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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Note 8—Income Taxes Income tax expense (benefit) consisted of the following:
|  | Year Ended December 31, |
(in thousands) |  | 2024 |  |  | 2023 |  |  | 2022 |
Current: |  |  |  |  |  |  |  |  |
U.S. Federal |  | $ | (1,587 | ) |  | $ | 2,989 |  |  | $ | 903 |
State and local |  |  | 358 |  |  |  | 587 |  |  |  | 107 |
Foreign |  |  | 27,725 |  |  |  | 28,321 |  |  |  | 22,351 |
Total current taxes |  |  | 26,496 |  |  |  | 31,897 |  |  |  | 23,361 |
Deferred: |  |  |  |  |  |  |  |  |
U.S. Federal |  |  | (5,910 | ) |  |  | (6,206 | ) |  |  | (6,544 | )
State and local |  |  | 809 |  |  |  | (1,612 | ) |  |  | (1,734 | )
Foreign |  |  | (827 | ) |  |  | (7,174 | ) |  |  | 1,030 |
Total deferred taxes |  |  | (5,928 | ) |  |  | (14,992 | ) |  |  | (7,248 | )
Total income tax expense |  | $ | 20,568 |  |  | $ | 16,905 |  |  | $ | 16,113 |
Income (loss) before income taxes consisted of the following:
|  | Year Ended December 31, |
(in thousands) |  | 2024 |  |  | 2023 |  |  | 2022 |
United States |  | $ | (32,871 | ) |  | $ | (31,534 | ) |  | $ | (45,390 | )
Foreign |  |  | 116,766 |  |  |  | 112,754 |  |  |  | 129,732 |
Total income before income taxes |  | $ | 83,895 |  |  | $ | 81,220 |  |  | $ | 84,342 |
Income tax expense differed from the amounts computed by applying the U.S. Federal statutory income tax rate to income (loss) before income taxes as follows:
|  | Year Ended December 31, |
(in thousands) |  | 2024 |  |  | 2023 |  |  | 2022 |
Tax at statutory rate |  | $ | 17,618 |  |  | $ | 17,056 |  |  | $ | 17,713 |
State taxes, net of federal tax effect |  |  | 923 |  |  |  | (809 | ) |  |  | (1,285 | )
Effect of foreign operations and tax incentives |  |  | (3,110 | ) |  |  | (7,474 | ) |  |  | (5,954 | )
Permanent differences |  |  | (5,046 | ) |  |  | 6,768 |  |  |  | 3,105 |
Change in valuation allowance |  |  | 8,155 |  |  |  | (241 | ) |  |  | 41 |
Global minimum tax |  |  | 1,038 |  |  |  | — |  |  |  | — |
GILTI and other foreign income inclusion |  |  | 1,429 |  |  |  | (450 | ) |  |  | 1,768 |
Stock-based compensation |  |  | (423 | ) |  |  | 623 |  |  |  | 447 |
Non-deductible compensation |  |  | 1,370 |  |  |  | 1,883 |  |  |  | 807 |
Change in uncertain tax benefit reserve |  |  | — |  |  |  | 370 |  |  |  | 40 |
Other |  |  | (1,386 | ) |  |  | (821 | ) |  |  | (569 | )
Total income tax expense |  | $ | 20,568 |  |  | $ | 16,905 |  |  | $ | 16,113 |
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 to 21% from 35%, implementing a territorial tax system, adding a global intangible taxation regime (GILTI) and imposing a transition tax (Transition Tax) on deemed repatriated cumulative earnings of foreign subsidiaries. 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 accounts for the GILTI as a period cost and includes the effect in the period in which it is incurred and it is not included as a factor in the determination of deferred taxes. A Global Minimum Tax (GMT) directive has been enacted by the Organization for Economic Cooperation and Development (OECD) and various foreign jurisdictions have implemented new laws based on the directive effective as of January 1, 2024. The GMT has been implemented by several international jurisdictions where the Company conducts its manufacturing operations. The adoption by these jurisdictions of the GMT requires that the Company's applicable foreign operations include in their income tax expense an additional “top-up” tax that achieves a corporate minimum effective tax rate of 15% if the overall adjusted effective tax rate is less than 15% for the jurisdiction. The Company has included in its income tax expense for the calendar year ended December 31, 2024 an estimated amount of GMT for its foreign subsidiaries as required under the applicable GMT rules of the jurisdictions that have adopted the GMT directives. The Company incurred a total Transition Tax liability of $80.5 million after reduction for net operating loss carryforwards, U.S. tax credit carryforwards and foreign tax credit carryforwards that were allowed to be utilized against its 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 remaining as of December 31, 2024 of $20.1 million. The Company intends to pay this remaining liability in 2025. The $20.1 million is included in current liabilities as of December 31, 2024. During 2024, 2023 and 2022, the Company repatriated $55.0 mi llion, $70.0 million and $20.0 million, respectively, of foreign earnings to the United States. As of December 31, 2024, the Company has approximately $514.3 million in cumulative undistributed foreign earnings related to 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 are considered to be non-permanently reinvested and are 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 $12.1 million of unrecognized deferred tax liabilities 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 tax on cash distributions. The tax effects of temporary differences that give rise to significant portions of the Company's deferred tax assets and liabilities were as follows:
|  | December 31, |
(in thousands) |  | 2024 |  |  | 2023 |
Deferred tax assets: |  |  |  |  |  |
Carrying value of inventories |  | $ | 3,904 |  |  | $ | 5,782 |
Accrued liabilities and allowances deductible for tax purposes on a cash basis |  |  | 8,317 |  |  |  | 10,213 |
Goodwill |  |  | 254 |  |  |  | 554 |
Stock-based compensation |  |  | 5,973 |  |  |  | 5,853 |
Operating lease liabilities |  |  | 30,063 |  |  |  | 33,260 |
Net operating loss carryforwards |  |  | 26,014 |  |  |  | 12,662 |
Tax credit carryforwards |  |  | 6,677 |  |  |  | 7,372 |
Research and experimentation |  |  | 18,580 |  |  |  | 15,861 |
Interest rate swap and foreign exchange hedging |  |  | 970 |  |  |  | — |
Other |  |  | 10,484 |  |  |  | 8,540 |
Total gross deferred tax assets |  |  | 111,236 |  |  |  | 100,097 |
Less: valuation allowance |  |  | (26,657 | ) |  |  | (18,502 | )
Total net deferred tax assets |  |  | 84,579 |  |  |  | 81,595 |
Deferred tax liabilities: |  |  |  |  |  |
Plant and equipment, due to differences in depreciation |  |  | (11,469 | ) |  |  | (10,652 | )
Operating lease right-of-use assets |  |  | (29,802 | ) |  |  | (32,999 | )
Intangible assets, due to differences in amortization |  |  | (7,830 | ) |  |  | (8,946 | )
Foreign taxes |  |  | (898 | ) |  |  | (898 | )
Interest rate swap and foreign exchange hedging |  |  | — |  |  |  | (52 | )
Other |  |  | (688 | ) |  |  | (1,105 | )
Total gross deferred tax liabilities |  |  | (50,687 | ) |  |  | (54,652 | )
Total net deferred tax assets |  | $ | 33,892 |  |  | $ | 26,943 |
The net deferred tax assets are classified as follows: |  |  |  |  |  |
Long-term assets |  | $ | 33,892 |  |  | $ | 26,943 |
Long-term liabilities |  |  | — |  |  |  | — |
Total net deferred tax assets |  | $ | 33,892 |  |  | $ | 26,943 |
All of the Company's deferred tax assets and liabilities are classified as long-term on the consolidated balance sheets as of December 31, 2024 and 2023. Deferred tax assets and liabilities are offset for each tax jurisdiction and presented as a single net long-term amount on the consolidated balance sheet. During 2024 and 2023, the Company incurred and capitalized certain research and experimentation expenses that are required to be capitalized as an amortizable asset under Internal Revenue Code (IRC) Section 174 and to be amortized over a period of five years. This requirement is based on the implementation of the U.S. Tax Reform Act of 2017 and became effective on January 1, 2022. As of December 31, 2024, the Company's net deferred tax asset from capitalized research and experimentation expenses wa s $18.6 million. The net change in the Company's valuation allowance for 2024, 2023 and 2022 was a $8.2 million increase, $0.2 million decrease and a less than $0.1 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. As of December 31, 2024, 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, 2024, the Company has U.S. state operating loss carryforw ards of approximately $20.5 million which will expire from 2037 to 2044; foreign operating loss carryforwards of approximately $11.7 million with indefinite carryforward periods; and foreign operating loss carryforwards of approximately $76.9 million which will expire at varying dates through 2034. 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 $0.1 million which will expire at varying dates through 2026. The Company also has U.S. research and development tax credit carryforwards of $6.6 million which w ill expire from 2038 through 2044. The Company has been granted certain tax incentives, including tax holidays, for its subsidiaries in Thailand and China that expire at various dates, unless extended or otherwise renegotiated and are subject to certain conditions with which the Company expects to comply. The tax incentives in Thailand will expire on December 31, 2030. The tax incentives in China will expire on December 31, 2026. In the fourth quarter of 2024, the Company was awarded a China tax holiday retroactive to January 1, 2024 through December 31, 2026. The tax holiday reduces the statutory tax rate from 25% to 15%. The net impact of the current tax incentives was to lower income tax expense for 2024, 2023, and 2022 by approximately $5.8 million (approximately $0.16 per diluted share), $6.3 million (approximately $0.17 per diluted share) and $9.0 million (approximately $0.25 per diluted share), respectively, as follows:
|  | Year Ended December 31, |
(in thousands) |  | 2024 |  |  | 2023 |  |  | 2022 |
Thailand |  | $ | 4,110 |  |  | $ | 4,923 |  |  | $ | 8,362 |
China |  |  | 1,663 |  |  |  | 1,338 |  |  |  | 643 |
Total tax incentives |  | $ | 5,773 |  |  | $ | 6,261 |  |  | $ | 9,005 |
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 consolidated financial statements. As of December 31, 2024, the total amount of the reserve for uncertain tax benefits, including interest and penalties, was $7.3 million. A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows:
|  | December 31, |
(in thousands) |  | 2024 |  |  | 2023 |  |  | 2022 |
Balances as of the beginning of the year |  | $ | 9,061 |  |  | $ | 9,061 |  |  | $ | 9,121 |
Additions related to current year tax positions |  |  | — |  |  |  | — |  |  |  | — |
Additions related to prior year tax positions |  |  | — |  |  |  | — |  |  |  | — |
Decreases related to prior year tax positions |  |  | (1,775 | ) |  |  | — |  |  |  | — |
Decreases related to lapse of statutes |  |  | — |  |  |  | — |  |  |  | (60 | )
Balances as of the end of the year |  | $ | 7,286 |  |  | $ | 9,061 |  |  | $ | 9,061 |
During 2024, there were decreases of prior year tax positions due to settlements of tax examinations. During 2023, there were no uncertain tax position changes. During 2022, the Company released less than $0.1 million of uncertain tax benefits related to lapse of statutes. The reserve is classified as a current or long-term liability on the consolidated balance sheet 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 tax benefits as a component of current income tax expense. As of December 31, 2024, the Company did no t have any accrued potential interest on unrecognized tax benefits included in the reserve. 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 2018 to 2024. 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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