XML 56 R18.htm IDEA: XBRL DOCUMENT
v3.23.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2022
Income Taxes [Abstract] |
Income Taxes |
| 11. | Income Taxes
The components of the Company’s income tax provision expense are as follows (in thousands):
|  | Year ended December 31 |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Current provision: |  |  |  |  |  |  |  |  |
Federal |  | $ | (68 | ) |  | $ | 2,536 |  |  | $ | 21 |
State and local |  |  | 268 |  |  |  | 795 |  |  |  | 133 |
Foreign |  |  | 1,402 |  |  |  | 3,572 |  |  |  | 1,415 |
|  |  | 1,602 |  |  |  | 6,903 |  |  |  | 1,569 |
Deferred expense (benefit): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 8,882 |  |  |  | (9,013 | ) |  |  | — |
State and local |  |  | 3,552 |  |  |  | (3,472 | ) |  |  | (118 | )
Foreign |  |  | 65 |  |  |  | (213 | ) |  |  | 490 |
|  |  | 12,499 |  |  |  | (12,698 | ) |  |  | 372 |
Provision for (benefit from) income taxes |  | $ | 14,101 |  |  | $ | (5,795 | ) |  | $ | 1,941 |
Income (loss) before provision for income taxes consisted of the following (in thousands):
|  | Year ended December 31 |
|  | 2022 |  |  | 2021 |  |  | 2020 |
United States |  | $ | (52,598 | ) |  | $ | 17,018 |  |  | $ | 24,616 |
International |  |  | 9,270 |  |  |  | 13,449 |  |  |  | 7,751 |
Total |  | $ | (43,328 | ) |  | $ | 30,467 |  |  | $ | 32,367 |
Deferred income taxes reflect the 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. The 2017 tax reform act amended Internal Revenue Code Section 174, effective for amounts paid or incurred for research and experimentation expenses in tax years beginning after December 31, 2021. Prior to this change taxpayers could elect to expense these costs in the year incurred or amortize these them over 5 years. Under the law as amended research and experimental expenses are capitalized and amortized over five years (15 years for expenditures attributable to foreign research). As such, The Company capitalizing its Section 174 costs for fiscal year 2022 in the amount of 2.6M, net of current year amortization. The Company’s deferred income tax assets and liabilities consisted of the following (in thousands):
|  | December 31 |
|  | 2022 |  |  | 2021 |
Deferred tax assets: |  |  |  |  |  |
Accounts receivable |  | $ | 5,123 |  |  |  | 4,295 |
Inventories |  |  | 2,807 |  |  |  | 4,413 |
Reserves and other accruals |  |  | 3,062 |  |  |  | 5,903 |
Lease liabilities |  |  | 20,668 |  |  |  | 22,203 |
Section 174 Costs |  |  | 2,601 |  |  |  | — |
Credits and other |  |  | 1,965 |  |  |  | 2,144 |
Net operating losses |  |  | 9,921 |  |  |  | 6,102 |
Gross deferred tax assets |  |  | 46,147 |  |  |  | 45,060 |
Valuation allowance |  |  | (24,128 | ) |  |  | (5,543 | )
Total deferred tax assets, net |  |  | 22,019 |  |  |  | 39,517 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Prepaid expenses |  |  | (864 | ) |  |  | (798 | )
Other |  |  | (773 | ) |  |  | (621 | )
ROU |  |  | (19,514 | ) |  |  | (21,212 | )
Property and equipment |  |  | — |  |  |  | (3,219 | )
Long-term investment |  |  | — |  |  |  | (300 | )
Total deferred tax liabilities |  |  | (21,151 | ) |  |  | (26,150 | )
Net deferred tax assets |  | $ | 868 |  |  | $ | 13,367 |
In accordance with ASC 740, Income Taxes, the Company evaluates whether a valuation allowance should be established against the net deferred tax assets based upon the consideration of all available evidence and using a “more-likely than-not” standard. Significant weight is given to evidence that can be objectively verified. The determination to record a valuation allowance is based on the recent history of cumulative losses and losses expected in the near future. The Company’s U.S. federal consolidated filing group includes certain international entities. Based upon results of operations for the years ended December 31, 2022, 2021 and 2020, it is determined that it is not more likely than not that the Company will realize the benefit from the U.S. federal net deferred tax assets. As a result, the Company has recorded a valuation allowance against its net deferred tax assets for the year ended December 31, 2022 for its U.S. operations. The Company maintains valuation allowances against certain non-US loss corporations. Total valuation allowance against U.S. and non-U.S. deferred tax assets was $24.1 million and $5.5 million as of December 31, 2022 and 2021, respectively. At December 31, 2022, the Company has net operating losses (“NOL”) carryforward of $19.6 million and has $22.0 million of apportioned state NOL carryforwards available to reduce future taxable income. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted into law in response to the COVID-19 pandemic. The CARES Act temporarily suspends the 80% of taxable income limitation on the use of NOLs for tax years beginning before January 1, 2021, thereby permitting corporate taxpayers to use NOLs to fully offset taxable income in these years regardless of the year in which the NOL arose. As a result, the Company can fully utilize the remaining cumulative federal NOL for tax years before January 1, 2021, and then will be limited to 80% of taxable income afterwards. The state NOL carryforwards begin to expire in 2028. The Company has $4.6 million of NOL carryforwards in China as of December 31, 2022. The Company has $10.0 million of NOL carryforwards in Taiwan, which will begin to expire in 2024. The Company has $2.3 million NOLs in Hong Kong with indefinite carryforward. A valuation allowance was recorded on the NOLs in China, Taiwan, and Hong Kong. The Company has not provided for deferred income taxes on undistributed earnings of its foreign subsidiaries, as these amounts are considered indefinitely reinvested outside the United States. It is not practicable to determine the estimated income tax liability that might apply if these earnings were to be repatriated. A reconciliation of the U.S. federal statutory tax rate to the Company’s effective tax rate is as follows:
|  | Year ended December 31 |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Federal taxes at statutory rate |  |  | 21.00 | % |  |  | 21.00 | % |  |  | 21.00 | %
State taxes, net of federal benefit |  |  | 2.48 |  |  |  | (6.85 | ) |  |  | 0.04 |
Permanent items: |  |  |  |  |  |  |  |  |  |  |  |
Other nondeductible items |  |  | (0.30 | ) |  |  | 0.48 |  |  |  | 0.17 |
Subpart F income |  |  | (0.80 | ) |  |  | — |  |  |  | 0.03 |
SEC. 956 Income inclusion |  |  | — |  |  |  | — |  |  |  | — |
Stock-based compensation |  |  | (10.88 | ) |  |  | 0.74 |  |  |  | 0.07 |
Foreign withholding tax |  |  | — |  |  |  | — |  |  |  | — |
Research & development credit |  |  | 1.57 |  |  |  | — |  |  |  | (2.04 | )
Global intangible low-taxed income |  |  | — |  |  |  | — |  |  |  | 2.36 |
Foreign rate differential and foreign tax credits |  |  | (0.74 | ) |  |  | 2.15 |  |  |  | 1.12 |
Change in valuation allowance – U.S. Federal |  |  | (34.09 | ) |  |  | (33.11 | ) |  |  | (15.48 | )
Change in valuation allowance – U.S. States |  |  | (11.17 | ) |  |  | — |  |  |  | — |
Change in valuation allowance – Foreign |  |  | 0.96 |  |  |  | — |  |  |  | — |
Change in uncertainty in income taxes (“FIN48”) |  |  | (0.10 | ) |  |  | — |  |  |  | — |
Other |  |  | (0.01 | ) |  |  | (3.43 | ) |  |  | (1.27 | )
Effective tax rate |  |  | (32.08 | )% |  |  | (19.02 | )% |  |  | 6.00 | %
The significant items that caused the effective tax rate change related to recording of the U.S. portion of the valuation allowance and equity compensation. Uncertain Tax Positions As of the end of fiscal year 2022, the total liability for income tax associated with unrecognized tax benefits was $1.6 million. The Company’s effective tax rate will be affected by any portion of this liability we may recognize. The Company does not believe it is reasonably possible that any of the uncertain tax benefits will be recognized in the next 12 months. As such, all uncertain tax positions, including accrued interest, have been classified as long-term taxes payable on the consolidated balance sheets. A reconciliation of the beginning and ending amounts of uncertain tax positions is as follows (in thousands):
|  | Year ended December 31 |
|  | 2022 |  |  | 2021 |
Beginning balance |  | $ | 1,563 |  |  | $ | 850 |
Additions based on tax positions related to the prior year |  |  | 43 |  |  |  | 713 |
Ending balance |  | $ | 1,606 |  |  | $ | 1,563 |
The Company’s continuing practice is to recognize interest and penalties related to unrecognized tax benefits as tax expense. As of December 31, 2022 and 2021, interest and penalties related to uncertain tax positions were not material. The Company files a consolidated federal income tax return in the United States, as well as combined and separate U.S. state income tax returns. Certain subsidiaries of the Company are subject to income tax in China, Taiwan, Hong Kong, and Canada. The Company is still subject to examination for federal income tax returns for the years 2014 through 2021, for certain U.S. state income tax returns for the years 2009 through 2021, and for certain foreign income tax returns for the years 2012 through 2021. The Company is currently under examination by the Internal Revenue Service for the years 2012 through 2014 and by the California Franchise Tax Board for the years 2007 through 2012. The California Franchise Tax Board examination is related to amended tax returns filed for the years under exam. No additional reserve was accrued in 2022 based on the current audit status.

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 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
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration