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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Taxes [Abstract] |
Income Taxes |
12. | Income Taxes
Consolidated income (loss) before provision for income taxes consists of the following for the years ended December 31, 2024, 2023 and 2022 (U.S. dollars in thousands):
|  | 2024 |  |  | 2023 |  |  | 2022 |
U.S. |  | $ | (237,693 | ) |  | $ | (37,152 | ) |  | $ | 24,411 |
Foreign |  |  | 62,642 |  |  |  | 63,730 |  |  |  | 64,559 |
Total |  | $ | (175,051 | ) |  | $ | 26,578 |  |  | $ | 88,970 |
The provision (benefit) for current and deferred taxes for the years ended December 31, 2024, 2023 and 2022 consists of the following (U.S. dollars in thousands):
|  | 2024 |  |  | 2023 |  |  | 2022 |
Current |  |  |  |  |  |  |  |  |
Federal |  | $ | 998 |  |  | $ | — |  |  | $ | — |
State |  |  | 708 |  |  |  | 3,903 |  |  |  | 1,515 |
Foreign |  |  | 25,314 |  |  |  | 29,179 |  |  |  | 34,117 |
|  |  | 27,020 |  |  |  | 33,082 |  |  |  | 35,632 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (60,354 | ) |  |  | (18,039 | ) |  |  | (65,733 | )
State |  |  | (1,593 | ) |  |  | (1,440 | ) |  |  | (1,239 | )
Foreign |  |  | 6,470 |  |  |  | 4,380 |  |  |  | 15,532 |
|  |  | (55,477 | ) |  |  | (15,099 | ) |  |  | (51,440 | )
Provision (benefit) for income taxes |  | $ | (28,457 | ) |  | $ | 17,983 |  |  | $ | (15,808 | )
The principal components of deferred taxes are as follows (U.S. dollars in thousands):
|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |
Deferred tax assets: |  |  |  |  |  |
Inventory differences |  | $ | 108,895 |  |  | $ | 78,338 |
Foreign tax credit and other foreign benefits |  |  | 36,689 |  |  |  | 37,369 |
Stock-based compensation |  |  | 3,882 |  |  |  | 4,556 |
Accrued expenses not deductible until paid |  |  | 26,529 |  |  |  | 33,066 |
Net operating losses |  |  | 19,710 |  |  |  | 21,864 |
Interest Expense Limitation - 163(j) |  |  | 2,832 |  |  |  | — |
Capitalized research and development |  |  | 27,917 |  |  |  | 27,750 |
R&D credit carryforward |  |  | 2,594 |  |  |  | 2,294 |
Other |  |  | 285 |  |  |  | 293 |
Gross deferred tax assets |  |  | 229,333 |  |  |  | 205,530 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Foreign currency exchange |  |  | 1,341 |  |  |  | 3,596 |
Foreign withholding taxes |  |  | 10,936 |  |  |  | 14,591 |
Intangibles step-up |  |  | 1,020 |  |  |  | 3,787 |
Overhead allocation to inventory |  |  | — |  |  |  | 106 |
Amortization of intangibles |  |  | 11,215 |  |  |  | 22,857 |
Other |  |  | 6,580 |  |  |  | 6,281 |
Gross deferred tax liabilities |  |  | 31,092 |  |  |  | 51,218 |
Valuation allowance |  |  | (24,337 | ) |  |  | (47,142 | )
Deferred taxes, net |  | $ | 173,904 |  |  | $ | 107,170 |
At December 31, 2024, the Company had foreign operating loss carryforwards of $35.9 million for tax purposes, which will be available to offset future taxable income. If not used, $25.1 million of carryforwards will expire between 2025 and 2044, while $10.8 million do not expire. Tax effected, the foreign operating losses are $17.7 million. A valuation allowance has been placed on foreign operating loss carryforwards of $17.7 million. In addition, a valuation allowance of $6.6 million has been recorded on a portion of the foreign tax credit carryforwards which will expire between 2028 and 2034. The Company uses the tax law ordering approach when determining when excess tax benefits have been realized. Valuation allowances have been recognized for a portion of the foreign tax credit and all of the foreign net operating loss carryforwards. On January 2, 2025 the Company sold its subsidiary Mavely, which will affect its U.S. earnings. The gain from the sale in the U.S. will increase the Company’s ability to utilize foreign tax credits. As a result, the Company released $18.3 million of the valuation allowance against the Company’s foreign tax credits and the $2.3 million valuation allowance against R&D credits. The remaining 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 remaining foreign tax credits or the foreign net operating losses, the valuation allowance will be released which would reduce the provision for income taxes. The deferred tax asset valuation adjustments for the years ended December 31, 2024, 2023 and 2022 are as follows (U.S. dollars in thousands):
|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
Balance at the beginning of period |  | $ | 47,142 |  |  | $ | 33,557 |  |  | $ | 80,186 |
Additions charged to cost and expenses |  |  | 2,245 | (1) |  |  | 13,183 | (4) |  |  | 3,231 | (6)
Decreases |  |  | (27,086 | )(2) |  |  | (1,825 | )(5) |  |  | (50,315 | )(7)
Adjustments |  |  | 2,036 | (3) |  |  | 2,227 | (3) |  |  | 455 | (3)
Balance at the end of the period |  | $ | 24,337 |  |  | $ | 47,142 |  |  | $ | 33,557 |
(1) | Increase in valuation is due primarily to net operating losses in foreign markets.
(2) | The decrease was due primarily to the release of the valuation allowance against $18.3 million of foreign tax credits and $2.3 million of R&D credits.
(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 and $6.1 million that was recorded on the foreign tax credit carryforward.
(5) | The decrease was due to expiration of foreign net operating losses.
(6) | Increase in valuation is primarily due to net operating losses in foreign markets.
(7) | The decrease was due to utilization of $18.1 million of foreign tax credits and the valuation allowance release of $32.2 million foreign tax credits.
The components of deferred taxes, net on a jurisdiction basis are as follows (U.S. dollars in thousands):
|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |
Net noncurrent deferred tax assets |  | $ | 174,249 |  |  | $ | 107,692 |
Net noncurrent deferred tax liabilities |  |  | 345 |  |  |  | 522 |
Deferred taxes, net |  | $ | 173,904 |  |  | $ | 107,170 |
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, 2024, 2023 and 2022 compared to the statutory U.S. Federal tax rate is as follows:
|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
Income taxes at statutory rate |  |  | 21.00 | % |  |  | 21.00 | % |  |  | 21.00 | %
Excess tax benefit from equity award |  |  | (0.73 | )% |  |  | 5.04 | % |  |  | (0.12 | )%
Deferred compensation |  |  | 1.35 | % |  |  | (4.28 | )% |  |  | 2.18 | %
Executive salary limitation |  |  | (1.15 | )% |  |  | 1.59 | % |  |  | 2.06 | %
State taxes |  |  | 0.38 | % |  |  | 7.34 | % |  |  | 0.25 | %
Foreign exchange |  |  | 0.20 | % |  |  | (1.91 | )% |  |  | 0.68 | %
Non-U.S. income taxed at different rates |  |  | (2.55 | )% |  |  | 12.70 | % |  |  | 4.78 | %
Foreign withholding taxes |  |  | (0.89 | )% |  |  | 13.31 | % |  |  | (0.73 | )%
Change in reserve for uncertain tax positions |  |  | (3.77 | )% |  |  | 1.74 | % |  |  | 17.69 | %
Valuation allowance recognized foreign tax credit & others |  |  | 11.89 | % |  |  | 24.66 | % |  |  | (56.17 | )%
Foreign-Derived Intangible Income (FDII) |  |  | — |  |  |  | (14.11 | )% |  |  | (8.14 | )%
Acquisition adjustments |  |  | (1.55 | )% |  |  | (0.05 | )% |  |  | (0.93 | )%
Goodwill impairment |  |  | (7.86 | )% |  |  | — |  |  |  | — |
Other |  |  | (0.06 | )% |  |  | 0.63 | % |  |  | (0.32 | )%
|  |  | 16.26 | % |  |  | 67.66 | % |  |  | (17.77 | )%
The decrease in the effective tax rate for 2024 is primarily due to the company having an overall book loss but still paying taxes primarily in foreign jurisdictions. The increase in the Company’s effective tax rate for 2023 was primarily due to the Company incurring restructuring charges that primarily affected their U.S. earnings. These additional expenses in the U.S. reduced the Company’s ability to utilize foreign tax credits. 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, 2024. If this amount were repatriated to the United States, the amount of incremental taxes would be approximately $6.0 million.

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