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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Note 8—Income Taxes Income tax expense (benefit) based on income before income taxes consisted of the following:
|  | Year Ended December 31, |
(in thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |
Current: |  |  |  |  |  |  |  |  |
U.S. Federal |  | $ | 903 |  |  | $ | 6 |  |  | $ | 1,406 |
State and local |  |  | 107 |  |  |  | 1,702 |  |  |  | 24 |
Foreign |  |  | 22,351 |  |  |  | 14,812 |  |  |  | 9,120 |
|  |  | 23,361 |  |  |  | 16,520 |  |  |  | 10,550 |
Deferred: |  |  |  |  |  |  |  |  |
U.S. Federal |  |  | (6,544 | ) |  |  | (6,179 | ) |  |  | (3,784 | )
State and local |  |  | (1,734 | ) |  |  | (1,380 | ) |  |  | (1,021 | )
Foreign |  |  | 1,030 |  |  |  | 676 |  |  |  | (2,507 | )
|  |  | (7,248 | ) |  |  | (6,883 | ) |  |  | (7,312 | )
|  | $ | 16,113 |  |  | $ | 9,637 |  |  | $ | 3,238 |
Worldwide income (loss) before income taxes consisted of the following:
|  | Year Ended December 31, |
(in thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |
United States |  | $ | (45,390 | ) |  | $ | (34,930 | ) |  | $ | (33,790 | )
Foreign |  |  | 129,732 |  |  |  | 80,337 |  |  |  | 51,083 |
|  | $ | 84,342 |  |  | $ | 45,407 |  |  | $ | 17,293 |
Income tax expense differed from the amounts computed by applying the U.S. Federal statutory income tax rate to income before income taxes as a result of the following:
|  | Year Ended December 31, |
(in thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |
Tax at statutory rate |  | $ | 17,713 |  |  | $ | 9,536 |  |  | $ | 3,632 |
State taxes, net of federal tax effect |  |  | (1,285 | ) |  |  | (36 | ) |  |  | (788 | )
Effect of foreign operations and tax incentives |  |  | (3,907 | ) |  |  | (4,048 | ) |  |  | (6,372 | )
Change in valuation allowance |  |  | 41 |  |  |  | (336 | ) |  |  | (3,029 | )
Stock-based compensation |  |  | 447 |  |  |  | (69 | ) |  |  | 347 |
GILTI |  |  | 1,768 |  |  |  | 2,104 |  |  |  | 1,667 |
Foreign tax refund benefit |  |  | — |  |  |  | (7,285 | ) |  |  | — |
Losses in foreign jurisdictions for which no benefit has been provided |  |  | 3 |  |  |  | 2,608 |  |  |  | 5,798 |
Change in uncertain tax benefits reserve |  |  | 40 |  |  |  | 8,858 |  |  |  | (31 | )
Other |  |  | 1,293 |  |  |  | (1,695 | ) |  |  | 2,014 |
Total income tax expense |  | $ | 16,113 |  |  | $ | 9,637 |  |  | $ | 3,238 |
The U.S. Tax Cuts and Jobs Act (U.S. Tax Reform), which was signed into law on December 22, 2017, significantly changed U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system, adding a global intangible taxation regime and imposing a transition (Transition Tax) tax on deemed repatriated cumulative earnings of foreign subsidiaries. The U.S. Tax Reform reduced the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. The Company recorded the effects of the changes in the tax rate in the Company’s deferred tax assets and liabilities as of December 31, 2017. To minimize tax base erosion with a territorial tax system, the U.S. Tax Reform enacted a new global intangible low-taxed income (GILTI) provision that requires the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiaries tangible assets. The taxable earnings can be offset by a limited deemed paid foreign tax credit with no carrybacks or carryforwards available. The Company is subject to the GILTI provisions. The Company elected to account for the GILTI as a period cost and include the effect in the period in which it is incurred and not include it as a factor in the determination of deferred taxes. The Company incurred a total Transition Tax liability of $80.5 million after reduction for net operating loss carryforwards, US tax credit carryforwards, and foreign tax credit carryforwards that were allowed to be utilized against the total tax liability as of December 31, 2017. The Company made an election to pay the net tax liability in installments. The Company has a total Transition Tax liability as of December 31, 2022 of $48.3 million. The Company intends to pay this liability over the remaining three year payment period as prescribed by the U.S. Tax Reform and regulatory guidance issued by the IRS. $48.3 million of the Transition Tax liability is included in other long-term liabilities. Payments for years subsequent to December 31, 2022 are as follows: 2023, $12.1 million; 2024, $16.1 million; 2025, $20.1 million. During 2022 and 2021, the Company repatriated $20.0 mi llion and $35.0 million, respectively, of foreign earnings to the U.S. As of December 31, 2022, the Company has approximately $455.0 million in cumulative undistributed foreign earnings of its foreign subsidiaries. These earnings would not be subject to U.S. federal income tax, if distributed to the Company. The Company changed its assertion during 2018 on its foreign subsidiaries earnings that are permanently reinvested. A certain amount of earnings from specific foreign subsidiaries are permanently reinvested, and certain foreign earnings from other specific foreign subsidiaries is considered to be non-permanently reinvested and is available for immediate distribution to the Company. Income taxes have been accrued on the non-permanently reinvested foreign earning s including the 2017 Transition Tax, the U.S. tax on GILTI, and any applicable foreign or local withholding taxes. The Company estimates that it has approximately $6.0 million of unrecognized deferred tax liability related to any remaining undistributed permanently reinvested foreign earnings that have not already been subject to the 2017 Transition Tax, the U.S. tax o n GILTI, and any applicable foreign income tax or local withholding taxes on cash distributions. During 2022, the Company recorded an additional tax benefit of $7.3 million with respect to a refund claim of foreign cash taxes of $16.5 million that was filed in 2021. $9.2 million of the total refund claim was recorded previously in 2018. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:
|  | December 31, |
(in thousands) |  | 2022 |  |  | 2021 |
Deferred tax assets: |  |  |  |  |  |
Carrying value of inventories |  | $ | 4,809 |  |  | $ | 2,704 |
Accrued liabilities and allowances deductible for tax purposes on a cash basis |  |  | 7,811 |  |  |  | 10,592 |
Goodwill |  |  | 937 |  |  |  | 1,320 |
Stock-based compensation |  |  | 5,032 |  |  |  | 3,741 |
Operating right-of-use lease liabilities |  |  | 23,252 |  |  |  | 24,851 |
Net operating loss carryforwards |  |  | 16,848 |  |  |  | 17,417 |
Tax credit carryforwards |  |  | 5,805 |  |  |  | 4,629 |
Interest rate swap |  |  | — |  |  |  | 1,133 |
Research and experimentation |  |  | 10,691 |  |  |  | — |
Other |  |  | 4,086 |  |  |  | 5,961 |
|  |  | 79,271 |  |  |  | 72,348 |
Less: valuation allowance |  |  | (18,743 | ) |  |  | (18,702 | )
Net deferred tax assets |  |  | 60,528 |  |  |  | 53,646 |
Deferred tax liabilities: |  |  |  |  |  |
Plant and equipment, due to differences in depreciation |  |  | (7,957 | ) |  |  | (4,887 | )
Operating right-of-use lease assets |  |  | (22,991 | ) |  |  | (24,590 | )
Intangible assets, due to differences in amortization |  |  | (10,502 | ) |  |  | (11,687 | )
Foreign withholding tax |  |  | (4,902 | ) |  |  | (4,902 | )
Interest rate swap |  |  | (263 | ) |  |  | — |
Other |  |  | (2,173 | ) |  |  | (1,692 | )
Gross deferred tax liability |  |  | (48,788 | ) |  |  | (47,758 | )
Net deferred tax liability |  | $ | 11,740 |  |  | $ | 5,888 |
The net deferred tax liability is classified as follows: |  |  |  |  |  |
Long-term asset |  | $ | 12,235 |  |  | $ | 5,972 |
Long-term liability |  |  | (495 | ) |  |  | (84 | )
Total |  | $ | 11,740 |  |  | $ | 5,888 |
All deferred taxes are classified as non-current on the balance sheet as of December 31, 2022 and 2021. All deferred tax assets and liabilities are offset and presented as a single net noncurrent amount by each tax jurisdiction. During 2022, the Company has capitalized research and experimentation expenses that are required to be capitalized as an amortizable asset under IRC Section 174 and amortized over a period of five years. This requirement is based on the implementation of the US Tax Reform Act of 2017 beginning as of January 1, 2022. As of December 31, 2022, the Company has a net deferred tax asset from capitalized research and experimentation expenses of $10.7 million. The net change in the total valuation allowance for 2022, 2021 and 2020 was a $0.04 million increase, a $0.3 million decrease, and a $3.0 million increase, respectively. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences, net of the existing valuation allowances as of December 31, 2022. As of December 31, 2022, the Company had no U.S. Federal operating loss carryforward as the final balance of the US loss carryforward was utilized in 2022. The Company has US state operating loss carryforwards of approximately $13.8 million which will expire from 2037 to 2042; foreign operating loss carryforwards of approximately $11.5 million with indefinite carryforward periods; and foreign operating loss carryforwards of approximately $47.2 million which will expire at varying dates through 2031. The utilization of these net operating loss carryforwards is limited to the future operations of the Company in the tax jurisdictions in which such carryforwards arose. The Company has state tax credit carryforwards of $1.7 million which will expire at varying dates through 2026. The Company also has U.S. research and development tax credit carryforwards of $4.1 million w hich will expire from 2038 through 2042. The Company has been granted certain tax incentives, including tax holidays, for its subsidiaries in China, Malaysia, and Thailand that expire at various dates, unless extended or otherwise renegotiated and are subject to certain conditions with which the Company expects to comply. The expiration dates of these tax incentives are as follows: 2023 in China and 2030 in Thailand. The Malaysia tax incentive expired as of March 31, 2021, but the Company has applied for an extension of the Malaysia tax holiday in 2022 which will extend the tax holiday for another five years until 2026. We have not yet received any official response for the Malaysia tax holiday application. The net impact of these tax incentives was to lower income tax expense for 2022, 2021, and 2020 by approximately $9.0 million (approximately $0.25 per diluted share), $4.5 million (approximately $0.13 per diluted share) and $5.0 million (approximately $0.13 per diluted share), respectively, as follows:
|  | Year Ended December 31, |
(in thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |
China |  | $ | 643 |  |  | $ | 443 |  |  | $ | — |
Malaysia |  |  | — |  |  |  | 1,946 |  |  |  | 4,945 |
Thailand |  |  | 8,362 |  |  |  | 5,360 |  |  |  | 2,496 |
|  | $ | 9,005 |  |  | $ | 7,749 |  |  | $ | 7,441 |
The Company must determine whether it is “more-likely-than-not” that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Once it is determined that a position meets the more-likely-than-not recognition threshold, the position is measured to determine the amount of benefit to recognize in the financial statements. As of December 31, 2022, the total amount of the reserve for uncertain tax benefits including interest and penalties was $9.5 million. A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows:
|  | December 31, |
(in thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |
Balance as of January 1 |  | $ | 9,121 |  |  | $ | 499 |  |  | $ | 513 |
Additions related to current year tax positions |  |  | — |  |  |  | 7,424 |  |  |  | — |
Additions related to prior year tax positions |  |  | — |  |  |  | 1,575 |  |  |  | — |
Decreases related to prior year tax positions |  |  | — |  |  |  | (138 | ) |  |  | — |
Decreases related to lapse of statutes |  |  | (60 | ) |  |  | (239 | ) |  |  | (14 | )
Balance as of December 31 |  | $ | 9,061 |  |  | $ | 9,121 |  |  | $ | 499 |
During 2022, the Company released $60 thousand of uncertain tax benefits related to lapse of statutes. During 2021, the Company recorded additional uncertain tax benefits related to prior year and current tax positions of $1.6 million and $7.4 million, respectively. During 2020, the Company released $14 thousand of uncertain tax benefits related to lapse of statutes. The reserve is classified as a current or long-term liability in the consolidated balance sheets based on the Company’s expectation of when the items will be settled. The Company records interest expense and penalties accrued in relation to uncertain income tax benefits as a component of current income tax expense. The amount of accrued potential interest on unrecognized tax benefits included in the reserve as of December 31, 2022 is $0.4 million. There is no reserve for penalties currently. The amount of accrued potential interest on unrecognized tax benefits included in the reserve as of December 31, 2021 is $0.3 million. The reserve for potential penalties is $17 thousand. The Company did no t record any interest and penalties during 2020. The Company and its subsidiaries in Brazil, China, Ireland, Malaysia, Mexico, Netherlands, Romania, Singapore, Thailand and the United States remain open to examination by the various local taxing authorities, in total or in part, for fiscal years 2015 to 2022. During the course of such income tax examinations, disputes may occur as to matters of fact or law. Also, in most tax jurisdictions, the passage of time without examination will result in the expiration of applicable statutes of limitations thereby precluding examination of the tax period(s) for which such statute of limitation has expired. The Company believes that it has adequately provided for its tax liabilities.

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- 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 -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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