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Note 15 - Income Taxes
 12 Months Ended
Dec. 31, 2022
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

15.

Income Taxes

 

The Company’s provision for income taxes consists of the following:

 

  

Year Ended December 31,

 
  

2022

  

2021

  

2020

 

Current:

            

Federal

 $118,320  $105,236  $62,714 

State

  25,743   21,295   13,071 

Foreign

  51,055   10,536   1,974 
   195,118   137,067   77,759 

Deferred:

            

Federal

  (43,475)  10,518   20,452 

State

  (10,966)  (3,728)  1,243 

Foreign

  (40,109)  (7,863)  (1,197)
   (94,550)  (1,073)  20,498 

Change in valuation allowance

  (972)  (1,037)  716 

Provision for income taxes

 $99,596  $134,957  $98,973 

 

The Company files U.S. federal, U.S. state and foreign jurisdiction tax returns which are subject to examination up to the expiration of the statute of limitations. The Company believes the tax positions taken on its returns would be sustained upon an exam, or where a position is uncertain, adequate reserves have been recorded. As of December 31, 2022, the Company is no longer subject to income tax examinations for United States federal income taxes for tax years prior to 2019. Due to the carryforward of net operating losses and research & development credits, the Company’s Wisconsin state income tax returns for tax years 2008 through 2021 remain open. In addition, the Company is subject to audit by various foreign taxing jurisdictions for tax years 2011 through 2022.

 

The Company is regularly under tax return examination by tax authorities in the various jurisdictions in which we operate. The Company is actively managing the examinations and working to address any open matters. While the Company does not believe any material taxes or penalties are due, there is a possibility that the ultimate tax outcome of an examination may result in differences from what was recorded. Such differences may affect the provision for income taxes in the period in which the determination is made and could impact the Company’s financial results.

 

Significant components of deferred tax assets and liabilities are as follows:

 

  

December 31,

 
  

2022

  

2021

 

Deferred tax assets:

        

Accrued expenses

 $46,994  $37,797 

Deferred revenue

  34,914   27,003 

Inventories

  20,229   14,907 

Stock-based compensation

  11,750   10,202 

Operating loss and credit carryforwards

  56,279   68,368 

Bad debt

  1,415   1,253 

Other

  7,531   12,203 

Capitalized R&D

  33,738   - 

Valuation allowance

  (4,638)  (7,874)

Total deferred tax assets

  208,212   163,859 
         

Deferred tax liabilities:

        

Goodwill and intangible assets

  260,745   328,162 

Depreciation

  44,385   21,340 

Debt refinancing costs

  1,184   2,916 

Interest swap and derivative

  12,370   - 

Prepaid expenses

  2,473   1,664 

Total deferred tax liabilities

  321,157   354,082 
         

Net deferred tax liabilities

 $(112,945)  $(190,223)

 

As of December 31, 2022 and 2021, deferred tax assets of $12,746 and $15,740, and deferred tax liabilities of $125,691 and $205,964, respectively, were reflected on the consolidated balance sheets.

 

The Company maintains a valuation allowance against the deferred tax assets when it is uncertain it will generate sufficient taxable income to utilize the asset. During 2022, the valuation allowance decreased by $3,236 primarily due to a reversal of valuation allowance in certain jurisdictions where we believe the deferred tax assets can now be utilized, partially offset by the establishment of valuation allowances in certain jurisdictions where we believe the deferred tax assets cannot be used.

 

At December 31, 2022, the Company had tax loss carryforwards of approximately $238,371, which have varying expiration periods ranging from 2023 to indefinite. For carryforward amounts where the Company believes the losses will expire prior to use, a valuation allowance has been established. For all other carryforwards the Company believes it will generate sufficient taxable income in these jurisdictions to utilize its loss carryforwards.

 

At December 31, 2022, the Company had state manufacturing tax credit carryforwards of approximately $29,946, which expire between 2028 and 2037. The Company believes it will generate sufficient taxable income in these jurisdictions to fully utilize the credits prior to their expiration.

 

Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, were as follows:

 

  

December 31,

 
  

2022

  

2021

 

Unrecognized tax benefit, beginning of period

 $8,647  $7,613 

Increase in unrecognized tax benefit for positions taken in prior period

  97   272 

Increase in unrecognized tax benefit for positions taken in current period

  975   990 

Statute of limitation expirations

  (824)  (228)

Settlements

  -   - 

Unrecognized tax benefit, end of period

 $8,895  $8,647 

 

The unrecognized tax benefit as of  December 31, 2022 and 2021, if recognized, would favorably impact the effective tax rate.

 

As of  December 31, 2022 and 2021, total accrued interest of approximately $161 and $127, respectively, and accrued penalties of approximately $422 and $357, respectively, associated with net unrecognized tax benefits are included in the consolidated balance sheets. Interest and penalties are recorded as a component of income tax expense.

 

The Company does not expect a significant increase or decrease to the total amounts of unrecognized tax benefits related to continuing operations during the following fiscal year ending December 31, 2023.

 

A reconciliation of the statutory tax rates to the effective tax rates for the years ended December 31, 2022, 2021 and 2020 are as follows:

 

  

Year Ended December 31,

 
  

2022

  

2021

  

2020

 

U.S. statutory rate

  21.0%  21.0%  21.0%

State taxes

  4.0   4.3   4.3 

State tax rate differential

  (0.3)  0.0   0.0 

Research and development credits

  (1.1)  (1.0)  (1.1)

State credits

  (1.5)  (1.1)  (1.5)

Share-based compensation

  (2.7)  (3.8)  (1.0)

Nondeductible U.S. compensation

  1.6   1.5   0.0 

Foreign tax deduction

  (0.4)  (1.5)  0.0 

Foreign deferred tax rate change

  0.0   1.2   0.0 

Other

  (1.0)  (1.1)  0.5 

Effective tax rate

  19.6%  19.5%  22.2%