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

10. Income Taxes

The domestic and foreign components of income before income taxes were as follows (in millions):

 

Year Ended December 31,

 

 

2024

 

 

2023

 

 

2022

 

United States

$

97

 

 

$

106

 

 

$

108

 

Foreign

 

17

 

 

 

32

 

 

 

31

 

Income before income taxes

$

114

 

 

$

138

 

 

$

139

 

The provision (benefit) for income taxes for 2024, 2023 and 2022 consisted of the following (in millions):

 

Year Ended December 31,

 

 

2024

 

 

2023

 

 

2022

 

U.S. Federal:

 

 

 

 

 

 

 

 

Current

$

—

 

 

$

—

 

 

$

—

 

Deferred

 

22

 

 

 

(99

)

 

 

—

 

 

 

22

 

 

 

(99

)

 

 

—

 

U.S. State:

 

 

 

 

 

 

 

 

Current

 

1

 

 

 

1

 

 

 

—

 

Deferred

 

2

 

 

 

(15

)

 

 

—

 

 

 

3

 

 

 

(14

)

 

 

—

 

Foreign:

 

 

 

 

 

 

 

 

Current

 

6

 

 

 

8

 

 

 

9

 

Deferred

 

1

 

 

 

(5

)

 

 

1

 

 

 

7

 

 

 

3

 

 

 

10

 

Income tax provision (benefit)

$

32

 

 

$

(110

)

 

$

10

 

The reconciliation between the Company’s effective tax rate on income from continuing operations and the statutory tax rate is as follows (in millions):

 

Year Ended December 31,

 

 

2024

 

 

2023

 

 

2022

 

Income tax provision at federal statutory rate

$

24

 

 

$

29

 

 

$

29

 

Foreign tax rate differential

 

1

 

 

 

1

 

 

 

1

 

State income tax provision, net of federal benefit

 

3

 

 

 

4

 

 

 

4

 

Nondeductible expenses

 

4

 

 

 

2

 

 

 

2

 

Currency translation losses

 

1

 

 

 

—

 

 

 

2

 

Capital loss carryforward

 

—

 

 

 

—

 

 

 

(2

)

Foreign tax credits

 

2

 

 

 

—

 

 

 

—

 

Change in valuation allowance

 

(4

)

 

 

(148

)

 

 

(28

)

Other

 

1

 

 

 

2

 

 

 

2

 

Income tax provision (benefit)

$

32

 

 

$

(110

)

 

$

10

 

Effective tax rate

 

28.1

%

 

 

(79.7

)%

 

 

7.2

%

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, 2024, the effective tax rate was also impacted by foreign currency translation losses and other charges incurred as a result of substantially completing the liquidation of certain foreign subsidiaries with no associated tax benefit, foreign tax credits expiring unused in the period, and the change in valuation allowance recorded against deferred tax assets. 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.

Significant components of the Company’s deferred tax assets and liabilities were as follows (in millions):

 

December 31,

 

 

2024

 

 

2023

 

 

2022

 

Deferred tax assets:

 

 

 

 

 

 

 

 

Allowances and operating liabilities

$

6

 

 

$

6

 

 

$

6

 

Net operating loss carryforwards

 

43

 

 

 

58

 

 

 

76

 

Foreign tax credit carryforwards

 

6

 

 

 

7

 

 

 

7

 

Allowance for credit losses

 

3

 

 

 

5

 

 

 

5

 

Inventory reserve

 

8

 

 

 

8

 

 

 

9

 

Stock-based compensation

 

3

 

 

 

4

 

 

 

5

 

Intangible assets

 

27

 

 

 

36

 

 

 

45

 

Capital loss carryforward

 

11

 

 

 

12

 

 

 

12

 

Tax over book basis in depreciable assets

 

3

 

 

 

4

 

 

 

4

 

Lease liabilities

 

15

 

 

 

15

 

 

 

11

 

Other

 

3

 

 

 

2

 

 

 

3

 

Total deferred tax assets

 

128

 

 

 

157

 

 

 

183

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

ROU assets

 

(14

)

 

 

(14

)

 

 

(10

)

Other

 

—

 

 

 

—

 

 

 

(1

)

Total deferred tax liabilities

 

(14

)

 

 

(14

)

 

 

(11

)

Net deferred tax assets before valuation allowance

 

114

 

 

 

143

 

 

 

172

 

Valuation allowance

 

(21

)

 

 

(25

)

 

 

(173

)

Net deferred tax assets (liabilities)

$

93

 

 

$

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.

As of December 31, 2024, the Company recognized a valuation allowance of $21 million 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. The total change during the year in the valuation allowance was a reduction of $4 million. The valuation allowance against U.S. deferred tax assets was reduced by $3 million due to utilization of capital loss carryforwards and expiration of foreign tax credits. The valuation allowance against deferred tax assets in other foreign jurisdictions was reduced by $1 million primarily due to substantially completing the liquidation of certain foreign subsidiaries. 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.

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 had 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 believed that sufficient positive evidence existed as of December 31, 2023, to conclude that it was 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.

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, 2024, 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 2020 and outside the U.S. for the tax years ending after 2018.

In the U.S., the Company has $162 million of federal net operating loss carryforwards as of December 31, 2024, of which $15 million will expire in 2037 and $147 million have no expiration. The Company recorded a deferred tax asset of $34 million for the U.S. federal net operating loss carryforwards. The Company has $123 million of state net operating loss carryforwards as of December 31, 2024, with the majority either expiring after 2034 or have no expiration. The Company recorded a deferred tax asset of $6 million for the U.S. state net operating loss carryforwards. Outside the U.S., the Company has $15 million of net operating loss carryforwards as of December 31, 2024, of which $6 million will expire between 2027 and 2036 and $9 million have no expiration. 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, 2024, the Company has $6 million of excess foreign tax credits in the U.S. The foreign tax credits will expire between 2025 and 2027. The potential tax benefit of $6 million for foreign tax credits has been reduced by a $6 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, 2024, 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.