XML 35 R20.htm IDEA: XBRL DOCUMENT
v3.22.0.1

INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2021
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income (Loss) before income taxes consisted of the following:
| Years Ended December 31,
Dollars in thousands | 2021 |  | 2020 |  | 2019
United States operations | $ | 91,150 |  |  | $ | 15,082 |  |  | $ | (38,359) |
Foreign operations | 123,527 |  |  | 78,438 |  |  | 98,463 |
Total | $ | 214,677 |  |  | $ | 93,520 |  |  | $ | 60,104 |
A reconciliation of the U.S. Federal statutory rate to the Company’s effective tax rate is as follows:
| Years Ended December 31,
| 2021 |  | 2020 |  | 2019
Federal statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Increase (decrease) in income taxes resulting from: |  |  |  |  |
State income taxes, net of federal tax benefit | 1.9 | % |  | 1.2 | % |  | 1.0 | %
Foreign operations | (4.0) | % |  | (7.9) | % |  | (20.0) | %
Excess tax benefits from stock compensation | (1.2) | % |  | (1.0) | % |  | (5.6) | %
Nondeductible meals and entertainment | 0.1 | % |  | 0.4 | % |  | 1.5 | %
Intercompany profit in inventory | (0.2) | % |  | 1.2 | % |  | 1.2 | %
Nondeductible facilitative costs | 0.2 | % |  | 1.4 | % |  | 0.8 | %
Research and development credit | (1.2) | % |  | (1.6) | % |  | (2.9) | %
Return to provision | (0.7) | % |  | (2.3) | % |  | 1.7 | %
Global intangible low-taxed income ("GILTI") | 0.7 | % |  | 2.5 | % |  | 7.6 | %
Nondeductible executive compensation | 0.9 | % |  | 2.4 | % |  | 3.0 | %
Fair market value step up on intra-entity transfer of intellectual property | — | % |  | (63.3) | % |  | — | %
Gain from sale of business - book to tax differences | 3.9 | % |  | 2.8 | % |  | — | %
Swiss tax holiday | — | % |  | — | % |  | (15.7) | %
Nondeductible R&D expense | — | % |  | — | % |  | 22.7 | %
Other | (0.2) | % |  | — | % |  | 0.2 | %
Effective tax rate | 21.2 | % |  | (43.2) | % |  | 16.5 | %
Our effective tax rate was 21.2% and (43.2)% of income before income taxes for the years ended December 31, 2021 and December 31, 2020, respectively. In 2021, the Company's higher effective tax rate was driven in part by an $8.5 million income tax expense for nondeductible goodwill related to the sale of the Extremity Orthopedics business, offset by a $3.1 million income tax benefit related to excess tax benefits from stock compensation. In 2020, the Company’s lower worldwide effective tax rate was primarily driven by an $59.2 million income tax benefit on an intra-entity transfer of certain intellectual property, substantially completed during the fourth quarter in 2020. Excluding this transaction, the effective worldwide tax rate for 2020 was 20.2%. In December 2020, the Company completed an intra-entity transfer of certain intellectual property rights to one of its subsidiaries in Switzerland. While the transfer did not result in a taxable gain, the Company’s Swiss subsidiary received a step-up in tax basis based on the fair value of the transferred intellectual property rights. The Company determined the fair value using a discounted cash flow model based on expectations of revenue growth rates, royalty rates, discount rates, and useful lives of the intellectual property. The Co mpany recorded a $59.2 million deferred tax benefit in Switzerland related to the amortizable tax basis in the transferred intellectual property. During 2021, the Company’s foreign operations generated a $63.6 million increase in income tax expense when compared to the same period in 2020, because of the intra-entity transfer of certain intellectual property in 2020, geographic and business mix of taxable earnings and losses, among other factors. The 2021 foreign effective tax rate is 15.2%, compared to (57.1)% in 2020. The Company’s foreign tax rate is primarily based upon statutory rates and is also impacted by the intra-entity transfer of certain intellectual property as described above for 2020. During 2020, the Company’s foreign operations generated a $48.2 million decrease in income tax expense when compared to the same period in 2019 due to the intra-entity transfer of certain intellectual property, geographic and business mix of taxable earnings and losses, among other factors. The 2020 foreign effective tax rate is (57.1)%, compared to 3.5% in 2019. The Company’s foreign tax rate is primarily based upon statutory rates and is also impacted by the intra-entity transfer of certain intellectual property as described above for 2020. During 2019, the Company finalized negotiations related to tax holidays in Switzerland, on a federal, cantonal, and communal level. The Company received a federal tax credit in Switzerland of $12.1 million ($0.14 per share), which may be used over a seven-year period, ending in 2024. The Company also received a reduction in its rate for the cantonal and communal level taxes during the third quarter of 2019, pursuant to tax reform in Switzerland. Changes to income tax laws and regulations, in any of the tax jurisdictions in which the Company operates, could impact the effective tax rate. Various governments, both U.S. and non-U.S., are increasingly focused on tax reform and revenue-raising legislation. The current U.S. administration has proposed tax reform which, if enacted, may increase the Company’s U.S. federal income tax liability. Further, legislation in foreign jurisdictions may be enacted, in response to the base erosion and profit-sharing (BEPS) project begun by the Organization for Economic Cooperation and Development (OECD). The OECD recently finalized major reform of the international tax system with respect to implementing a global minimum tax rate. Such changes in U.S. and Non-U.S. jurisdictions could have an adverse effect on the Company’s effective tax rate. The provision for income taxes consisted of the following:
| Years Ended December 31,
Dollars in thousands | 2021 |  | 2020 |  | 2019
Current: |  |  |  |  |
Federal | $ | 31,938 |  |  | $ | 6,184 |  |  | $ | 14,597 |
State | 11,377 |  |  | 5,029 |  |  | 3,447 |
Foreign | 5,042 |  |  | 12,553 |  |  | 10,905 |
Total current | $ | 48,357 |  |  | $ | 23,766 |  |  | $ | 28,949 |
Deferred: |  |  |  |  |
Federal | (12,830) |  |  | (5,079) |  |  | (10,889) |
State | (3,688) |  |  | (1,760) |  |  | (666) |
Foreign | 13,763 |  |  | (57,299) |  |  | (7,491) |
Total deferred | $ | (2,755) |  |  | $ | (64,138) |  |  | $ | (19,046) |
Provision for income taxes | $ | 45,602 |  |  | $ | (40,372) |  |  | $ | 9,903 |
The income tax effects of significant temporary differences that give rise to deferred tax assets and liabilities, shown before jurisdictional netting, are presented below:
| December 31,
Dollars in thousands | 2021 |  | 2020
Assets: |  |  |
Doubtful accounts | $ | 2,029 |  |  | $ | 2,207 |
Inventory related items | 31,841 |  |  | 47,034 |
Tax credits | 13,319 |  |  | 18,319 |
Accrued vacation | 3,042 |  |  | 3,403 |
Accrued bonus | 7,415 |  |  | 4,883 |
Stock compensation | 13,955 |  |  | 6,160 |
Deferred revenue | 1,742 |  |  | 1,665 |
Net operating loss carryforwards | 26,198 |  |  | 29,335 |
Capitalization of research and development expenses | 36,770 |  |  | 13,044 |
Unrealized foreign exchange loss | 12,849 |  |  | 23,798 |
Charitable contributions carryforward | 206 |  |  | 203 |
Leases and Other | 41,371 |  |  | 23,205 |
Total deferred tax assets | 190,737 |  |  | 173,256 |
Less valuation allowance | (9,767) |  |  | (9,897) |
Deferred tax assets after valuation allowance | $ | 180,970 |  |  | $ | 163,359 |
Liabilities: |  |  |
Intangible and fixed assets | (152,150) |  |  | (90,274) |
Leases and Other | (17,658) |  |  | (15,585) |
Total deferred tax liabilities | $ | (169,808) |  |  | $ | (105,859) |
Total net deferred tax assets (liabilities) | $ | 11,162 |  |  | $ | 57,500 |
At December 31, 2021, the Company had net operating loss carryforwards of $71.7 million for federal income tax purposes, $26.6 million for foreign income tax purposes and $39.0 million for state income tax purposes to offset future taxable income. The majority of the federal net operating loss carryforwards expire through 2037, while $4.1 million have an indefinite carry forward period. For foreign net operating loss carryforwards, the remaining $26.6 million have an indefinite carry forward period. The state net operating loss carryforwards expire through 2036. The valuation allowance relates to deferred tax assets for certain items that will be deductible for income tax purposes under very limited circumstances and for which the Company believes it will not satisfy the more likely than not threshold for realization of the associated tax benefit. In the event that the Company determines that it would be able to realize more or less than the recorded amount of net deferred tax assets, an adjustment to the deferred tax asset valuation allowance would be recorded in the period such a determination is made. The Company’s valuation allowance decreased by less than $0.1 million, increased by less than $0.1 million and increased by $2.9 million at December 31, 2021, 2020 and 2019, respectively. The 2021 and 2020 valuation allowance primarily remained unchanged from the prior period. As of December 31, 2021, the Company has not provided deferred income taxes on unrepatriated earnings from foreign subsidiaries as they are deemed to be indefinitely reinvested unless there is a manner under which to remit the earnings with no material tax cost. Material taxes would primarily be attributable to foreign withholding taxes and local income taxes when such earnings are distributed. The Company will repatriate foreign earnings when there is no need for reinvestment overseas and no material tax cost to bring the earnings back to the United States. Reinvestment considerations would include future acquisitions, transactions, and capital expenditure plans. As such, the Company has determined the tax impact of repatriating these earnings would not be material as of December 31, 2021. The Company does not anticipate the need to repatriate earnings from foreign subsidiaries as a result of the impact of the COVID-19 pandemic. A reconciliation of the beginning and ending amount of uncertain tax benefits is as follows:
| Years Ended December 31,
Dollars in thousands | 2021 |  | 2020 |  | 2019
| (In thousands)
Balance, beginning of year | $ | 702 |  |  | $ | 676 |  |  | $ | 676 |
Gross increases: |  |  |  |  |
Current year tax positions | — |  |  | — |  |  | 53 |
Prior years' tax positions | — |  |  | 26 |  |  | — |
Other | (26) |  |  | — |  |  | (53) |
Balance, end of year | $ | 676 |  |  | $ | 702 |  |  | $ | 676 |
Approximately $0.7 million of the balance at December 31, 2021 relates to uncertain tax positions that, if recognized, would affect the annual effective tax rate. There are no amounts within the balance of uncertain tax positions at December 31, 2021 related to tax positions for which it is reasonably possible that the amounts could be reduced during the twelve months following December 31, 2021. The Company recognizes interest and penalties relating to uncertain tax positions in income tax expense. The Company recognized a minimal benefit for the years ended December 31, 2021, 2020 and 2019. The Company had minimal interest and penalties accrued for the years ended December 31, 2021 and 2020 and 2019. The Company files Federal income tax returns, as well as multiple state, local and foreign jurisdiction tax returns. The Company is no longer subject to examinations of its U.S. consolidated Federal income tax returns by the IRS through fiscal year 2017. All significant state and local matters have been concluded through fiscal 2015. All significant foreign matters have been settled through fiscal 2012.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
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 -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://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 http://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 http://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 http://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 http://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 http://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 http://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 http://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 http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration