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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | 10. Income Taxes The domestic and foreign components of income (loss) before income taxes were as follows (in millions):
| Year Ended December 31, |
| 2023 |  |  | 2022 |  |  | 2021 |
United States | $ | 106 |  |  | $ | 108 |  |  | $ | (9 | )
Foreign |  | 32 |  |  |  | 31 |  |  |  | 21 |
Income (loss) before income taxes | $ | 138 |  |  | $ | 139 |  |  | $ | 12 |
The provision (benefit) for income taxes for 2023, 2022 and 2021 consisted of the following (in millions):
| Year Ended December 31, |
| 2023 |  |  | 2022 |  |  | 2021 |
U.S. Federal: |  |  |  |  |  |  |  |
Current | $ | — |  |  | $ | — |  |  | $ | — |
Deferred |  | (99 | ) |  |  | — |  |  |  | (1 | )
|  | (99 | ) |  |  | — |  |  |  | (1 | )
U.S. State: |  |  |  |  |  |  |  |
Current |  | 1 |  |  |  | — |  |  |  | — |
Deferred |  | (15 | ) |  |  | — |  |  |  | — |
|  | (14 | ) |  |  | — |  |  |  | — |
Foreign: |  |  |  |  |  |  |  |
Current |  | 8 |  |  |  | 9 |  |  |  | 7 |
Deferred |  | (5 | ) |  |  | 1 |  |  |  | 1 |
|  | 3 |  |  |  | 10 |  |  |  | 8 |
Income tax provision (benefit) | $ | (110 | ) |  | $ | 10 |  |  | $ | 7 |
The reconciliation between the Company’s effective tax rate on income (loss) from continuing operations and the statutory tax rate is as follows (in millions):
| Year Ended December 31, |
| 2023 |  |  | 2022 |  |  | 2021 |
Income tax provision at federal statutory rate | $ | 29 |  |  | $ | 29 |  |  | $ | 3 |
Foreign tax rate differential |  | 1 |  |  |  | 1 |  |  |  | 2 |
State income tax provision (benefit), net of federal benefit |  | 4 |  |  |  | 4 |  |  |  | (1 | )
Nondeductible expenses |  | 2 |  |  |  | 2 |  |  |  | — |
Currency translation losses |  | — |  |  |  | 2 |  |  |  | — |
Capital loss carryforward |  | — |  |  |  | (2 | ) |  |  | — |
Change in valuation allowance |  | (148 | ) |  |  | (28 | ) |  |  | 2 |
Other |  | 2 |  |  |  | 2 |  |  |  | 1 |
Income tax provision (benefit) | $ | (110 | ) |  | $ | 10 |  |  | $ | 7 |
Effective tax rate |  | (79.7 | %) |  |  | 7.2 | % |  |  | 54.8 | %
In general, the effective tax rate differs from the U.S. statutory rate due to recurring items, such as differing tax rates on income earned in foreign jurisdictions, nondeductible expenses and state income taxes. For the year ended December 31, 2023, the effective tax rate was primarily driven by a $148 million deferred tax benefit from the release of the valuation allowance against certain U.S. and non-U.S. deferred tax assets and the recognition of tax expense from earnings in Canada and the United Kingdom. For the year ended December 31, 2022, the effective tax rate was primarily driven by the recognition of tax expense from earnings in Canada offset by current year realization of deferred tax assets and corresponding release of valuation allowance in the U.S., as well as impairment charges incurred as a result of substantially completing the liquidation of certain foreign subsidiaries with no associated tax benefit. For the year ended December 31, 2021, the effective tax rate was primarily driven by the low level of consolidated pre-tax income and the recognition of tax expense from earnings in Canada, which was not able to be offset by benefits recognized on losses in other jurisdictions. Significant components of the Company’s deferred tax assets and liabilities were as follows (in millions):
| December 31, |
| 2023 |  |  | 2022 |  |  | 2021 |
Deferred tax assets: |  |  |  |  |  |  |  |
Allowances and operating liabilities | $ | 6 |  |  | $ | 6 |  |  | $ | 6 |
Net operating loss carryforwards |  | 58 |  |  |  | 76 |  |  |  | 92 |
Foreign tax credit carryforwards |  | 7 |  |  |  | 7 |  |  |  | 7 |
Allowance for doubtful accounts |  | 5 |  |  |  | 5 |  |  |  | 4 |
Inventory reserve |  | 8 |  |  |  | 9 |  |  |  | 10 |
Stock-based compensation |  | 4 |  |  |  | 5 |  |  |  | 5 |
Intangible assets |  | 36 |  |  |  | 45 |  |  |  | 57 |
Capital loss carryforward |  | 12 |  |  |  | 12 |  |  |  | 10 |
Tax over book basis in depreciable assets |  | 4 |  |  |  | 4 |  |  |  | 5 |
Lease liabilities |  | 15 |  |  |  | 11 |  |  |  | 9 |
Other |  | 2 |  |  |  | 3 |  |  |  | 3 |
Total deferred tax assets | $ | 157 |  |  | $ | 183 |  |  | $ | 208 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
ROU assets |  | (14 | ) |  |  | (10 | ) |  |  | (7 | )
Other |  | — |  |  |  | (1 | ) |  |  | — |
Total deferred tax liabilities | $ | (14 | ) |  | $ | (11 | ) |  | $ | (7 | )
Net deferred tax assets before valuation allowance |  | 143 |  |  |  | 172 |  |  |  | 201 |
Valuation allowance |  | (25 | ) |  |  | (173 | ) |  |  | (201 | )
Net deferred tax assets (liabilities) | $ | 118 |  |  | $ | (1 | ) |  | $ | — |
The Company records a valuation allowance when it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets depends on the ability to generate sufficient taxable income of the appropriate character in the future and in the appropriate taxing jurisdictions. If the Company was to determine that it would be able to realize the deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the valuation allowance, which would reduce the provision for income taxes. The Company performs a detailed analysis of all available evidence, both positive and negative, for each quarterly financial reporting period to assess the realizability of its deferred tax assets. The Company considers its recent pre-tax earnings, realization of deferred tax assets, sources and character of future taxable income, scheduled reversals of deferred tax liabilities, and tax planning strategies, if available, in assessing the need for a valuation allowance. In projecting future taxable income, the Company begins with historical results adjusted for the results of discontinued operations and incorporates assumptions about the amount of future state, federal and foreign pre-tax operating income adjusted for items that do not have tax consequences. For the years ending December 31, 2015, through December 31, 2022, the Company recorded a valuation allowance against the majority of its deferred tax assets, due to substantial negative evidence against the realizability of its deferred tax assets, including remaining in a three-year cumulative loss position throughout those years despite individually profitable years, most recently in 2021 and 2022. For the years ended December 31, 2022 and 2021, the Company recorded pre-tax income of $139 million and $12 million, respectively, but remained in a three-year cumulative loss position of $279 million and $511 million, respectively. As of December 31, 2023, the Company was in a three-year positive cumulative pre-tax earnings position on a consolidated basis and within the U.S. and most foreign jurisdictions, recognizing $289 million of pre-tax earnings globally over the past three years. Since December 31, 2020, the Company has realized over $57 million in deferred tax assets which were previously subject to a valuation allowance. Positive macroeconomic factors, rising demand for energy related products, diligent cost management, and the accretive benefits resulting from recent acquisitions have bolstered the Company’s outlook and expectations for future taxable income. During the fourth quarter of 2023, the Company evaluated all positive and negative evidence in line with the assumptions and judgments described above, noting that the Company has demonstrated indicators of realizability including a sustained recent earnings history, recent realization of deferred tax assets, and expectations of future taxable income (exclusive of reversing temporary differences). The Company believes that sufficient positive evidence exists as of December 31, 2023, to conclude that it is more-likely-than-not that the Company will realize substantially all of the Company’s deferred tax assets. As such, the Company released the majority of its valuation allowance, recognizing a non-cash deferred tax benefit in the fourth quarter of 2023 of $126 million. The total change during the year in the valuation allowance was $142 million in the U.S., $3 million in Canada and $3 million in other foreign jurisdictions. The Company continues to recognize a valuation allowance on certain identified deferred tax assets in the U.S. and non-U.S. jurisdictions where management believes that it is not more-likely-than-not that the Company will be able to realize the benefits of those specific deferred tax assets. In the U.S., a valuation allowance of approximately $17 million was maintained against deferred tax assets related to foreign tax credit carryovers and capital loss carryovers that have a limited carryforward period and require income of a certain character in order to be realized. In Canada and other foreign jurisdictions, a valuation allowance of approximately $8 million was maintained against deferred tax assets primarily related to capital loss carryovers in multiple jurisdictions that may only be utilized in the event of future capital gains and operating loss carryovers in jurisdictions in which the Company does not anticipate future taxable income. The Company will continue to monitor the need for a valuation allowance against its deferred tax assets and record adjustments as appropriate in future periods. There are no uncertain tax positions as of any of the periods presented. To the extent penalties and interest would be assessed on any underpayment of income tax, such accrued amounts are classified as a component of income tax provision (benefit) in the financial statements consistent with the Company’s policy. For the year ended December 31, 2023, the Company did not record any income tax expense for interest and penalties related to uncertain tax positions. The Company is subject to taxation in the U.S., various states and foreign jurisdictions. The Company has significant operations in the U.S. and Canada and to a lesser extent in various other international jurisdictions. Tax years that remain subject to examination vary by legal entity but are generally open in the U.S. for the tax years ending after 2019 and outside the U.S. for the tax years ending after 2017. In the U.S., the Company has $227 million of federal net operating loss carryforwards as of December 31, 2023, of which $80 million will expire between 2036 through 2037 and $147 million have no expiration. The Company recorded a deferred tax asset of $48 million for the U.S. federal net operating loss carryforwards. The Company has $138 million of state net operating loss carryforwards as of December 31, 2023, with the majority expiring after 2034. The Company recorded a deferred tax asset of $7 million for the U.S. state net operating loss carryforwards. Outside the U.S., the Company has $17 million of net operating loss carryforwards as of December 31, 2023, of which $11 million have no expiration and $6 million will expire between 2024 and 2032. The potential tax benefit of $3 million for non-U.S. net operating loss carryforwards has been reduced by a $3 million valuation allowance. As of December 31, 2023, the Company has $7 million of excess foreign tax credits in the U.S. The foreign tax credits will expire between 2024 and 2027. The potential tax benefit of $7 million for foreign tax credits has been reduced by a $7 million valuation allowance. In the event the Company ultimately realizes the benefit of these net operating loss carryforwards and foreign tax credits, future income tax payments will also be reduced. As of December 31, 2023, the Company has an immaterial amount of undistributed foreign earnings that may be subject to taxation upon a future distribution. The Company has not recorded deferred income taxes on undistributed foreign earnings that it considers to be indefinitely reinvested. The Company makes a determination each period whether to indefinitely reinvest these earnings. If, as a result of these reassessments, the Company distributes these earnings in the future, additional tax liabilities may result, offset by any available foreign tax credits. The Company has not recorded deferred income taxes on other outside basis differences inherent in the Company’s foreign subsidiaries that it considers to be indefinitely reinvested, as such determination is not practicable. Because of the number of tax jurisdictions in which the Company operates, its effective tax rate can fluctuate as operations and the local country tax rates fluctuate. The Company is also subject to audits by federal, state and foreign jurisdictions which may result in proposed assessments. The Company’s future tax provision will reflect any favorable or unfavorable adjustments to its estimated tax liabilities when resolved. The Company is unable to predict the outcome of these matters. However, the Company believes that none of these matters will have a material adverse effect on the results of operations or financial position of the Company.

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