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Note 15 - Income Taxes
 12 Months Ended
Dec. 31, 2023
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,

 
  

2023

  

2022

  

2021

 

Current:

            

Federal

 $71,741  $118,320  $105,236 

State

  13,802   25,743   21,295 

Foreign

  22,115   51,055   10,536 
   107,658   195,118   137,067 

Deferred:

            

Federal

  (26,504)  (43,475)  10,518 

State

  (5,254)  (10,966)  (3,728)

Foreign

  (3,218)  (40,109)  (7,863)
   (34,976)  (94,550)  (1,073)

Change in valuation allowance

  498   (972)  (1,037)

Provision for income taxes

 $73,180  $99,596  $134,957 

 

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, 2023, the Company is no longer subject to income tax examinations for United States federal income taxes for tax years prior to 2020. Due to the carryforward of net operating losses and research & development credits, the Company’s Wisconsin state income tax returns for tax years 2007 through 2022 remain open. In addition, the Company is subject to audit by various foreign taxing jurisdictions for tax years 2012 through 2023.

 

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,

 
  

2023

  

2022

 

Deferred tax assets:

        

Accrued expenses

 $48,758  $46,994 

Deferred revenue

  36,927   34,914 

Inventories

  12,549   20,229 

Stock-based compensation

  14,143   11,750 

Operating loss and credit carryforwards

  54,753   56,279 

Bad debt

  1,380   1,415 

Other

  8,722   7,531 

Capitalized R&D

  65,523   33,738 

Valuation allowance

  (5,136)  (4,638)

Total deferred tax assets

  237,619   208,212 
         

Deferred tax liabilities:

        

Goodwill and intangible assets

  253,342   260,745 

Depreciation

  45,964   44,385 

Debt refinancing costs

  828   1,184 

Interest swap and derivative

  9,521   12,370 

Prepaid expenses

  2,444   2,473 

Total deferred tax liabilities

  312,099   321,157 
         

Net deferred tax liabilities

 $(74,480) $(112,945)

 

As of December 31, 2023 and 2022, deferred tax assets of $15,532 and $12,746, and deferred tax liabilities of $90,012 and $125,691, 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 2023, the valuation allowance increased by $498 primarily due to the establishment of valuation allowances in certain jurisdictions where we believe the deferred tax assets may not be able to be fully utilized.

 

At December 31, 2023, the Company had tax loss carryforwards of approximately $218,432, which have varying expiration periods ranging from 2024 to indefinite. For carryforward amounts which 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, 2023, the Company had state manufacturing tax credit carryforwards of approximately $29,196, which expire between 2028 and 2038. 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,

 
  

2023

  

2022

 

Unrecognized tax benefit, beginning of period

 $8,895  $8,647 

Increase in unrecognized tax benefit for positions taken in prior period

  3,081   97 

Increase in unrecognized tax benefit for positions taken in current period

  1,122   975 

Statute of limitation expirations

  (3,395)  (824)

Settlements

  -   - 

Unrecognized tax benefit, end of period

 $9,703  $8,895 

 

The unrecognized tax benefit as of  December 31, 2023 and 2022, if recognized, would favorably impact the effective tax rate.

 

As of  December 31, 2023 and 2022, total accrued interest of approximately $532 and $161, respectively, and accrued penalties of approximately $1,275 and $422, 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 change to the total amount of unrecognized tax benefits during the fiscal year ending December 31, 2024.

 

A reconciliation of the statutory tax rate to the effective tax rate for the years ended December 31, 2023, 2022 and 2021 is as follows:

 

  

Year Ended December 31,

 
  

2023

  

2022

  

2021

 

U.S. statutory rate

  21.0%  21.0%  21.0%

State taxes

  4.0   4.0   4.3 

State tax rate differential

  0.0   (0.3)  0.0 

Research and development credits

  (2.4)  (1.1)  (1.0)

State credits

  (0.9)  (1.5)  (1.1)

Share-based compensation

  (0.4)  (2.7)  (3.8)

Nondeductible U.S. compensation

  1.0   1.6   1.5 

Foreign tax deduction

  0.0   (0.4)  (1.5)

Foreign deferred tax rate change

  0.0   0.0   1.2 

Uncertain tax positions reserve

  0.9   0.0   0.0 

Global intangible low tax income

  1.7   0.2   0.0 

Other

  0.3   (1.2)  (1.1)

Effective tax rate

  25.2%  19.6%  19.5%