Income Taxes

Pre-tax income (loss) consisted of the following for the years ended December 31:



	2017			2016			2015
Domestic	$	(2,093	)	$	(13,928	)	$	16,819
Foreign	15,738			20,762			—
Total	$	13,645		$	6,834		$	16,819

A reconciliation of income taxes computed at the statutory rates to the reported income tax provision for the years ended December 31 follows:



	2017			2016			2015
Federal provision at statutory rate	$	4,776		$	2,392		$	5,887
U.S./Foreign tax rate differential	(919		)	(1,842		)	1
Foreign non-deductible expenses	(2,006		)	743			(479		)
Foreign tax provision	615			336			296
State taxes, net of federal benefit	73			(171		)	556
State tax rate change, net of federal benefit	(264		)	541			32
Change in uncertain tax positions	81			114			236
Change in valuation allowance	2,475			(1,858		)	3,283
Tax credits	(152		)	(104		)	(283		)
Share-based compensation	(657		)	(108		)	459
Change in U.S. corporate tax rate	7,214			—			—
Repatriation of foreign earnings	3,964			—			—
Other	150			6			(230		)
Provision for income taxes	$	15,350		$	49		$	9,758

The provision (benefit) for income taxes for the years ended December 31 follows:



	2017								2016									2015
	Current		Deferred			Total			Current			Deferred			Total			Current			Deferred		Total
Federal	$	2,954	$	7,716		$	10,670		$	(4	)	$	(1,801	)	$	(1,805	)	$	(153	)	$	6,077	$	5,924
State and local	362		(371		)	(9		)	(27		)	1,021			994			380			389		769
Foreign	4,042		647			4,689			2,605			(1,745		)	860			1,374			1,691		3,065
Total	$	7,358	$	7,992		$	15,350		$	2,574		$	(2,525	)	$	49		$	1,601		$	8,157	$	9,758

A summary of deferred income tax assets and liabilities as of December 31 follows:



	2017			2016
Noncurrent deferred tax assets:
Amortization and fixed assets	$	1,835		$	4,109
Accounts receivable	396			815
Inventories	2,254			2,899
Pension obligations	2,903			4,623
Warranty obligations	973			2,519
Accrued benefits	787			1,060
Foreign exchange contracts	89			460
Restricted stock	73			145
Tax credits carryforwards	1,611			2,238
Net operating loss carryforwards	24,784			20,130
Other temporary differences not currently available for tax purposes	(411		)	2,135
Total noncurrent deferred tax assets	$	35,294		$	41,133
Valuation allowance	(15,021		)	(12,546		)
Net noncurrent deferred tax assets	$	20,273		$	28,587
Noncurrent deferred tax liabilities:
Amortization and fixed assets	$	(100	)	$	(764	)
Net operating loss carryforwards	—			2,178
Other temporary differences not currently available for tax purposes	60			(1,430		)
Total noncurrent tax liabilities	(40		)	(16		)
Total net deferred tax asset	$	20,233		$	28,571

Our overall deferred tax position was a net deferred tax asset of $20.2 million. The $8.3 million change in our net deferred tax asset position includes a $7.2 million reduction attributable to the decrease in U.S. corporate tax rate from 35% to 21% effective January 1, 2018. Staff Accounting Bulletin ("SAB") 118 addresses the accounting implications of the U.S Tax Reform. Under SAB 118, the assessment of the $7.2 million remeasurement of our net deferred tax asset position is complete.

The U.S. Tax Reform gave rise to a provision of $4.0 million on the deemed repatriation of accumulated untaxed earnings of foreign subsidiaries. Under SAB 118, the assessment of the $4.0 million of accumulated untaxed earnings of foreign subsidiaries is reasonably estimated. The measurement period to finalize our calculations cannot extend beyond one year of the enactment date. Any adjustments recorded to the provisional amounts will be included in income from operations as an adjustment to tax expense in the period the amounts are determined.

We assess whether valuation allowances should be established against deferred tax assets based on consideration of all available evidence using a “more likely than not” standard. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with unused tax attributes expiring and tax planning alternatives. In making such judgments, significant weight is given to evidence that can be objectively verified.

During 2017, we recorded additional valuation allowances of $2.3 million in certain foreign affiliates, notably Luxembourg and United Kingdom, due to pre-tax losses or a decrease in earnings in the current year. We increased a valuation allowance of $0.2 million for deferred assets associated with certain U.S. state tax net operating loss carry forwards. We expect to be able to realize the benefits of all of our deferred tax assets that are not currently offset by a valuation allowance, as discussed above. In the event that our actual results differ from our estimates or we adjust these estimates in future periods, the effects of these adjustments could materially impact our financial position and results of operations.

As of December 31, 2017, we had $71.5 million of foreign, $24.0 million of U.S. federal and $65.6 million of U.S. state net operating loss carryforwards available to offset future taxable income. Utilization of these losses is subject to the tax laws of the applicable tax jurisdiction and may be limited by the ability of certain subsidiaries to generate taxable income in the associated tax jurisdiction. Generally, our net operating loss carryforwards continue through 2037. Although some of our net operating loss carryforwards expire beginning in 2018, there are certain tax jurisdictions with no expiration dates. We have established valuation allowances for all net operating losses that we believe are more likely than not to expire before they can be utilized.

As of December 31, 2017, we had $1.6 million of research and development tax credits being carried forward related to our U.S. operations. Utilization of these credits may be limited by the ability to generate federal taxable income in future years; the credits will expire between 2026 and 2038.

As of December 31, 2017, cash of $38.2 million was held by foreign subsidiaries. We do not have any plans to repatriate the earnings held by our foreign affiliates and consider these earnings to be indefinitely reinvested. Rather, we intend to use the cash to fund the growth of our foreign operations. Should our plans change with respect to cash held by our foreign subsidiaries, we would accrue and pay the appropriate withholding and local income taxes.

We file federal income tax returns in the U.S. and income tax returns in various states and foreign jurisdictions. With few exceptions, we are no longer subject to income tax examinations by any of the taxing authorities for years before 2014.

As of December 31, 2017, and 2016, we provided a liability of $0.5 million and $0.6 million, respectively, for unrecognized tax benefits related to U.S. federal and state, and foreign jurisdictions. These unrecognized tax benefits are netted against their related noncurrent deferred tax assets.

We accrue interest and penalties related to unrecognized tax benefits through income tax expense. We had $0.3 million and $0.2 million accrued for the payment of interest and penalties as of December 31, 2017 and December 31, 2016, respectively. Accrued interest and penalties are included in the $0.5 million of unrecognized tax benefits.

A reconciliation of the beginning and ending amount of unrecognized tax benefits (including interest and penalties) at December 31 follows:



	2017			2016			2015
Balance - Beginning of the year	$	628		$	489		$	27
Gross increase - tax positions in prior periods	68			40			445
Gross decreases - tax positions in prior periods	(38		)	—			—
Gross increases - current period tax positions	29			103			44
Lapse of statute of limitations	(221		)	(4		)	(27		)
Currency translation adjustment	19			—			—
Balance - End of the year	$	485		$	628		$	489