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Income Tax | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Tax | 14. Income Tax Income (loss) before income taxes consisted of the following:
|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
|  | (In thousands) |
Domestic |  | $ | (15,464 | ) |  | $ | (33,082 | ) |  | $ | (135,403 | )
Foreign |  |  | 28,932 |  |  |  | 37,785 |  |  |  | 9,856 |
Total |  | $ | 13,468 |  |  | $ | 4,703 |  |  | $ | (125,547 | )
The income tax provision (benefit) consists of the following:
|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
|  | (In thousands) |
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | (451 | ) |  | $ | (8,632 | ) |  | $ | 833 |
Foreign |  |  | 15,992 |  |  |  | 8,635 |  |  |  | 10,579 |
Total current |  |  | 15,541 |  |  |  | 3 |  |  |  | 11,412 |
Deferred: |  |  |  |  |  |  |  |  |
Federal |  |  | 343 |  |  |  | (289 | ) |  |  | (56 | )
Foreign |  |  | (3,020 | ) |  |  | 6,613 |  |  |  | (8,410 | )
Total deferred |  |  | (2,677 | ) |  |  | 6,324 |  |  |  | (8,466 | )
Total |  | $ | 12,864 |  |  | $ | 6,327 |  |  | $ | 2,946 |
The Company’s effective income tax rate fluctuates from the U.S. statutory tax rate based on, among other factors, changes in pretax income in jurisdictions with varying statutory tax rates, impact of valuation allowances, changes in tax legislation, and other permanent differences related to the recognition of income and expense between U.S. GAAP and applicable tax rules. The difference between the effective income tax rate reflected in the provision for income taxes and the U.S. federal statutory rate was as follows:
|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Federal income tax statutory rate |  |  | 21.00 | % |  |  | 21.00 | % |  |  | 21.00 | %
Change in withholding tax reserve |  |  | 3.86 |  |  |  | (4.52 | ) |  |  | 0.79 |
Foreign income tax rate differential |  |  | 7.37 |  |  |  | 31.51 |  |  |  | - |
Foreign development tax incentive |  |  | (1.06 | ) |  |  | 12.32 |  |  |  | (0.24 | )
Exempt income |  |  | (1.30 | ) |  |  | (4.54 | ) |  |  | 0.54 |
Foreign taxes and inclusions (net of FTC) |  |  | 6.16 |  |  |  | 82.63 |  |  |  | (1.15 | )
Nondeductible expenses |  |  | 21.88 |  |  |  | 38.72 |  |  |  | (2.82 | )
Change in valuation allowance |  |  | 5.80 |  |  |  | 336.85 |  |  |  | (21.87 | )
Changes to prior year accruals |  |  | 33.91 |  |  |  | 37.56 |  |  |  | 0.23 |
Deferred tax rate change |  |  | (0.13 | ) |  |  | 0.77 |  |  |  | 0.11 |
Change in uncertain tax positions |  |  | (3.54 | ) |  |  | (420.45 | ) |  |  | (0.19 | )
Interest on net equity |  |  | - |  |  |  | 9.23 |  |  |  | 0.41 |
General business credits |  |  | (7.09 | ) |  |  | (13.91 | ) |  |  | 1.31 |
Branch income |  |  | 9.07 |  |  |  | 9.93 |  |  |  | (0.29 | )
Other |  |  | (0.42 | ) |  |  | (2.57 | ) |  |  | (0.19 | )
Effective tax rate |  |  | 95.51 | % |  |  | 134.53 | % |  |  | -2.36 | %
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred tax assets (liabilities) are as follows:
|  | As of December 31, |
|  | 2023 |  |  | 2022 |
|  | (In thousands) |
Deferred tax assets: |  |  |  |  |  |
Foreign tax credit carryforward |  | $ | 19,179 |  |  | $ | 17,577 |
General business credit carryforward |  |  | 8,008 |  |  |  | 7,053 |
Inventory |  |  | 11,156 |  |  |  | 9,564 |
Net operating losses |  |  | 29,321 |  |  |  | 32,278 |
Allowance for doubtful accounts |  |  | 440 |  |  |  | 970 |
Reserve for accrued liabilities |  |  | 3,302 |  |  |  | 2,769 |
Stock options and awards |  |  | 1,350 |  |  |  | 904 |
Unrealized gain/loss |  |  | - |  |  |  | 810 |
Disallowed interest carryforward |  |  | 1,437 |  |  |  | 2,662 |
Capitalized R&D costs |  |  | 4,653 |  |  |  | 3,282 |
Other |  |  | 2,162 |  |  |  | 820 |
Total deferred tax assets |  |  | 81,008 |  |  |  | 78,689 |
Valuation allowance |  |  | (60,863 | ) |  |  | (59,952 | )
Deferred tax liabilities: |  |  |  |  |  |
Property, plant and equipment |  |  | (7,346 | ) |  |  | (7,652 | )
Goodwill & Intangibles |  |  | (6,263 | ) |  |  | (1,519 | )
Deferred revenue |  |  | (2,851 | ) |  |  | (2,728 | )
Reserve for unremitted earnings |  |  | (2,713 | ) |  |  | (2,244 | )
Unrealized gain/loss |  |  | (561 | ) |  |  | - |
Other |  |  | (1,986 | ) |  |  | (3,862 | )
Total deferred tax liability |  |  | (21,720 | ) |  |  | (18,005 | )
Net deferred tax asset (liability) |  | $ | (1,575 | ) |  | $ | 732 |
The Company has $19.2 million of excess foreign tax credits of which $16.2 million will expire in years ending 2024 - 2032 and $3.0 million are carried forward indefinitely. The Company has $8.0 million of general business credits which expire in tax years ending 2037 - 2043. Tax operating loss carryforwards totaled $140.0 million (gross) at December 31, 2023. These operating losses will expire as shown in the table below.
| Tax operating losses |  |  | Expiration
| (in thousands) |  |  |
| $ | 2,411 |  |  | 2023 - 2028
|  | - |  |  | 2029 - 2034
|  | 1,811 |  |  | 2035 - 2040
|  | 718 |  |  | 2041 - 2046
|  | 135,053 |  |  | Indefinite
| $ | 139,993 |  |  |
The United States gross loss carryforwards of approximately $135.5 millio n, includes $134.4 million of losses which are indefinite. In assessing the realizability of our deferred tax assets, the Company has assessed 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. In making this determination, the Company considered taxable income in prior years, if carryback is permitted, the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. The Company has a three-year cumulative loss at December 31, 2023 in the United States and certain foreign jurisdictions and has recorded a valuation allowance at December 31, 2023 of $60.9 million against deferred tax assets in those jurisdictions. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020 and includes tax relief provisions and incentives for businesses impacted by COVID-19. The CARES Act includes provisions relating to net operating loss carryback (“NOLs”) periods. During the year ended December 31, 2023, the Comp any has received $15.8 million in N OL carryback claims and $5.2 million in transition tax payment refund. Except with respect to our operations in Canada, the Company no longer asserts the indefinite reinvestment assertion. We maintain a deferred foreign tax liability, which had a balance of $2.7 million as of December 31, 2023. It is primarily related to estimated foreign withholding tax associated with repatriating non-U.S. earnings back to the United States. The indefinite reinvestment assertion with respect to Canada pertains to earnings of $2.7 million as of December 31, 2023. The Company operates in multiple jurisdictions with complex tax and regulatory environments and our tax returns are periodically audited or subjected to review by tax authorities. We monitor tax law changes and the potential impact to our results of operations. The recently enacted Global Anti-Base Erosion (“GloBE”) rules (“GloBE Rules”) is a “top-up tax” that applies to the excess profits calculated on a jurisdictional basis. Based upon the applicable thresholds of the GloBE Rules, we do not anticipate being subject to the tax but will continue to monitor developments. The Company evaluates uncertain tax positions for recognition and measurement in the consolidated financial statements. To recognize a tax position, the Company determines whether it is more likely than not that the tax positions will be sustained upon examination, including resolution of any related appeals or litigation, based on the technical merits of the position. A tax position that meets the more likely than not threshold is measured to determine the amount of benefit to be recognized in the consolidated financial statements. The amount of tax benefit recognized with respect to any tax position is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. The Company had an accrual for uncertain tax position of $0.3 million at December 31, 2023 due to uncertainty in tax positions taken in the U.S. and certain foreign tax jurisdictions. The tax years which remain subject to examination by major tax jurisdictions are the years ended March 31, 2017 through December 31, 2023. A reconciliation of the beginning and ending amount of liabilities associated with uncertain tax positions is as follows:
|  | 2023 |  |  | 2022 |  |  | 2021 |
|  | (In thousands) |
Balance at beginning of year |  | $ | 631 |  |  | $ | 18,618 |  |  | $ | 18,665 |
Additions for tax positions related to the current year |  |  | 192 |  |  |  | 482 |  |  |  | 3 |
Reductions for tax positions related to the prior year |  |  | (550 | ) |  |  | (18,469 | ) |  |  | (50 | )
Balance at end of year |  | $ | 273 |  |  | $ | 631 |  |  | $ | 18,618 |
The amounts above exclude accrued interest and penalties of $0.1 million, $0.2 million and $2.4 million at December 31, 2023, 2022 and 2021 respectively. The Company classifies interest and penalties relating to uncertain tax positions within “Income tax provision (benefit)” in the consolidated statements of income (loss). It is reasonably possible that the Company’s existing liabilities for unrecognized tax benefits may increase or decrease in the year ending December 31, 2023, primarily due to the progression of any audits and the expiration of statutes of limitation. However, the Company cannot reasonably estimate a range of potential changes in its existing liabilities for unrecognized tax benefits due to various uncertainties, such as the unresolved nature of any possible audits. As of December 31, 2023, if recognized, $0.3 million of the Company’s unrecognized tax benefits would favorably impact the effective tax rate. The Company received net income tax refund of $13.7 million in 2023, paid net income taxes of $1.3 million and net income taxes of $2.0 million in 2022 and 2021, respectively.

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