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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | 19. Income Taxes The following is a summary of income before income taxes (in thousands):
Years Ended December 31, | 2024 |  | 2023 |  | 2022
Domestic | $ | 195,059 |  |  | $ | 92,552 |  |  | $ | 97,235 |
Foreign | 1,133 |  |  | (32,698) |  |  | (5,418) |
Total income before income taxes | $ | 196,192 |  |  | $ | 59,854 |  |  | $ | 91,817 |
The following is a summary of the provision for income taxes (in thousands):
Years Ended December 31, | 2024 |  | 2023 |  | 2022
Federal: |  |  |  |  |
Current | $ | 29,754 |  |  | $ | 1,579 |  |  | $ | 255 |
Deferred | 11,803 |  |  | 23,331 |  |  | 10,326 |
Total federal | 41,557 |  |  | 24,910 |  |  | 10,581 |
State: |  |  |  |  |
Current | 10,612 |  |  | 3,565 |  |  | 5,721 |
Deferred | 2,363 |  |  | 1,362 |  |  | (1,691) |
Total state | 12,975 |  |  | 4,927 |  |  | 4,030 |
Foreign: |  |  |  |  |
Current | 1,824 |  |  | (1,432) |  |  | 1,951 |
Deferred | (607) |  |  | 1,862 |  |  | (3,602) |
Total foreign | 1,217 |  |  | 430 |  |  | (1,651) |
Total provision for income taxes | $ | 55,749 |  |  | $ | 30,267 |  |  | $ | 12,960 |
The following is a reconciliation of our provision for income taxes based on the Federal statutory tax rate to our effective tax rate (dollars in thousands):
Years Ended December 31, | 2024 |  | 2023 |  | 2022
Federal statutory tax | $ | 41,200 |  |  | 21.0 | % |  | $ | 12,569 |  |  | 21.0 | % |  | $ | 19,282 |  |  | 21.0 | %
State taxes, net of federal tax benefit | 9,693 |  |  | 4.9 |  |  | 5,171 |  |  | 8.6 |  |  | 2,761 |  |  | 3.0 |
Non-controlling interests | (2,960) |  |  | (1.5) |  |  | 2,942 |  |  | 4.9 |  |  | 933 |  |  | 1.0 |
Equity in income of affiliates | (2,490) |  |  | (1.2) |  |  | (3,419) |  |  | (5.7) |  |  | (2,629) |  |  | (2.9) |
Change in valuation allowance, net | 1,855 |  |  | 0.9 |  |  | 3,163 |  |  | 5.3 |  |  | (3,212) |  |  | (3.5) |
Nondeductible debt extinguishment costs | 5,537 |  |  | 2.8 |  |  | 10,360 |  |  | 17.3 |  |  | — |  |  | — |
Nondeductible executive compensation | 2,314 |  |  | 1.2 |  |  | 790 |  |  | 1.3 |  |  | 801 |  |  | 0.9 |
Nondeductible meals and entertainment | 1,408 |  |  | 0.7 |  |  | 1,407 |  |  | 2.4 |  |  | 972 |  |  | 1.1 |
Percentage depletion deduction | (1,304) |  |  | (0.7) |  |  | (1,119) |  |  | (1.9) |  |  | (1,062) |  |  | (1.2) |
Nondeductible goodwill | — |  |  | — |  |  | 945 |  |  | 1.6 |  |  | 8,212 |  |  | 8.9 |
Assets held for sale | — |  |  | — |  |  | — |  |  | — |  |  | (14,427) |  |  | (15.7) |
Return to provision adjustments | 1,288 |  |  | 0.7 |  |  | (1,250) |  |  | (2.1) |  |  | (1,102) |  |  | (1.2) |
Other nontaxable / nondeductible items | (792) |  |  | (0.4) |  |  | (1,292) |  |  | (2.2) |  |  | 2,431 |  |  | 2.7 |
Total | $ | 55,749 |  |  | 28.4 | % |  | $ | 30,267 |  |  | 50.6 | % |  | $ | 12,960 |  |  | 14.1 | %
The variance from the U.S. federal statutory tax rate in 2024 is due primarily to the tax expense associated with nondeductible debt extinguishment costs and state and local income taxes. The following is a summary of the deferred tax assets and liabilities:
(in thousands) | December 31, 2024 |  | December 31, 2023
Deferred tax assets: |  |  |
Receivables | $ | 1,270 |  |  | $ | 1,328 |
Insurance | 15,307 |  |  | 15,018 |
Deferred compensation | 11,884 |  |  | 10,424 |
Convertible debt - capped call amortization | 19,852 |  |  | 11,963 |
Accrued compensation | 5,048 |  |  | 3,811 |
Other accrued liabilities | 2,073 |  |  | 1,218 |
Contract income recognition | 16,822 |  |  | 16,986 |
Lease liabilities | 19,678 |  |  | 16,272 |
Net operating loss carryforwards | 29,182 |  |  | 40,541 |
Valuation allowance | (23,450) |  |  | (24,569) |
Other | 4,199 |  |  | 3,587 |
Total deferred tax assets | 101,865 |  |  | 96,579 |
Deferred tax liabilities: |  |  |
Property and equipment | 96,908 |  |  | 76,067 |
Right of use assets | 18,831 |  |  | 16,041 |
Total deferred tax liabilities | 115,739 |  |  | 92,108 |
Net deferred tax assets (liabilities) | $ | (13,874) |  |  | $ | 4,471 |
The following is a summary of the net operating loss carryforwards at December 31, 2024:
(in thousands) | Expiration |  | Gross Carryforward |  | Tax Effected Carryforward
Federal net operating loss carryforwards | N/A |  | $ | 10,793 |  |  | $ | 2,267 |
State net operating loss carryforwards | 2025-2044 |  | $ | 238,153 |  |  | 11,005 |
Foreign tax loss carryforwards | 2025-2044 |  | $ | 54,135 |  |  | 15,910 |
Total net operating loss carryforwards |  |  |  |  | $ | 29,182 |
The federal, state and foreign net operating loss carryforwards above include unrecognized tax benefits taken in prior years and the net operating loss carryforward deferred tax asset is presented net of these unrecognized tax benefits in accordance with ASC Topic 740, Income Taxes. The federal and state net operating losses acquired during the Layne Christensen Company acquisition in 2018 are subject to Internal Revenue Code Section 382 limitations and may be limited in future periods and a portion may expire unused. As we expect to use the federal net operating loss carryforwards prior to expiration we believe that it is more likely than not that these deferred tax assets will be realized and no valuation allowance was deemed necessary. We have provided a valuation allowance on the net operating loss deferred tax asset or the net deferred tax assets for certain foreign, state and local jurisdictions because we do not believe it is more likely than not that they will be realized. The following is a summary of the change in valuation allowance:
(in thousands) | December 31, 2024 |  | December 31, 2023
Beginning balance | $ | 24,569 |  |  | $ | 19,919 |
Additions (deductions), net | (1,119) |  |  | 4,650 |
Ending balance | $ | 23,450 |  |  | $ | 24,569 |
The change in the valuation allowance in 2024 is mainly due to the reversal of valuation allowances related to the utilization of state and local net operating loss carryforwards and a decrease in net deferred tax assets associated with our foreign operations which we do not believe are more likely than not to be used in future years. We intend to indefinitely reinvest certain earnings of our foreign subsidiaries and affiliates. There are generally no federal income taxes on dividends from foreign subsidiaries therefore we would only be subject to other taxes, such as withholding and local taxes, upon distribution of these earnings. We have $54.4 million of accumulated undistributed earnings that we consider indefinitely reinvested as of December 31, 2024. It is not practicable to determine the amount of taxes that would be payable upon remittance of these earnings. Deferred foreign withholding taxes have been provided on undistributed earnings of certain foreign subsidiaries and foreign affiliates where the earnings are not considered to be invested indefinitely. Uncertain tax positions: We file income tax returns in the U.S. and various state and local jurisdictions. We are currently under examination by various state taxing authorities for various tax years. We do not anticipate that any of these audits will result in a material change in our financial position. We are no longer subject to U.S. federal examinations by tax authorities for years before 2021 except for the 2018 tax year. With few exceptions, as of December 31, 2024, we are no longer subject to state examinations by taxing authorities for years before 2018. We file income tax returns in foreign jurisdictions where we operate. The returns are subject to examination which may be ongoing at any point in time and tax liabilities are recorded based on estimates of additional taxes which will be due upon settlement of those examinations. The tax years subject to examination by foreign tax authorities vary by jurisdiction, but generally we are no longer subject to examinations by taxing authorities for years before 2016. We had approximately $22.4 million and $22.6 million of total gross unrecognized tax benefits as of December 31, 2024 and 2023, respectively. There were approximately $5.2 million and $5.5 million of unrecognized tax benefits that would affect the effective tax rate in any future period at December 31, 2024 and 2023, respectively. It is reasonably possible that our unrecognized tax benefit could decrease by approximately $1.2 million in 2025, which would impact our effective tax rate in 2025. The decrease relates to anticipated statute expirations and anticipated resolution of outstanding unrecognized tax benefits. The following is a tabular reconciliation of unrecognized tax benefits (in thousands). The balances in the reconciliation are the gross amounts before considering reductions related to available net operating losses. The balance of unrecognized tax benefits net of available net operating losses is included in other long-term liabilities and accrued expenses and other current liabilities in the consolidated balance sheets:
December 31, | 2024 |  | 2023 |  | 2022
Beginning balance | $ | 22,591 |  |  | $ | 22,756 |  |  | $ | 22,724 |
Gross increases – current period tax positions | — |  |  | — |  |  | — |
Gross decreases – current period tax positions | — |  |  | — |  |  | — |
Gross increases – prior period tax positions | — |  |  | — |  |  | — |
Gross decreases – prior period tax positions | (162) |  |  | 77 |  |  | (426) |
Settlements with taxing authorities/lapse of statute of limitations | (70) |  |  | (242) |  |  | (60) |
Reclassification of balances from held for sale | — |  |  | — |  |  | 518 |
Ending balance | $ | 22,359 |  |  | $ | 22,591 |  |  | $ | 22,756 |

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