Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

Components of Deferred Income Tax Assets and Liabilities

Significant components of the Company’s deferred income tax assets and liabilities are as follows at December 31 (in thousands):



	2014			2013
Deferred income tax assets:
Net operating loss carryforward	$	343		$	513
Deferred warranty revenue	4,141			2,837
Inventory reserve	508			389
Non-qualified and non-employee stock option expense	3,094			3,518
Capitalized research and development	4,847			6,588
Alternative minimum tax carryforward	1,081			1,466
Research and development tax credit carryforward	2,139			3,165
Deferred legal settlement	—			1,294
IRC section 481(a) adjustment—tangible property	—			1,316
Reserves, accruals, and other	2,320			2,066
Total deferred income tax assets	18,473			23,152
Deferred income tax liabilities:
Depreciation	(1,674		)	(2,136		)
Amortization	(236		)	(236		)
Total deferred income tax liabilities	(1,910		)	(2,372		)
Net deferred income tax assets before valuation allowance	16,563			20,780
Valuation allowance	(500		)	—
Net deferred income tax assets	$	16,063		$	20,780

Net Deferred Tax Assets

The Company’s net deferred tax assets are presented as follows on the accompanying consolidated balance sheets at December 31 (in thousands):



	2014		2013
Current deferred tax assets, net	$	5,186	$	7,101
Long-term deferred tax assets, net	10,877		13,679
Total	$	16,063	$	20,780

Significant Components of the Provision (Benefit) for Income Taxes

Significant components of the provision for income taxes are as follows for the years ended December 31 (in thousands):



	2014		2013			2012
Current:
Federal	$	7,793	$	7,963		$	4,605
State	800		987			666
Total current	8,593		8,950			5,271
Deferred:
Federal	2,656		764			3,168
State	942		(143		)	(1,485		)
Total deferred	3,598		621			1,683
Tax provision recorded as an increase in liability for unrecorded tax benefits	202		219			920
Provision for income taxes	$	12,393	$	9,790		$	7,874

Reconciliation of the Company's Effective Income Tax Rate to the Federal Statutory Rate

A reconciliation of the Company’s effective income tax rate to the federal statutory rate for the years ended December 31, 2014, 2013 and 2012 is as follows (in thousands):



	2014			2013			2012
Federal income tax at the statutory rate	$	11,236		$	9,812		$	7,914
State income taxes, net of federal benefit	1,433			1,283			969
Permanent differences ⁽ⁱ⁾	98			(96		)	156
Research and development	(452		)	(386		)	(327		)
Return to provision adjustment ⁽ⁱⁱ⁾	28			(361		)	(270		)
Change in liability for unrecognized tax benefits	202			219			921
Incentive stock option detriment/(benefit)	(616		)	(538		)	174
Change in valuation allowance	500			—			(1,429		)
Other	(36		)	(143		)	(234		)
Provision for income taxes	$	12,393		$	9,790		$	7,874
Effective tax rate	38.4		%	34.9		%	34.8		%


(i)	Permanent differences include certain expenses that are not deductible for tax purposes including lobbying fees as well as favorable items including the domestic production activities deduction


(ii)	The 2012 return to provision adjustment was driven by higher than estimated 2011 R&D tax credits which increased the net tax benefit and therefore, reduced the effective tax rate. The 2013 return to provision adjustment was driven by the domestic production activities deduction which decreased taxable income, and therefore, reduced the effective tax rate.

Roll Forward of Liability for Unrecognized Tax Benefits Exclusive of Accrued Interest

The following table presents a roll forward of our liability for unrecognized tax benefits, exclusive of accrued interest, as of December 31 (in thousands):



	2014		2013		2012
Balance, beginning of period	$	3,110	$	2,903	$	1,982
Increase in previous year tax positions	—		57		659
Increase in current year tax positions	121		144		151
Increase (decrease) related to adjustment of previous estimates of activity	94		6		111
Balance, end of period	$	3,325	$	3,110	$	2,903