Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of Income before Income Tax, Domestic and Foreign

Income before income taxes included the following components for the years ended December 31 (in thousands):



	2017		2016			2015
United States	$	14,978	$	38,414		$	42,761
Foreign	783		(6,917		)	(7,400		)
Total	$	15,761	$	31,497		$	35,361

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):



	2017			2016
Deferred income tax assets:
Net operating loss carryforward	$	3,691		$	2,405
Deferred revenue	9,442			11,537
Deferred compensation	1,109			1,695
Inventory reserve	702			1,126
Non-qualified and non-employee stock option expense	3,704			4,410
Capitalized research and development	485			1,991
Research and development tax credit carryforward	3,817			2,722
Reserves, accruals, and other	1,921			1,239
Total deferred income tax assets	24,871			27,125
Deferred income tax liabilities:
Depreciation	(2,027		)	(2,364		)
Amortization	(1,398		)	(1,473		)
Other	(256		)	(294		)
Total deferred income tax liabilities	(3,681		)	(4,131		)
Net deferred income tax assets before valuation allowance	21,190			22,994
Valuation allowance	(5,435		)	(3,479		)
Net deferred income tax assets	$	15,755		$	19,515

Significant Components of the Provision for Income Taxes

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



	2017			2016			2015
Current:
Federal	$	6,039		$	16,346		$	13,594
State	1,263			1,534			996
Foreign	656			1,050			—
Total current	7,958			18,930			14,590
Deferred:
Federal	4,539			(4,145		)	288
State	(1,631		)	(977		)	984
Foreign	(78		)	(45		)	(278		)
Total deferred	2,830			(5,167		)	994
Tax provision recorded as an increase (decrease) in liability for unrecorded tax benefits	(234		)	437			(156		)
Provision for income taxes	$	10,554		$	14,200		$	15,428

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 follows for the years ended December 31 (in thousands):



	2017			2016			2015
Federal income tax at the statutory rate	$	5,518		$	11,024		$	12,347
State income taxes, net of federal benefit	339			889			1,061
Difference between statutory and foreign tax rates	(560		)	1,521			2,442
Permanent differences ⁽ⁱ⁾	300			(457		)	(205		)
Research and development	(2,380		)	(1,928		)	(1,050		)
Return to provision adjustment	23			327			(67		)
Change in liability for unrecognized tax benefits	7			700			(156		)
Excess stock-based compensation benefit	(1,819		)	(77		)	(144		)
Change in valuation allowance	1,949			1,779			1,200
Tax effects of intercompany transactions	(277		)	630			—
Adjustments to deferreds resulting from enactment of new tax law⁽ⁱⁱ⁾	7,601			—			—
Other	(147		)	(208		)	—
Provision for income taxes	$	10,554		$	14,200		$	15,428
Effective tax rate	66.9		%	45.1		%	43.6		%


⁽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 adjustment to deferreds of $7.6 million was a result of the impact of changes in the U.S. federal effective tax rate, as well as a reduction of the stock-based compensation deferred tax asset due to expected permanent limitations on its deductibility for certain key executives under the recently enacted tax law.

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

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



	2017			2016		2015
Balance, beginning of period	$	4,050		$	3,396	$	3,325
Increase (decrease) in previous year tax positions	123			—		(389		)
Increase in current year tax positions	587			448		270
Decrease due to lapse of statute of limitations	(773		)	—		(14		)
Increase related to adjustment of previous estimates of activity	256			206		204
Balance, end of period	$	4,243		$	4,050	$	3,396