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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 14: INCOME TAXES

The components of the income tax expense for continuing operations are as follows:

 

 

Year ended December 31,

 

 

2024

 

 

2023

 

 

2022

 

 

(in thousands)

 

Current

 

 

 

 

 

 

 

 

 

Domestic

 

$

54,406

 

 

$

37,333

 

 

$

40,405

 

Foreign

 

 

39,792

 

 

 

22,732

 

 

 

18,485

 

Total current

 

 

94,198

 

 

 

60,065

 

 

 

58,890

 

Deferred

 

 

 

 

 

 

 

 

 

Domestic

 

 

(25,195

)

 

 

(17,238

)

 

 

(14,742

)

Foreign

 

 

1,780

 

 

 

(2,647

)

 

 

(1,152

)

Total deferred

 

 

(23,415

)

 

 

(19,885

)

 

 

(15,894

)

Income tax expense

 

$

70,783

 

 

$

40,180

 

 

$

42,996

 

 

Income from continuing operations before taxes for U.S. and foreign operations are as follows:

 

 

Year ended December 31,

 

 

2024

 

 

2023

 

 

2022

 

 

(in thousands)

 

Domestic

 

$

(130,387

)

 

$

(105,986

)

 

$

(79,328

)

Foreign

 

 

212,144

 

 

 

111,105

 

 

 

101,324

 

Income from continuing operations before income taxes

 

$

81,757

 

 

$

5,119

 

 

$

21,996

 

 

Accumulated other comprehensive income at December 31, 2024 and 2023, has been reported net of a $3.5 million deferred tax asset and a $2.4 million deferred tax asset, respectively.

The Company has the intent and ability to assert that undistributed foreign earnings are indefinitely or “permanently” reinvested outside the U.S. The Company is aware that there may be withholding taxes on an actual distribution of the undistributed foreign earnings. If the undistributed earnings were not considered permanently reinvested, deferred tax liabilities would have been provided for any applicable income taxes and withholding taxes payable in various countries, which would not be significant. A determination of the unrecognized deferred tax liabilities on the other outside basis differences reinvested indefinitely at December 31, 2024, is not practicable due to the complexities in the calculations.

The items accounting for the difference between income taxes computed at the U.S. statutory rate and the expense for income taxes for continuing operations are as follows:

 

 

Year ended December 31,

 

 

2024

 

 

2023

 

 

2022

 

 

(in thousands)

 

Income tax expense at the U.S. statutory rate, 21%

 

$

17,169

 

 

$

1,075

 

 

$

4,619

 

State taxes, net

 

 

919

 

 

 

1,175

 

 

 

1,418

 

Effect of foreign tax rates

 

 

(4,093

)

 

 

(5,325

)

 

 

(2,940

)

GILTI

 

 

13,094

 

 

 

7,919

 

 

 

6,452

 

Effect of change in tax rates

 

 

1,636

 

 

 

4,193

 

 

 

1,572

 

Non-taxable income

 

 

(215

)

 

 

(431

)

 

 

(221

)

Non-deductible expenses

 

 

5,991

 

 

 

5,698

 

 

 

5,869

 

Stock based compensation

 

 

2,186

 

 

 

—

 

 

 

—

 

Valuation allowance

 

 

22,838

 

 

 

31,854

 

 

 

29,514

 

Tax credits

 

 

—

 

 

 

—

 

 

 

120

 

Adjustments in respect of prior years

 

 

11,122

 

 

 

(5,509

)

 

 

(3,072

)

Other, net

 

 

136

 

 

 

(469

)

 

 

(335

)

Income tax expense

 

$

70,783

 

 

$

40,180

 

 

$

42,996

 

 

The Company has adopted a position of indefinitely reinvesting earnings in its foreign operations. Despite the Company’s position of indefinitely reinvesting earnings in its foreign operations, the Tax Cuts and Jobs Act of 2017 made significant changes to the way U.S. multinationals’ foreign profits are taxed. GILTI was introduced as an outbound anti-base erosion provision.

In 2021, the Organization for Economic Cooperation and Development (“OECD”) released Pillar Two Global Anti-Base Erosion model rules (“Pillar Two Rules”), designed to ensure large corporations are taxed at a minimum rate of 15% in all countries of operation. On June 20, 2024, as part of Bill C-69, Canada enacted its Pillar Two legislation effective January 1, 2024. Canada Bill C-59 was also enacted on June 20, 2024, and included the excessive interest and financing expenses limitation (EIFEL) regime effective for tax years beginning on or after December 31, 2023. The Company has performed a quantitative and qualitative assessment and determined the effects are not materially significant to the 2024 financial statements. The Company will continue to evaluate Pillar Two and EIFEL for their potential impact on future periods as further legislation is proposed or enacted.

Deferred income tax liabilities consist of the following:

 

 

As of December 31,

 

 

2024

 

 

2023

 

 

(in thousands)

 

Deferred tax assets consist of the following:

 

 

 

 

 

 

Capitalized research & development

 

$

4,653

 

 

$

—

 

Deferred finance charges

 

 

4,275

 

 

 

2,322

 

Inventory reserve

 

 

26,534

 

 

 

12,927

 

Other

 

 

23,278

 

 

 

19,191

 

Disallowed business interest expense

 

 

180,571

 

 

 

163,739

 

Operating lease liability

 

 

43,744

 

 

 

40,894

 

Pension

 

 

1,134

 

 

 

3,632

 

Tax losses carried forward

 

 

11,397

 

 

 

15,055

 

Deferred tax assets, before valuation allowance

 

 

295,586

 

 

 

257,760

 

Valuation allowance

 

 

(117,650

)

 

 

(94,812

)

Deferred tax assets

 

 

177,936

 

 

 

162,948

 

Deferred tax liabilities consist of the following:

 

 

 

 

 

 

Property, plant and equipment

 

 

(35,836

)

 

 

(36,824

)

Intangible assets

 

 

(246,422

)

 

 

(244,076

)

Operating lease right of use asset

 

 

(55,966

)

 

 

(53,314

)

Other

 

 

(8,457

)

 

 

(6,309

)

Deferred tax liabilities

 

 

(346,681

)

 

 

(340,523

)

Net deferred tax liability

 

$

(168,745

)

 

$

(177,575

)

 

Changes to the Company’s valuation allowance are as follows:

 

 

As of December 31,

 

 

2024

 

 

2023

 

 

2022

 

 

(in thousands)

 

Balance, beginning of the year

 

$

94,812

 

 

$

62,958

 

 

$

33,444

 

Additions charge to income tax expense

 

 

26,050

 

 

 

31,953

 

 

 

29,514

 

Reductions credited to income tax expense

 

 

(3,212

)

 

 

(99

)

 

 

—

 

Change in valuation allowance

 

 

22,838

 

 

 

31,854

 

 

 

29,514

 

Balance, end of the year

 

$

117,650

 

 

$

94,812

 

 

$

62,958

 

 

The total increase in valuation allowance was $22.8 million, $31.9 million and $29.5 million for the years ending December 31, 2024, 2023 and 2022, respectively. A “more likely than not” criterion is applied when evaluating the realizability of a deferred tax asset. A valuation allowance of $117.7 million and $94.8 million as of December 31, 2024 and 2023, respectively, has been recorded against the foreign net operating losses in various countries and U.S. Section 163(j) interest expense carryforwards. The Company has determined that it is more likely than not that the amount of the deferred tax assets will not be realized. A portion of the foreign losses may be carried forward indefinitely, as well as the U.S. Section 163(j) limitation. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, available taxes in the carryback periods, projected future taxable income and tax planning strategies in making this assessment.

The Company’s policy is to recognize accrued interest and penalties associated with uncertain tax positions as part of the tax provision. As of December 31, 2024 and December 31, 2023, the Company has no liability recorded for the payment of interest and penalties and has not included an amount in the current year’s tax provision.

Unrecognized tax benefits were nil as at December 31, 2024 and December 31, 2023. It is expected that the amount of unrecognized tax benefits will not change in the next 12 months.

The Company files a U.S. federal income tax return as part of a consolidated group as well as income tax returns in various states and other foreign jurisdictions. The Company is open to examination in the United States. for 2019 onward, and Canada for 2020 onward. Generally, for the remaining tax jurisdictions, years from 2019 onward are still open to examination.