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INCOME TAXES | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income (loss) before income taxes, consisted of the following for the years set forth below (amounts in thousands):
| 2021 |  | 2020 |  | 2019
Domestic | $ | (5,862) |  |  | $ | (36,761) |  |  | $ | (52,234) |
Foreign | 56,902 |  |  | (21,370) |  |  | 4,190 |
| $ | 51,040 |  |  | $ | (58,131) |  |  | $ | (48,044) |
The income tax provision was as follows for the years set forth below (amounts in thousands):
| 2021 |  | 2020 |  | 2019
Current |  |  |  |  |
Federal | $ | (933) |  |  | $ | (4,050) |  |  | $ | (4,599) |
State | (160) |  |  | 326 |  |  | 622 |
Foreign | 16,422 |  |  | 13,677 |  |  | 9,752 |
| 15,329 |  |  | 9,953 |  |  | 5,775 |
Deferred |  |  |  |  |
Federal | — |  |  | — |  |  | — |
State | — |  |  | — |  |  | — |
Foreign | (14,180) |  |  | (3,007) |  |  | (2,300) |
| (14,180) |  |  | (3,007) |  |  | (2,300) |
Income tax provision | $ | 1,149 |  |  | $ | 6,946 |  |  | $ | 3,475 |
The income tax provision differs from the amount of income tax determined by applying the statutory U.S. federal income tax rate to pre-tax income (loss) as a result of the following:
| 2021 |  | 2020 |  | 2019
Statutory U.S. federal tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Unrecognized tax positions | (1.1) |  |  | 5.9 |  |  | 6.1 |
Impact of foreign income | 13.0 |  |  | (7.2) |  |  | (0.8) |
Valuation allowance | (31.6) |  |  | (38.4) |  |  | (29.0) |
State taxes, net | 1.4 |  |  | (0.5) |  |  | (0.9) |
Nondeductible royalty | 1.9 |  |  | (1.2) |  |  | (1.5) |
Sale of investment | — |  |  | 8.7 |  |  | — |
Equity based compensation | (1.0) |  |  | (0.2) |  |  | — |
Nondeductible interest | 1.5 |  |  | (1.0) |  |  | (1.4) |
Other, net | (2.8) |  |  | 1.0 |  |  | (0.7) |
Effective tax rate | 2.3 | % |  | (11.9) | % |  | (7.2) | %
The effective tax rate for the year ended December 31, 2021, was 2.3% compared to (11.9)% for the year ended December 31, 2020. For 2021 the Company recorded pre-tax income and had a positive effective tax rate and for 2020 the Company recorded a pre-tax loss and had a negative effective tax rate. These both represent tax expense in the consolidated financial statements. In jurisdictions where the Company operates its businesses, management analyzes the ability to utilize its deferred tax assets arising from losses in its cyclical business. The Company continues to record a valuation allowance in several jurisdictions, including the U.S., various U.S. states, Italy, and Australia as it remains more likely than not that the deferred tax assets would not be utilized. In 2021, the Company released the $16.1 million valuation allowance on its deferred tax assets related to Luxembourg. The Company expects to generate positive taxable income in Luxembourg in future periods as a result of the legal entity and loan rationalization completed during 2021. In 2020, the Company recorded a valuation allowance of $22.3 million primarily related to net operating losses generated from operations in the affected jurisdictions. The Company is involved in various tax matters, for some of which the outcome is uncertain. The Company believes that it has adequate tax reserves to address open tax matters acknowledging that the outcome and timing of these events are uncertain. 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 deferred tax assets and liabilities at December 31, 2021 and 2020, were as follows (amounts in thousands):
| 2021 |  | 2020
Deferred tax assets: |  |  |
Net operating loss carryforwards | $ | 138,472 |  |  | $ | 151,597 |
Pension | 447 |  |  | 3,904 |
Inventory | 7,602 |  |  | 6,758 |
Warranty | 4,391 |  |  | 5,648 |
Employee benefits and related costs | 8,585 |  |  | 9,819 |
Prepaid royalties | 2,922 |  |  | 3,755 |
Interest limitation | 21,868 |  |  | 16,067 |
Lease liability | 6,482 |  |  | 7,734 |
Other | 17,672 |  |  | 19,633 |
Deferred tax assets | 208,441 |  |  | 224,915 |
Deferred tax liabilities: |  |  |
Fixed assets | (11,455) |  |  | (15,603) |
Intangible assets | (710) |  |  | (1,012) |
Lease assets | (6,441) |  |  | (7,759) |
Other | (3,810) |  |  | (2,669) |
Deferred tax liabilities | (22,416) |  |  | (27,043) |
Subtotal | 186,025 |  |  | 197,872 |
Valuation allowance | (173,172) |  |  | (199,176) |
Net deferred tax asset (liability) | $ | 12,853 |  |  | $ | (1,304) |
As of December 31, 2021 and 2020, certain net tax loss carryforwards of $138.5 million and $151.6 million were available with $3.2 million expiring between 2021 and 2026 and $135.3 million expiring after 2026. At December 31, 2021, a valuation allowance of $173.2 million has been established. The net change in the valuation allowance was $(26.0) million and $34.5 million for 2021 and 2020, respectively. The majority of the valuation allowance is related to deferred tax assets in the U.S., Italy, and Australia. The Company has $178.6 million of gross Federal net operating loss carryforward, a portion of which expires starting in 2035. Additionally, the Company has $321 million of state net operating losses and $334.4 million of foreign loss carryforwards. As a result of the Tax Cuts and Jobs Act, the Company can repatriate future foreign earnings back to the U.S. when needed with minimal additional taxes other than state income and foreign withholding tax. The Company has not changed its indefinite reinvestment assertion in light of the Tax Cuts and Jobs Act and has not accrued any potential incremental taxes which could be incurred if any foreign earnings are repatriated. The Company has not calculated the potential foreign withholding taxes as the Company does not expect to repatriate those earnings. On March 27, 2020, the U.S. government passed the CARES Act (the "CARES Act"), which provides tax relief to assist companies dealing with the effects of COVID-19. The impact of the CARES Act was not material to the Company’s financial position or results of operations, except for the deferral of Social Security payroll taxes, which benefited the Company's operating cash flows through the end of calendar year 2020. On December 27, 2020 the Consolidated Appropriations Act of 2021 (“the Appropriations Act”) was signed into law. The Appropriations Act, among other things includes provisions related to the deductibility of PPP expenses paid with PPP loan proceeds, payroll tax credits, modifications to the meals and entertainment deduction, increased limitations on charitable deductions for corporate taxpayers, and enhancements of expiring tax “extender” provisions. The Company has completed its assessment of the impact of the legislation, and there is no significant impact to the consolidated financial statements. The Company or one of its subsidiaries files income tax returns in the U.S., Federal and State, and various foreign jurisdictions. The Company’s major locations are in the U.S., Italy, Australia, Russia, and Brazil. Open tax years for the U.S. are from 2018-2021, for Italy open tax years are from 2016-2021, and for Russia open tax years are from 2018-2021. Australia has open tax years from 2017-2021 and Brazil has open tax years from 2015-2021. The Company has applied the provisions of ASC 740, “Income Taxes” related to unrecognized tax benefits. At December 31, 2021, 2020, and 2019, the unrecognized tax benefits were $0.1 million, $0.8 million, and $4.5 million, respectively. As of December 31, 2021, $0.1 million of unrecognized tax benefits would have affected income tax expense if the tax benefits were recognized. The majority of the accrual in unrecognized tax benefits relates to potential state tax exposures. Although management cannot predict with any degree of certainty the timing of ultimate resolution of matters under review by various taxing jurisdictions, it is possible that the Company’s gross unrecognized tax benefits balance will decrease by approximately $0.1 million within the next twelve months. A reconciliation of the total amounts of unrecognized tax benefits at December 31 were as follows (amounts in thousands):
| 2021 |  | 2020 |  | 2019
Balance at January 1 | $ | 1,012 |  |  | $ | 4,097 |  |  | $ | 7,406 |
Increases to tax positions taken during the prior years | — |  |  | 13 |  |  | 973 |
Decreases to tax positions taken during prior years | — |  |  | — |  |  | (350) |
Decreases due to lapse of statutes of limitations | (473) |  |  | (3,099) |  |  | (3,429) |
Settlements | — |  |  | — |  |  | (506) |
Foreign exchange | 1 |  |  | 1 |  |  | 3 |
Balance at December 31 | $ | 540 |  |  | $ | 1,012 |  |  | $ | 4,097 |
The Company accrues interest and penalties related to unrecognized tax benefits in income tax expense. The amount of interest and penalties related to unrecognized tax benefits recorded in income tax expense was $(0.2) million, $(1.1) million, and $(1.0) million at December 31, 2021, 2020 and 2019. The reconciliation of unrecognized tax benefits above does not include accrued interest and penalties of $0.0 million, $0.3 million, and $1.4 million, at December 31, 2021, 2020, and 2019, respectively. Brazilian Tax Credits In June 2021, the Company’s Brazilian subsidiaries received a notice that it had prevailed on an existing legal claim in regards to certain non-income (indirect) taxes that had been previously charged and paid. The matter specifically relates to companies’ rights to exclude the state tax on goods circulation (a value-added-tax or VAT equivalent, known in Brazil as “ICMS”) from the calculation of certain additional indirect taxes (specifically the program of social integration (“PIS”) and contribution for financing of social security (“COFINS”) levied by the Brazilian States on the sale of goods. The Company is in the process of submitting the related supporting documentation to the Brazilian tax authorities during the first half of 2022. After review by the Brazilian tax authorities, the Company could receive approximately $29 million of non-income tax credits to be applied as credits against future PIS/COFINS tax obligations. The Company plans to recognize the full benefit of the non-income tax credits, contingent upon successful approval and verification from the Brazilian tax authorities.

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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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