Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

(Loss) income before income tax expense (benefit) consists of the following:

	Years ended December 31,
	2019		2018		2017
Domestic	$	(40,963)	$	(1,723)	$	2,468
Foreign	(20,051)		6,281		3,359
(Loss) Income before income taxes	$	(61,014)	$	4,558	$	5,827

The components of the income tax expense (benefit) for income taxes are as follows:

	Years ended December 31,
	2019		2018		2017
Current:
Federal	$	3,215	$	(1,694)	$	18,951
State	400		120		507
Foreign	3,809		1,394		2,072
Current income tax expense (benefit)	7,424		(180)		21,530
Deferred:
Federal	(7,630)		(486)		1,038
State	(1,667)		(153)		(580)
Foreign	3,006		447		(1,645)
Deferred income tax benefit	(6,291)		(192)		(1,187)
Income tax expense (benefit)	$	1,133	$	(372)	$	20,343

Reconciliations of the income tax expense at the U.S. federal statutory income tax rate compared to our actual income tax expense (benefit) are summarized below:

	Years ended December 31,
	2019		2018		2017
Tax expense at statutory rate	$	(12,812)	$	956	$	1,981
State income taxes, net of federal benefit	(1,564)		(13)		81
Foreign tax rate difference	(1,954)		(1,003)		(2,057)
Research and development credit	(753)		(919)		(1,037)
Change in valuation allowance	8,485		464		678
Equity based compensation	(25)		(390)		33
Manufacturing credit	—		—		(191)
Permanent impact of non-deductible cost	1,550		727		766
Provision to return adjustments & deferred adjustments	356		(654)		777
Impact of the U.S. Tax Cuts and Jobs Act of 2017	—		—		17,340
Change in enacted tax rates	359		58		2,015
Global intangible low-taxed income (“GILTI”)	1,795		402		—
Intangible & goodwill impairment	4,999		—		—
Other	697		—		(43)
Income tax expense (benefit)	$	1,133	$	(372)	$	20,343

The components of our net deferred income tax assets and liabilities are as follows:

	As of December 31,
	2019		2018
Net deferred income tax asset - Non-current
Warranty cost	$	616	$	533
Inventory reserve	4,820		1,559
Unearned service revenue	11,616		6,684
Employee stock options	4,157		4,222
Tax credits	1,207		485
Loss carryforwards	7,481		7,038
Depreciation	345		—
Other, net	1,760		641
Total deferred tax assets	32,002		21,162
Valuation allowance	(10,419)		(1,924)
Total deferred tax assets net of valuation allowance	21,583		19,238
Net deferred income tax liability - Non-current
Depreciation	—		(2,996)
Intangibles & goodwill	(3,174)		(2,261)
Total deferred tax liabilities	(3,174)		(5,257)
Net deferred tax assets	$	18,409	$	13,981

Our domestic entities had deferred income tax assets in the amount of $15.3 million and $7.2 million as of December 31, 2019 and December 31, 2018, respectively. At December 31, 2019 and 2018, our foreign subsidiaries had deferred tax assets primarily relating to net operating losses of $7.2 million and $6.5 million, respectively, the majority of which can be carried forward indefinitely. The valuation allowance for deferred tax assets as of December 31, 2019 and 2018 was $10.4 million and $1.9 million, respectively. The net change in the total valuation allowance for each of the years ended December 31, 2019, 2018 and 2017 was an $8.5 million, a $0.3 million and a $0.7 million increase, respectively.

The valuation allowance as of December 31, 2019 and 2018 was primarily related to foreign net operating loss carryforwards that, in the judgment of management, were not more likely than not to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected taxable income, and tax-planning strategies in making this assessment.

Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of a global business, there are many transactions for which the ultimate tax outcome is uncertain. We review our tax contingencies on a regular basis and make appropriate accruals as necessary.

As of December 31, 2019, 2018 and 2017, our unrecognized tax benefits totaled $1.9 million, $0.3 million and $0.3 million, respectively, which are included in Income taxes payable - less current portion in our consolidated balance sheet.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	Years ended December 31,
	2019		2018		2017
Balance at January 1	$	324	$	324	$	324
Additions based on tax positions related to the current year	314		—		—
Additions for tax positions of prior years	1,675		—		—
Lapse of statute of limitations	(389)		—		—
Balance at December 31	$	1,924	$	324	$	324

We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The table below summarizes the open tax years and ongoing tax examinations in major jurisdictions as of December 31, 2019:

Jurisdiction	Open Years	Examination in Process
United States - Federal Income Tax	2016-2019	2016
United States - various states	2015-2019	N/A
Germany	2013-2019	2013-2014
Switzerland	2017-2019	N/A
Singapore	2015-2019	N/A

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $1.9 million. We do not currently anticipate that the total amount of unrecognized tax benefits will result in material changes to our financial position. We are subject to income taxes at the federal, state and foreign country level. Our tax returns are subject to examination at the U.S. state level are subject to a three to four year statute of limitations, depending on the state.