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INCOME TAXES

12 Months Ended

Dec. 31, 2023

INCOME TAXES

INCOME TAXES

NOTE 4.           INCOME TAXES

The geographic distribution of pretax income from continuing operations was as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	Years Ended December 31,
​		2023			2022			2021
Domestic	​	$	(17,458)	​	$	5,969	​	$	24,541
Foreign	​		139,919	​		235,772	​		124,170
Income from continuing operations, before income taxes	​	$	122,461	​	$	241,741	​	$	148,711

​

The income tax provision (benefit) from continuing operations is summarized as follows:

​

​	​	​	​	​	​	​	​	​	​	​
​	​	Years Ended December 31,
​		2023			2022			2021
Current:		​			​			​		​
Federal	​	$	13,402	​	$	23,370	​	$	(2,468)	​
State	​		589	​		1,949	​		929	​
Foreign	​		11,661	​		20,267	​		14,217	​
Total current provision	​	​	25,652	​	​	45,586	​	​	12,678	​
​	​	​	​	​	​	​	​	​	​	​
Deferred:	​			​			​			​
Federal	​	​	(5,455)	​	​	(6,742)	​	​	762	​
State	​		(955)	​		(1,030)	​		(200)	​
Foreign	​		(27,530)	​		2,036	​		764	​
Total deferred provision (benefit)	​		(33,940)	​		(5,736)	​		1,326	​
Total income tax provision (benefit)	​	$	(8,288)	​	$	39,850	​	$	14,004	​
Effective tax rate	​	​	(6.8)	%	​	16.5	%	​	9.4	%

​

Our effective tax rate decreased in 2023 compared to 2022, primarily driven by a change in valuation allowance assessment in 2023.

​

The principal causes of the difference between the federal statutory rate and the effective income tax rate for each of the years below are as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	Years Ended December 31,
​		2023			2022			2021
Income taxes per federal statutory rate	​	$	25,850	​	$	50,766	​	$	31,229
State income taxes, net of federal deduction	​	​	(490)	​	​	510	​	​	534
U.S. tax on foreign operations	​	​	20,451	​	​	28,726	​	​	5,786
Foreign derived intangible income deduction	​	​	(2,868)	​	​	(6,259)	​	​	(3,927)
Tax effect of foreign operations	​	​	(27,959)	​	​	(28,432)	​	​	(11,520)
Uncertain tax positions	​	​	1,291	​	​	1,080	​	​	(6,899)
Audit settlements	​	​	—	​	​	34	​	​	7,764
Change in valuation allowance assessment	​	​	(25,636)	​	​	—	​	​	—
Tax credits	​	​	(7,289)	​	​	(5,857)	​	​	(6,149)
Change in valuation allowance	​	​	12,927	​	​	268	​	​	(73)
Executive compensation limitation	​	​	1,955	​	​	641	​	​	1,926
Other permanent items, net	​	​	(6,520)	​	​	(1,627)	​	​	(4,667)
Total income tax provision (benefit)	​	$	(8,288)	​	$	39,850	​	$	14,004

​

Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to be reversed. Significant deferred tax assets and liabilities consist of the following:

​	​	​	​	​	​	​
​	​	December 31,		​	December 31,
​		2023			2022
Deferred tax assets		​			​
Net operating loss and tax credit carryforwards	​	$	73,954	​	$	47,733
Interest expense limitation	​	​	7,282	​	​	7,282
Pension obligation	​		9,960	​		7,301
Bond hedge original issue discount	​		24,755	​		—
Employee bonuses and commissions	​		6,654	​		9,276
Depreciation and amortization	​		24,787	​		25,879
Operating lease liabilities	​	​	12,054	​	​	10,136
Other	​		28,099	​		17,102
Total deferred tax assets	​		187,545	​		124,709
Less: valuation allowance	​		(37,999)	​		(36,046)
Deferred tax assets, net of valuation allowance	​		149,546	​		88,663
​	​	​	​	​	​	​
Deferred tax liabilities	​		​	​
Depreciation and amortization	​		32,110	​		35,678
Unremitted earnings	​		3,277	​		4,115
Operating lease right-of-use assets	​	​	9,520	​	​	8,392
Other	​		4,107	​		1,801
Total deferred tax liabilities	​		49,014	​		49,986
Net deferred tax assets	​	$	100,532	​	$	38,677

​

Of the $100.5 million and $38.7 million net deferred tax asset on December 31, 2023 and 2022, respectively, $107.9 million and $48.1 million, respectively, are included as a net non-current deferred tax asset within other assets on

the Consolidated Balance Sheets. $7.4 million and $9.4 million, respectively, are included as a net non-current deferred tax liability within other long-term liabilities on the Consolidated Balance Sheets.

During the fourth quarter of 2023, we executed a tax planning strategy to facilitate the future utilization of deferred tax assets against which a valuation allowance had been previously recorded. We simultaneously evaluated the need for a valuation allowance and determined that the tax planning strategy resulted in sufficient positive evidence to more likely than not realize the deferred tax assets. As a result, we recorded at $25.6 million tax benefit from the release of the related valuation allowance.

As of December 31, 2023, we have recorded a total valuation allowance on $2.5 million of our U.S. domestic deferred tax assets, largely attributable to state carryforward attributes that are expected to expire before sufficient income can be realized in those jurisdictions. The remaining valuation allowance on deferred tax assets approximates $35.5 million and is associated primarily with operations in Germany, Hong Kong, and Switzerland. As of December 31, 2023, there is not sufficient positive evidence to conclude that such deferred tax assets, presently reduced by a valuation allowance, will more likely than not be recognized. The December 31, 2023 valuation allowance balance reflects a decrease of $1.9 million during the year. The change in the valuation allowance is primarily due to the release of valuation allowance in Germany, offset by increased losses in Hong Kong subject to a valuation allowance and increases from foreign exchange movements and current year’s activity.

As of December 31, 2023, we had U.S., foreign and state tax loss carryforwards of $36.7 million, $287.1 million, and $103.9 million, respectively. Additionally, we had $1.8 million and $30.5 million of capital loss and interest expense limitation carryforwards, respectively. Finally, we had U.S. and state tax credit carryforwards of $0.1 million and $1.9 million, respectively. The U.S. and state net operating losses, tax credits, and interest expense limitation are subject to various utilization limitations under Section 382 of the Internal Revenue Code and applicable state laws. These Section 382 limited attributes have various expiration periods through 2036 or, in the case of the interest expense limitation amount, no expiration period. Much of the foreign loss carryforwards, and $8.0 million of the federal net operating loss carry forwards, have no expiration period.

We operate under a tax holiday in Singapore, China, and Malaysia. These tax holidays are in effect through June 30, 2027, December 31, 2025, and January 31, 2025, respectively. The tax holidays are conditional upon our meeting certain employment and investment thresholds. For the years ended December 31, 2023, 2022 and 2021, the impact of the tax holidays decreased foreign taxes by $14.3 million, $19.4 million, and $13.3 million, respectively, and. the benefit on earnings per diluted share was $0.38, $0.52, and $0.35, respectively.

As of December 31, 2023, we have undistributed earnings in certain foreign subsidiaries of approximately $34.9 million that we have indefinitely invested, and on which we have not recognized deferred taxes. Estimating the amount of potential tax is not practicable because of the complexity and variety of assumptions necessary to compute the tax.

​

We account for uncertain tax positions by applying a minimum recognition threshold to tax positions before recognizing these positions in the consolidated financial statements. The following table provides a reconciliation of our total gross unrecognized tax benefits, which we include within other long-term liabilities on the Consolidated Balance Sheets:

​

​	​	​	​	​	​	​	​	​	​
​	​	Years Ended December 31,
​		2023			2022			2021
Balance at beginning of period	​	$	7,467	​	$	5,513	​	$	9,673
Additions based on tax positions taken during a prior period	​		199	​		245	​		963
Additions based on tax positions taken during a prior period - acquisitions	​		—	​		1,025	​		—
Additions based on tax positions taken during the current period	​		1,070	​		836	​		566
Reductions based on tax positions taken during a prior period	​		—	​		—	​		—
Reductions related to a lapse of applicable statute of limitations	​		(139)	​		(152)	​		(4,575)
Reductions related to a settlement with taxing authorities	​		(145)	​		—	​		(1,114)
Balance at end of period	​	$	8,452	​	$	7,467	​	$	5,513

​

The unrecognized tax benefits of $8.5 million, if recognized, will impact our effective tax rate. In accordance with our accounting policy, we recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. We had $0.7 million and $0.6 million of accrued interest and penalties on December 31, 2023 and 2022, respectively. With few exceptions, we are no longer subject to federal, state, or foreign income tax examinations by tax authorities for years before 2020.

​

The Inflation Reduction Act (“IRA”) and CHIPS and Science Act (“CHIPS Act”) were both enacted in August 2022. The IRA introduced new provisions including a 15% corporate alternative minimum tax for certain large corporations that have at least an average of $1 billion adjusted financial statement income over a consecutive three-tax-year period and a 1% excise tax surcharge on stock repurchases. The CHIPS Act provides a variety of incentives associated with investments in domestic semiconductor manufacturing and related activities. The IRA and the CHIPS Act are applicable for tax years beginning after December 31, 2022 and had no benefit to our consolidated financial statements for any of the periods presented, and we do not expect them to have a direct material impact on our future results of operations, financial condition, or cash flows.

The Organization for Economic Cooperation and Development is coordinating negotiations among more than 140 countries with the goal of achieving consensus around substantial changes to international tax policies, including the implementation of a minimum global effective tax rate of 15%. Various countries have implemented the legislation as of January 1, 2024, and we are still evaluating the impact. As additional jurisdictions enact such legislation, our effective tax rate and cash tax payments could increase in future years.

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The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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