Income Taxes

Income before income taxes was as follows for the indicated periods:



	Year ended December 31,
	2015			2014			2013

United States	$	(20,758	)	$	(5,488	)	$	15,290
Foreign	(7,777		)	10,646			5,358
Income before income taxes	$	(28,535	)	$	5,158		$	20,648

Income tax expense was comprised of the following for the indicated periods:



	Year ended December 31,
	2015			2014			2013

Current:
Federal	$	(3,742	)	$	3,854		$	3,040
State	(56		)	729			870
Foreign	1,732			2,865			1,884
Total current	(2,066		)	7,448			5,794

Deferred:
Federal	6,224			(4,284		)	328
State	4,417			(822		)	1,669
Foreign	(24		)	(201		)	(91		)
Total deferred	10,617			(5,307		)	1,906

Income tax expense	$	8,551		$	2,141		$	7,700

The following table reconciles income tax expense and rate based on the U.S. statutory rate to the Company’s income tax expense for the indicated periods:



	Year ended December 31,
	2015					2014					2013
	$			%		$			%		$			%

Income tax expense based on the U.S. statutory rate	$	(9,987	)	35.0	%	$	1,805		35.0	%	$	7,227		35.0	%
State income taxes, net of federal tax benefit	(483		)	1.7		(60		)	(1.2	)	1,147			5.6
Permanent items	247			(0.9	)	658			12.8		179			0.9
Goodwill impairment	4,020			(14.1	)	—			—		—			—
Effect of foreign operations	304			(1.1	)	(809		)	(15.7	)	1,008			4.9
Net change in uncertain tax positions	(201		)	0.7		—			—		(737		)	(3.6	)
Change in valuation allowance -deferred tax assets	14,963			(52.4	)	70			1.4		(898		)	(4.3	)
Federal employer tax credits	—			—		—			—		(763		)	(3.7	)
Stock-based compensation	113			(0.4	)	563			10.9		241			1.1
Other	(425		)	1.5		(86		)	(1.7	)	296			1.4
Income tax expense	$	8,551		(30.0	)	$	2,141		41.5		$	7,700		37.3

The tax effects of temporary differences that give rise to the Company’s deferred tax accounts were as follows for the indicated periods:



	December 31,
	2015		2014

Deferred tax assets:
Accrued compensation	$	7,552	$	8,232
Reserves and accruals	3,475		3,048
Inventory	1,497		1,220
Intangible asset amortization	366		—
Loss and credit carryforwards	11,432		10,902
Total gross deferred tax assets	24,322		23,402
Less: valuation allowances	20,124		5,161
Net total deferred tax assets	4,198		18,241

Deferred tax liabilities:
Property and equipment depreciation	1,868		1,515
Intangible asset amortization	—		2,817
Other	632		1,602
Total deferred tax liabilities	2,500		5,934

Net deferred tax assets	$	1,698	$	12,307

As of December 31, 2015, the Company had state net operating loss carry forwards aggregating $98.0 million, which expire at various dates from 2016 through 2035.

As of December 31, 2015, the Company had foreign tax credits of $2.3 million, which expire at various dates from 2018 through 2025.

As of December 31, 2015, the Company had foreign net operating losses of $21.3 million, the majority of which can be carried forward indefinitely.

A valuation allowance has been recorded to reduce deferred tax assets to the amount that is more likely than not to be realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible amounts. The valuation allowance at December 31, 2015 and December 31, 2014 was $20.1 million and $5.2 million, respectively. In 2015, the Company added $15.0 million to the valuation allowance, of which $11.3 million related to the Company's federal deferred tax assets, $3.5 million related to state tax benefits and $0.2 million related to foreign deferred tax assets due to cumulative tax losses. In 2014 the Company released $0.3 million of valuation allowance due primarily to foreign exchange movement. In 2013, the Company released $0.9 million from the valuation allowance for foreign deferred tax assets due primarily to the disposal of the AndersElite Australia Pty Limited business.

As of December 31, 2015, the Company had no material unrecognized tax benefits that, if recognized, would impact the effective tax rate.

The Company files a consolidated U.S. federal income tax return and files state and foreign income tax returns in various jurisdictions as required. The U.S. federal income tax return is open for examination back to 2012. State and foreign income tax returns remain open for examination back to 2010 in major jurisdictions in which the Company operates.

The Company has not recorded incremental deferred income taxes on the undistributed earnings of its foreign subsidiaries because it is management’s intention to reinvest such earnings for the foreseeable future. As of December 31, 2015, the undistributed earnings of the foreign subsidiaries amounted to approximately $28.0 million. Upon distribution of these earnings in the form of dividends or otherwise, the Company would be subject to U.S. income taxes and foreign withholding taxes, reduced by certain foreign tax credits.