XML 24 R14.htm IDEA: XBRL DOCUMENT v3.4.0.3
Income Taxes
3 Months Ended
Mar. 31, 2016
Income Tax Disclosure [Abstract]  
Income Taxes

8.    Income Taxes

Income taxes are determined using an estimated annual effective tax rate applied against income, and then adjusted for the tax impacts of certain significant and discrete items. For the three months ended March 31, 2016, the tax effects for discrete events such as changes to the beginning of the year valuation allowances, certain unrecognized tax benefits, and return to provision adjustments were recognized separately from the application of the annual effective tax rate. The Company’s effective tax rate recorded for the three months ended March 31, 2016 was 30%.

In accordance with the disclosure requirements as described in ASC Topic 740, Income Taxes, the Company has classified unrecognized tax benefits as non-current income tax liabilities, or a reduction in deferred tax assets, unless expected to be paid within one year. The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had an increase in gross unrecognized tax benefits of approximately $1.5 million during the three months ended March 31, 2016. The Company does not anticipate there will be a significant change in unrecognized tax benefits within the next 12 months.

The Company is subject to routine compliance reviews on various tax matters around the world in the ordinary course of business. Currently, income tax audits are being conducted in the state of New York and the state of Louisiana. U.S. and most foreign jurisdictions remain subject to examination in all years due to prior year net operating losses and R&D credits.

Upon the acquisition of Ellipse Technologies, the Company recorded a net deferred tax liability through goodwill of approximately $58.3 million primarily related to basis differences in the assigned fair value of acquired intangible assets. See Note 5 to the Unaudited Consolidated Financial Statements for further information regarding the acquisition.