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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Taxes [Abstract] |
Income Taxes |
11. | Income Taxes
Consolidated income before provision for income taxes consists of the following for the years ended December 31, 2021, 2020 and 2019 (U.S. dollars in thousands):
|  | 2021 |  |  | 2020 |  |  | 2019 |
U.S. |  | $ | 45,371 |  |  | $ | 71,138 |  |  | $ | 24,211 |
Foreign |  |  | 187,088 |  |  |  | 185,094 |  |  |  | 230,961 |
Total |  | $ | 232,459 |  |  | $ | 256,232 |  |  | $ | 255,172 |
The provision for current and deferred taxes for the years ended December 31, 2021, 2020 and 2019 consists of the following (U.S. dollars in thousands):
|  | 2021 |  |  | 2020 |  |  | 2019 |
Current |  |  |  |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | — |  |  | $ | — |
State |  |  | 1,458 |  |  |  | 1,629 |  |  |  | 2,213 |
Foreign |  |  | 77,393 |  |  |  | 77,079 |  |  |  | 79,694 |
|  |  | 78,851 |  |  |  | 78,708 |  |  |  | 81,907 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 3,705 |  |  |  | (14,430 | ) |  |  | (8,878 | )
State |  |  | (38 | ) |  |  | (563 | ) |  |  | (473 | )
Foreign |  |  | 2,675 |  |  |  | 1,162 |  |  |  | 9,063 |
|  |  | 6,342 |  |  |  | (13,831 | ) |  |  | (288 | )
Provision for income taxes |  | $ | 85,193 |  |  | $ | 64,877 |  |  | $ | 81,619 |
The principal components of deferred taxes are as follows (U.S. dollars in thousands):
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |
Deferred tax assets: |  |  |  |  |  |
Inventory differences |  | $ | 5,859 |  |  | $ | 6,181 |
Foreign tax credit and other foreign benefits |  |  | 69,401 |  |  |  | 57,720 |
Stock-based compensation |  |  | 9,392 |  |  |  | 8,925 |
Accrued expenses not deductible until paid |  |  | 36,401 |  |  |  | 42,694 |
Foreign currency exchange |  |  | 605 |  |  |  | 1,403 |
Net operating losses |  |  | 9,479 |  |  |  | 8,667 |
Capitalized research and development |  |  | 22,962 |  |  |  | 23,019 |
R&D credit carryforward |  |  | 1,451 |  |  |  | 1,229 |
Other |  |  | 34 |  |  |  | 45 |
Gross deferred tax assets |  |  | 155,584 |  |  |  | 149,883 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Foreign withholding taxes |  |  | 15,412 |  |  |  | 20,207 |
Intangibles step-up |  |  | 4,446 |  |  |  | 4,623 |
Overhead allocation to inventory |  |  | 3,373 |  |  |  | 2,684 |
Amortization of intangibles |  |  | 21,936 |  |  |  | 18,551 |
Other |  |  | 6,133 |  |  |  | 1,690 |
Gross deferred tax liabilities |  |  | 51,300 |  |  |  | 47,755 |
Valuation allowance |  |  | (80,186 | ) |  |  | (67,340 | )
Deferred taxes, net |  | $ | 24,098 |  |  | $ | 34,788 |
At December 31, 2021, the Company had foreign operating loss carryforwards of $26.7 million for tax purposes, which will be available to offset future taxable income. If not used, $12.4 million of carryforwards will expire between 2022 and 2031, while $14.3 million do not expire. A valuation allowance has been placed on foreign operating loss carryforwards of $25.8 million, tax effected the valuation on the net operating loss is $9.3 million. In addition, a valuation allowance has been recorded on the foreign tax credit carryforward, and the R&D credit carryforward of $70.9 million which will expire between 2026 and 2030. The Company uses the tax law ordering approach when determining when excess tax benefits have been realized. The valuation allowances have been recognized for the foreign tax credit, the foreign net operating loss carryforwards, and the R&D credit carryforward. The valuation allowances were recognized for assets which it is more likely than not some portion or all of the deferred tax asset will not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary difference, projected future taxable income, tax planning strategies and recent financial operations. When the Company determines that there is sufficient positive evidence to utilize the foreign tax credits, the foreign net operating losses, or the R&D credit carryforward, the valuation will be released which would reduce the provision for income taxes. The deferred tax asset valuation adjustments for the years ended December 31, 2021, 2020 and 2019 are as follows (U.S. dollars in thousands):
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Balance at the beginning of period |  | $ | 67,340 |  |  | $ | 77,042 |  |  | $ | 68,697 |
Additions charged to cost and expenses |  |  | 12,674 | (1) |  |  | 2,154 | (4) |  |  | 10,913 | (6)
Decreases |  |  | — | (2) |  |  | (12,100 | )(5) |  |  | (3,343 | )(7)
Adjustments |  |  | 172 | (3) |  |  | 244 | (3) |  |  | 775 | (3)
Balance at the end of the period |  | $ | 80,186 |  |  | $ | 67,340 |  |  | $ | 77,042 |
(1) | Increase in valuation is due primarily to $11.9 million that was recorded on the foreign tax credit carryforward due to the disposal of the Companies Grow Tech segment. The additional amount is due to net operating losses in foreign markets.
(2) | No decreases in 2021.
(3) | Represents the net currency effects of translating valuation allowances at current rates of exchange.
(4) | Increase in valuation is due primarily to net operating losses in foreign markets.
(5) | The decrease was due to the utilization of prior year foreign tax credits that had previously had a valuation allowance recorded against the asset.
(6) | Increase in valuation is due primarily to $9.8 million that was recorded on the foreign tax credit carryforward. The additional amount is due to net operating losses in foreign markets.
(7) | The decrease was due primarily to the utilization of foreign tax credits, and expiration of foreign net operating losses.
The components of deferred taxes, net on a jurisdiction basis are as follows (U.S. dollars in thousands):
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |
Net noncurrent deferred tax assets |  | $ | 26,483 |  |  | $ | 35,414 |
Net noncurrent deferred tax liabilities |  |  | 2,385 |  |  |  | 626 |
Deferred taxes, net |  | $ | 24,098 |  |  | $ | 34,788 |
The Company is subject to regular audits by federal, state and foreign tax authorities. These audits may result in proposed assessments that may result in additional tax liabilities. The actual tax rate for the years ended December 31, 2021, 2020 and 2019 compared to the statutory U.S. Federal tax rate is as follows:
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Income taxes at statutory rate |  |  | 21.00 | % |  |  | 21.00 | % |  |  | 21.00 | %
Excess tax benefit from equity award |  |  | (0.19 | )% |  |  | 0.70 | % |  |  | 0.02 | %
Non-U.S. income taxed at different rates |  |  | 6.06 | % |  |  | 3.37 | % |  |  | 3.09 | %
Foreign withholding taxes |  |  | 4.71 | % |  |  | 5.21 | % |  |  | 4.10 | %
Change in reserve for uncertain tax positions |  |  | (0.06 | )% |  |  | 1.98 | % |  |  | 1.07 | %
Valuation allowance recognized foreign tax credit & others |  |  | 5.12 | % |  |  | (4.59 | )% |  |  | 2.56 | %
Foreign-Derived Intangible Income (FDII) |  |  | (0.87 | )% |  |  | (2.78 | )% |  |  | (0.70 | )%
Other |  |  | 0.88 | % |  |  | 0.43 | % |  |  | 0.85 | %
|  |  | 36.65 | % |  |  | 25.32 | % |  |  | 31.99 | %
The decrease in the effective tax rate for 2020 reflected the strong growth in the U.S. market and Manufacturing segment, which enabled the utilization of additional foreign tax credits to offset the U.S. income taxes. The increase in the effective tax rate for 2021 was primarily caused by the disposal of the Company’s Grow Tech segment which reduced the utilization of foreign tax credits and increased the Company’s valuation allowance. The cumulative amount of undistributed earnings of the Company’s non-U.S. Subsidiaries held for indefinite reinvestment is approximately $60.0 million, at December 31, 2021. If this amount were repatriated to the United States, the amount of incremental taxes would be approximately $6.0 million.

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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 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
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