Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

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



	Year ended December 31,
	2017			2018			2019
Federal	$	550		$	(1,475	)	$	(212	)
State and local	51			62			66
Foreign	2,256			4,154			3,037
Total Current	2,857			2,741			2,891
Deferred	(1,251		)	210			(979		)
Total	$	1,606		$	2,951		$	1,912

Components of Deferred Tax Assets (Liabilities)

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



	December 31,
	2018				2019
Net deferred tax assets/(liabilities):
Reserve for sales allowances and possible losses	$	478			$	686
Accrued expenses	938				2,381
Prepaid royalties	2,659				6,224
Accrued royalties	5,973				2,314
Inventory	10,751				10,309
State income taxes	19				17
Property and equipment	2,635				1,952
Goodwill and intangibles	11,542				9,185
Share-based compensation	773				894
Undistributed foreign earnings	(2,121		)		(1,970		)
Interest limitation	2,210				3,539
Operating lease right-of-use assets	—				(7,422		)
Operating lease liabilities	—				8,195
Federal and state net operating loss carryforwards	46,759				53,845
Credit carryforwards	1,121				909
Other	(633		)		1,706
Gross	83,104				92,764
Valuation allowance	(84,097		)		(92,778		)
Total net deferred tax liabilities	$	(993	)	*	$	(14	)	*

*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 a deferred income tax liability, net in the consolidated balance sheets. As of December 31, 2019, a deferred tax asset of $212 was reported as other long term assets in the consolidated balance sheets and $226 was reported as a 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,
	2017		2018		2019
Federal income tax expense	35.0	%	21.0	%	21.0	%
State income tax expense, net of federal tax effect	5.0		9.7		6.1
Effect of differences in U.S. and foreign statutory rates	1.9		2.0		0.6
Uncertain tax positions	—		(0.8	)	(0.3	)
Provision to return	(0.7	)	(40.6	)	(1.6	)
Non-deductible expenses	(48.0	)	(16.9	)	(13.0	)
Other	(0.2	)	(0.6	)	(0.4	)
Foreign tax credit	20.3		—		—
Undistributed foreign earnings	57.3		4.5		0.2
Effect of change in federal statutory rate	(23.0	)	—		—
Valuation allowance	(49.6	)	14.2		(16.2	)
	(2.0	)%	(7.5	)%	(3.6	)%

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,
	2017			2018			2019
Domestic	$	(85,288	)	$	(58,693	)	$	(61,798	)
Foreign	3,866			19,219			8,331
	$	(81,422	)	$	(39,474	)	$	(53,467	)

Effective Tax Rate

The following table provides further information of UTPs that would affect the effective tax rate, if recognized, as of December 31, 2019 (in millions):



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
Current year additions	0.1
Balance, December 31, 2019	$	1.6