XML 29 R14.htm IDEA: XBRL DOCUMENT
v3.24.0.1

Note 7 - Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2023
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
7. | Income taxes
The components of income tax expense for the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):
|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Current tax: |  |  |  |  |  |  |  |  |  |  |  |
Netherlands |  | $ | 518 |  |  | $ | 283 |  |  | $ | 216 |
Foreign |  |  | 54,267 |  |  |  | 42,308 |  |  |  | 16,777 |
Total current tax |  |  | 54,785 |  |  |  | 42,591 |  |  |  | 16,993 |
Deferred tax: |  |  |  |  |  |  |  |  |  |  |  |
Netherlands |  |  | - |  |  |  | - |  |  |  | - |
Foreign |  |  | (10,478 | ) |  |  | (1,344 | ) |  |  | (726 | )
Total deferred tax |  |  | (10,478 | ) |  |  | (1,344 | ) |  |  | (726 | )
Income tax expense |  | $ | 44,307 |  |  | $ | 41,247 |  |  | $ | 16,267 |
The Netherlands and foreign components of loss from continuing operations before income taxes and equity in income of joint ventures for the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):
|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Netherlands |  | $ | (5,232 | ) |  | $ | (13,984 | ) |  | $ | (19,190 | )
Foreign |  |  | 13,326 |  |  |  | 19,355 |  |  |  | (113,181 | )
Total |  | $ | 8,094 |  |  | $ | 5,371 |  |  | $ | (132,371 | )
The provision for income taxes differs from the amount computed by applying Netherlands statutory income tax rate of 25.8% in effect as of December 31, 2023, (2022: 25.8%) to loss from continuing operations before taxes and equity in joint ventures for the reasons below (in thousands):
|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Statutory tax rate |  |  | 25.8 | % |  |  | 25.8 | % |  |  | 25.0 | %
Income tax expense (benefit) at statutory rate |  | $ | 2,089 |  |  | $ | 1,387 |  |  | $ | (33,093 | )
Permanent differences |  |  | 9,332 |  |  |  | 12,187 |  |  |  | 14,123 |
Effect of overseas tax rates |  |  | 30,572 |  |  |  | (4,024 | ) |  |  | 9,905 |
Net tax charge related to attributes with full valuation allowance |  |  | (7,408 | ) |  |  | 28,267 |  |  |  | 28,607 |
Exempt dividends from joint ventures |  |  | - |  |  |  | (2,649 | ) |  |  | (1,014 | )
Return to provision adjustments |  |  | (884 | ) |  |  | (5,966 | ) |  |  | (5,001 | )
Withholding taxes |  |  | 3,479 |  |  |  | 3,029 |  |  |  | 1,995 |
Foreign exchange movements on tax balances |  |  | 2,908 |  |  |  | 694 |  |  |  | 67 |
Movement in uncertain tax positions |  |  | 2,958 |  |  |  | 8,322 |  |  |  | 678 |
Other differences |  |  | 1,261 |  |  |  | - |  |  |  | - |
Income tax expense |  | $ | 44,307 |  |  | $ | 41,247 |  |  | $ | 16,267 |
Effective tax rate |  |  | 547.4 | % |  |  | 768.0 | % |  |  | (12.3 | )%
Deferred tax assets and liabilities are recorded for the anticipated future tax effects of temporary differences between the financial statement basis and tax basis of our assets and liabilities and are measured using the tax rates and laws expected to be in effect when the differences are projected to reverse. The primary components of our deferred tax assets and liabilities as of December 31, 2023 and 2022 were as follows (in thousands):
|  | December 31, |
|  | 2023 |  |  | 2022 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss carry forwards |  | $ | 760,720 |  |  | $ | 771,963 |
Employee compensation and benefits |  |  | 10,224 |  |  |  | 9,977 |
Depreciation |  |  | 77,174 |  |  |  | 66,300 |
Other |  |  | 53,202 |  |  |  | 44,133 |
Intangibles |  |  | 13,485 |  |  |  | 16,197 |
Valuation allowance |  |  | (862,201 | ) |  |  | (881,286 | )
Total deferred tax assets |  |  | 52,604 |  |  |  | 27,284 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation |  |  | (26,172 | ) |  |  | (13,630 | )
Goodwill and other intangibles |  |  | (32,955 | ) |  |  | (36,968 | )
Investment in partnership |  |  | (1,274 | ) |  |  | (911 | )
Other |  |  | (14,909 | ) |  |  | (6,194 | )
Total deferred tax liabilities |  |  | (75,310 | ) |  |  | (57,703 | )
Net deferred tax liabilities |  | $ | (22,706 | ) |  | $ | (30,419 | )
We recognize a valuation allowance where it is more likely than not that some or all of the deferred tax assets will not be realized. The realization of a deferred tax asset is dependent upon the ability to generate sufficient taxable income in the appropriate taxing jurisdictions where the deferred tax assets are initially recognized. The changes in valuation allowances were as follows (in thousands):
|  | Year Ended December 31 |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Balance at the beginning of the period |  | $ | 881,286 |  |  | $ | 829,087 |  |  | $ | 512,711 |
Additions attributable to the Merger |  |  | - |  |  |  | - |  |  |  | 187,319 |
Additions not attributable to the Merger |  |  | 88,497 |  |  |  | 146,451 |  |  |  | 160,299 |
Reductions |  |  | (107,582 | ) |  |  | (94,252 | ) |  |  | (31,242 | )
Balance at end of period |  | $ | 862,201 |  |  | $ | 881,286 |  |  | $ | 829,087 |
As of December 31, 2023, the Company had U.S. federal net operating loss carryforwards (“NOLs”) excluding interest limitations of approximately $561.1 million, net of existing Section 382 (as defined below) limitations. $155.2 million of these NOLs were incurred prior to January 1, 2018 and will begin to expire, if unused, in 2036. $405.9 million of these NOLs were incurred on or after January 1, 2018 and will not expire and will be carried forward indefinitely. The net operating loss carryforwards have been adjusted due to expected utilization during 2023 and integration related restructuring in the U.S. as the Company consolidated U.S. operations under one operating group. Section 382 of the Code (“Section 382”) imposes an annual limitation on the amount of NOLs that may be used to offset taxable income when a corporation has undergone an “ownership change” (as determined under Section 382). An ownership change generally occurs if one or more stockholders (or groups of stockholders) who are each deemed to own at least 5% of such corporation’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. In the event that an ownership change occurs, utilization of the relevant corporation’s NOLs would be subject to an annual limitation under Section 382, generally determined, subject to certain adjustments, by multiplying (i) the fair market value of such corporation’s stock at the time of the ownership change by (ii) a percentage approximately equivalent to the yield on long-term tax-exempt bonds during the month in which the ownership change occurs. Any unused annual limitation may be carried over to later years. The Company underwent an ownership change under Section 382 as a result of the Merger, which will trigger a limitation (calculated as described above) on the combined company’s ability to utilize any historic Frank’s NOLs and will cause some of the Frank’s NOLs incurred prior to January 1, 2018 to expire before the combined company will be able to utilize them to reduce taxable income in future periods. The exchange of ordinary shares of Legacy Expro for shares of the Company’s common stock (“Company Common Stock”) in the Merger was, standing alone, insufficient to result in an ownership change with respect to Legacy Expro. However, the Company will undergo an ownership change as a result of the Merger taking into account other changes in ownership of Company stock occurring within the relevant three-year period described above. Due to the ownership change with respect to Legacy Expro as a result of the Merger, the combined company will be prevented from fully utilizing Legacy Expro’s historic NOLs incurred prior to January 1, 2018 prior to their expiration. It is our intention that all cash and earnings of our subsidiaries as of December 31, 2023, are permanently reinvested and will be used to meet operating cash flow needs. Existing plans do not demonstrate a need to repatriate foreign cash to fund parent company activity, however, should we determine that parent company funding is required, we estimate that any such cash needs may be met without adverse tax consequences. We have performed an analysis of uncertain tax positions in the various jurisdictions in which we operate and concluded that we are adequately provided. Our tax filings are subject to regular audits by tax authorities in the various jurisdictions in which we operate. Tax liabilities are based on estimates, however due to the uncertain and complex application of tax legislation, the ultimate resolution of audits may be materially different to our estimates. The Company is subject to income taxation in many jurisdictions around the world. The following table presents the changes in our uncertain tax positions as of December 31, 2023 and 2022 (in thousands):
|  | Year ended December 31 |
|  | 2023 |  |  | 2022 |
Balance at the beginning of the period |  | $ | 88,137 |  |  | $ | 76,114 |
Additions attributable to the Merger |  |  | - |  |  |  | 7,259 |
Additions based on tax positions related to current period not attributable to the Merger |  |  | 3,042 |  |  |  | 8,009 |
Additions for tax positions of prior year period not attributable to the Merger |  |  | 2,125 |  |  |  | 2,371 |
Settlements with tax authorities |  |  | (1,945 | ) |  |  | (2,490 | )
Reductions for tax positions of prior years |  |  | (714 | ) |  |  | (547 | )
Reductions due to the lapse of statute of limitations |  |  | (976 | ) |  |  | (1,525 | )
Effect of changes in foreign exchange rates |  |  | (25 | ) |  |  | (1,054 | )
Balance at the end of the period |  | $ | 89,644 |  |  | $ | 88,137 |
The amounts above include penalties and interest of $11.6 million and $9.8 million for the years ended December 31, 2023 and 2022, respectively. We classify penalties and interest relating to uncertain tax positions within income tax expense in the consolidated statements of operations. Approximately $59.5 million and $58.0 million of unrecognized tax benefits as of December 31, 2023 and 2022 respectively, included in “Other non-current liabilities” on the consolidated balance sheets, would positively impact our future rate and be recognized as additional tax benefit in our statement of operations if resolved in our favor. Approximately $30.1 million of unrecognized tax benefits as of December 31, 2023 and 2022, respectively, relate to certain deductions and should not impact our future rate. We do not foresee material resolution of these positions in the coming 12 months. We file income tax returns in the Netherlands and in various other foreign jurisdictions in respect of the Company’s subsidiaries. In all cases we are no longer subject to income tax examination by tax authorities for years prior to 2008. Tax filings of our subsidiaries, branches and related entities are routinely examined in the normal course of business by the relevant tax authorities. We believe that there are no jurisdictions in which the outcome of unresolved issues is likely to be material to our results of operations, financial position or cash flows. In 2021 the OECD announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15%. Subsequently multiple sets of administrative guidance have been issued. Many non-US tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 (including the European Union Member States) with the adoption of additional components in later years or announced their plans to enact legislation in future years. We are continuing to evaluate the impacts of enacted legislation and pending legislation to enact Pillar Two Model Rules in the non-US tax jurisdictions we operate in.

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 13 -Publisher FASB -URI https://asc.fasb.org//1943274/2147480990/946-20-50-13 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//740/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 14 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-14 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-21 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 270 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482526/740-270-50-1 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 17 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-17 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 30 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482603/740-30-50-2 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration