Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Loss Before Income Tax Provision (Benefit)

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



	Years Ended December 31,
	2017		2016⁽¹⁾		2015
United States	$	50,706	$	38,268	$	6,864
Foreign	17,349		20,125		13,199
	$	68,055	$	58,393	$	20,063

Expense Benefit for Income Taxes

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



	Years Ended December 31,
	2017			2016⁽²⁾			2015
Current tax provision:
Federal	$	610		$	541		$	271
State	1,259			543			431
Foreign	6,135			7,289			4,393
	8,004			8,373			5,095
Deferred tax expense (benefit):
Federal	20,746			(129,405		)	(41		)
State	(1,127		)	(10,693		)	113
Foreign	(1,235		)	(836		)	328
	18,384			(140,934		)	400
Income tax provision	$	26,388		$	(132,561	)	$	5,495


(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 7 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, 2017 and 2016 are as follows (in thousands):



	December 31,
	2017			2016
Deferred tax assets:
Reserves and allowances not currently deductible for tax purposes	$	12,783		$	15,506
Basis difference related to fixed assets	5,946			9,697
Compensation and benefits	7,807			9,273
Basis difference for inventory valuation	1,612			2,100
Compensatory stock options and rights	3,869			5,715
Deferred revenue and other	175			226
Operating loss carryforwards	21,799			75,110
Tax credit carryforwards	62,668			32,730
Basis difference related to intangible assets with a definite life	7,061			13,993
Other	634			389
Total deferred tax assets	124,354			164,739
Valuation allowance for deferred tax assets	(11,114		)	(16,515		)
Deferred tax assets, net of valuation allowance	$	113,240		$	148,224
Deferred tax liabilities:
Prepaid expenses	(773		)	(1,082		)
Basis difference related to intangible assets with an indefinite life	(22,891		)	(34,031		)
Total deferred tax liabilities	(23,664		)	(35,113		)
Net deferred tax assets	$	89,576		$	113,111
Net deferred tax assets (liabilities) are shown on the accompanying consolidated balance sheets as follows:
Non-current deferred tax assets	$	91,398		$	114,707
Non-current deferred tax liabilities	(1,822		)	(1,596		)
Net deferred tax assets	$	89,576		$	113,111

Credit Carryforward Expiry

At December 31, 2017, the Company had federal and state income tax credit carryforwards of $56,285,000 and $15,499,000, respectively, which will expire at various dates beginning in 2021. Such credit carryforwards expire as follows (in thousands):



U.S. foreign tax credit	$	46,639	2021 - 2037
U.S. research tax credit	$	9,623	2031 - 2037
U.S. business tax credits	$	23	2031 - 2037
State investment tax credits	$	858	Do not expire
State research tax credits	$	14,641	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	$	63,493	2032 - 2035
State loss carryforwards	$	124,466	2018 - 2037

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,
	2017		2016		2015
Statutory U.S. tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of U.S. tax benefit	2.6	%	3.1	%	3.5	%
Federal and State tax credits, net of U.S. tax benefit	(4.1	)%	(5.0	)%	(11.5	)%
Foreign income taxed at other than U.S. statutory rate	(0.2	)%	1.8	%	(2.4	)%
Effect of foreign rate changes	0.2	%	0.5	%	0.9	%
Foreign tax credit	(1.3	)%	(11.3	)%	(12.0	)%
Basis differences of intangibles with an indefinite life	0.1	%	0.1	%	0.1	%
Change in deferred tax valuation allowance	(1.9	)%	(262.4	)%	0.3	%
Accrual for interest and income taxes related to uncertain tax positions	2.2	%	2.9	%	(0.3	)%
Income (loss) from flowthrough entities	1.0	%	(0.2	)%	(2.0	)%
Meals and entertainment	1.1	%	1.5	%	3.4	%
Group loss relief	(0.6	)%	(1.6	)%	(3.7	)%
Stock option compensation	(2.0	)%	0.2	%	(1.9	)%
Foreign dividends and earnings inclusion	0.7	%	9.9	%	7.1	%
Foreign tax withholding	0.9	%	0.6	%	1.4	%
Executive compensation limitation	0.5	%	0.7	%	4.3	%
Intra-entity asset transfers	(6.3	)%	—	%	—	%
Enactment of the Tax Cuts and Jobs Act	11.1	%	—	%	—	%
Other	(0.2	)%	(2.8	)%	5.2	%
Effective tax rate	38.8	%	(227.0	)%	27.4	%

Reconciliation of Unrecognized Tax Benefits

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



	2017			2016			2015
Balance at January 1	$	8,256		$	7,090		$	6,559
Additions based on tax positions related to the current year	1,061			969			1,120
Additions for tax positions of prior years	233			542			132
Reductions for tax positions of prior years	(192		)	(80		)	(255		)
Settlement of tax audits	(33		)	—			—
Reductions due to lapsed statute of limitations	(25		)	(265		)	(466		)
Balance at December 31	$	9,300		$	8,256		$	7,090

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	2010 and prior
South Korea	2011 and prior
United Kingdom	2013 and prior