Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

The income tax provision (benefit) consisted of the following (in thousands):

	Current		Deferred			Total
Year ended December 31, 2013
Federal	$	27,985	$	(3,050	)	$	24,935
State		4,145		2,051			6,196
Foreign		-		(598	)		(598	)
	$	32,130	$	(1,597	)	$	30,533
Year ended December 31, 2012
Federal	$	20,843	$	(504	)	$	20,339
State		4,232		(911	)		3,321
Foreign		-		(1,538	)		(1,538	)
	$	25,075	$	(2,953	)	$	22,122
Year ended December 31, 2011
Federal	$	-	$	(460	)	$	(460	)
State		2,704		(3,951	)		(1,247	)
	$	2,704	$	(4,411	)	$	(1,707	)

Schedule of Income Tax Reconciliation

Income tax expense differs from the “expected” tax expense (benefit) computed by applying the U.S. Federal corporate income tax rates of 35% to income before income taxes, as follows (in thousands):

	Years Ended December 31,
	2013			2012			2011
Computed “expected” tax expense	$	29,013		$	20,125		$	14,457
Change in income taxes resulting from:
State income taxes, net of federal income tax		4,027			2,159			2,217
Foreign income tax expense (benefit)		622			1,468			-
Deduction for domestic production activities		(1,361	)		(1,277	)		-
R&D tax credits		(1,652	)		(508	)
Other, net		(116	)		155			(876	)
Valuation allowance change		-			-			(17,505	)
Income tax expense (benefit)	$	30,533		$	22,122		$	(1,707	)

Geographical Allocation of Entity's Income Before Income Taxes

The geographical allocation of the Company’s income before income taxes between U.S. and foreign operations was as follows (in thousands):

	2013			2012			2011
Pre-tax income from U.S. operations	$	86,382		$	66,087		$	41,306
Pre-tax loss from foreign operations		(3,487	)		(8,587	)		—
Total pre-tax income	$	82,895		$	57,500		$	41,306

Net Deferred Income Taxes

Net deferred income taxes at December 31, 2013 and 2012 include (in thousands):

	December 31, 2013						December 31, 2012
	Current			Noncurrent			Current			Noncurrent
Deferred tax assets:
Net operating loss carry-forward	$	439		$	14,061		$	-		$	4,328
Stock-based compensation		-			6,630			-			4,912
Reserve for product returns		3,189			-			2,787			-
Inventory valuation reserve		2,193			-			3,980			-
Other		3,325			1,751			2,974			1,349
Total deferred tax assets		9,146			22,442			9,741			10,589

Deferred tax liabilities:
Prepaid expenses		(1,120	)		-			(551	)		-
Unamortized discount – convertible notes		-			(4,223	)		-			(5,815	)
Depreciation & amortization – tax over book		-			(16,576	)		-			(5,835	)
Other		(81	)		-			-			-
Total deferred tax liabilities		(1,201	)		(20,799	)		(551	)		(11,650	)

Net deferred income tax asset (liability)	$	7,945		$	1,643		$	9,190		$	(1,061	)

Summary of Unrecognized Tax Benefits

Based on its reviews as of and for the years ended December 31, 2012 and December 31, 2013, the Company determined that it would not recognize tax benefits as follows (in thousands):

Balance at December 31, 2011	$	-
Additions relating to current year		1,265
Additions relating to prior years		220
Balance at December 31, 2012	$	1,485
Additions relating to current year		589
Terminations of exposures relating to prior years		(1,229	)
Balance at December 31, 2013	$	845