of limitations	(1.1		)
Balance, December 31, 2017	1.3
Current year additions	0.6
Current year reduction due to audit settlement	(0.4		)
Balance, December 31, 2018	$	1.5