Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Loss Before Income Tax Provision (Benefit)

The Company’s income (loss) before income tax provision was subject to taxes in the following jurisdictions for the following periods (in thousands):



	Years Ended December 31,
	2016⁽¹⁾		2015		2014
United States	$	38,268	$	6,864	$	6,981
Foreign	20,125		13,199		14,658
	$	58,393	$	20,063	$	21,639

Expense Benefit for Income Taxes

The expense (benefit) for income taxes is comprised of (in thousands):



	Years Ended December 31,
	2016⁽²⁾			2015			2014
Current tax provision:
Federal	$	541		$	271		$	496
State	543			431			612
Foreign	7,289			4,393			4,930
	8,373			5,095			6,038
Deferred tax expense (benefit):
Federal	(129,405		)	(41		)	(1,549		)
State	(10,693		)	113			70
Foreign	(836		)	328			1,072
	(140,934		)	400			(407		)
Income tax provision	$	(132,561	)	$	5,495		$	5,631


(1)	Income before income taxes in 2016 includes a gain of $17,662,000 that was recognized in connection with the sale of preferred shares of the Company's investment in Topgolf. See Note 6 for further discussion.


(2)	The income tax benefit for 2016 includes the reversal of a significant portion of the valuation allowance on the Company's deferred tax assets in the U.S. See further discussion below.

Components of Deferred Tax Assets and Liabilities

Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2016 and 2015 are as follows (in thousands):



	December 31,
	2016			2015
Deferred tax assets:
Reserves and allowances not currently deductible for tax purposes	$	15,506		$	14,292
Basis difference related to fixed assets	9,697			10,170
Compensation and benefits	9,273			8,964
Basis difference for inventory valuation	2,100			1,764
Compensatory stock options and rights	5,715			3,659
Deferred revenue and other	226			169
Operating loss carryforwards	75,110			96,067
Tax credit carryforwards	32,730			19,787
Basis difference related to intangible assets with a definite life	13,993			16,617
Other	389			(162		)
Total deferred tax assets	164,739			171,327
Valuation allowance for deferred tax assets	(16,515		)	(164,616		)
Deferred tax assets, net of valuation allowance	$	148,224		$	6,711
Deferred tax liabilities:
Prepaid expenses	(1,082		)	(868		)
Basis difference related to intangible assets with an indefinite life	(34,031		)	(33,974		)
Total deferred tax liabilities	(35,113		)	(34,842		)
Net deferred tax liabilities	$	113,111		$	(28,131	)
Net deferred tax assets (liabilities) are shown on the accompanying consolidated balance sheets as follows:
Non-current deferred tax assets	$	114,707		$	6,962
Non-current deferred tax liabilities	(1,596		)	(35,093		)
Net deferred tax assets (liabilities)	$	113,111		$	(28,131	)

Credit Carryforward Expiry

At December 31, 2016, the Company had federal and state income tax credit carryforwards of $23,812,000 and $13,897,000, respectively, which will expire at various dates beginning in 2021. Such credit carryforwards expire as follows (in thousands):



U.S. foreign tax credit	$	15,793	2021 - 2026
U.S. research tax credit	$	7,819	2031 - 2036
U.S. business tax credits	$	21	2031 - 2036
U.S. AMT credits	$	179	Do not expire
State investment tax credits	$	820	Do not expire
State research tax credits	$	13,077	Do not expire

Net Operating Losses Expiry

The Company has recorded a deferred tax asset reflecting the benefit of operating loss carryforwards. The net operating losses expire as follows (in thousands):



U.S. loss carryforwards	$	187,696	2032 - 2035
State loss carryforwards	$	146,674	2017 - 2036

Reconciliation of Effective Tax Rate on Income or Loss and Statutory Tax Rate

A reconciliation of the effective tax rate on income or loss and the statutory tax rate is as follows:



	Years Ended December 31,
	2016		2015		2014
Statutory U.S. tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of U.S. tax benefit	3.1	%	3.5	%	1.9	%
Federal and State tax credits, net of U.S. tax benefit	(5.0	)%	(11.5	)%	(9.8	)%
Foreign income taxed at other than U.S. statutory rate	1.8	%	(2.4	)%	(13.4	)%
Effect of foreign rate changes	0.5	%	0.9	%	1.3	%
Foreign tax credit	(11.3	)%	(12.0	)%	(13.5	)%
Basis differences of intangibles with an indefinite life	0.1	%	0.1	%	0.1	%
Change in deferred tax valuation allowance	(262.4	)%	0.3	%	35.3	%
Accrual for interest and income taxes related to uncertain tax positions	2.9	%	(0.3	)%	(7.3	)%
Income (loss) from flowthrough entities	(0.2	)%	(2.0	)%	(1.9	)%
Meals and entertainment	1.5	%	3.4	%	3.3	%
Group loss relief	(1.6	)%	(3.7	)%	(2.6	)%
Stock option compensation	0.2	%	(1.9	)%	2.3	%
Foreign dividends and earnings inclusion	9.9	%	7.1	%	(0.9	)%
Foreign tax withholding	0.6	%	1.4	%	2.4	%
Executive compensation limitation	0.7	%	4.3	%	—	%
Other	(2.8	)%	5.2	%	(6.2	)%
Effective tax rate	(227.0	)%	27.4	%	26.0	%

Reconciliation of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):



	2016			2015			2014
Balance at January 1	$	7,090		$	6,559		$	11,851
Additions based on tax positions related to the current year	969			1,120			638
Additions for tax positions of prior years	542			132			121
Reductions for tax positions of prior years	(80		)	(255		)	(3,691		)
Settlement of tax audits	—			—			(258		)
Reductions due to lapsed statute of limitations	(265		)	(466		)	(2,102		)
Balance at December 31	$	8,256		$	7,090		$	6,559

Major Jurisdictions No Longer Subject to Income Tax Examinations by Tax Authorities

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is generally no longer subject to income tax examinations by tax authorities in its major jurisdictions as follows:



Major Tax Jurisdiction	Years No Longer Subject to Audit
U.S. federal	2010 and prior
California (U.S.)	2008 and prior
Canada	2009 and prior
Japan	2009 and prior
South Korea	2011 and prior
United Kingdom	2012 and prior