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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Components of the Company's income (loss) before taxes are as follows:
Year ended December 31,
(in thousands)
202420232022
Domestic (including U.S. exports)$41,665 $(59,397)$20,495 
Foreign subsidiaries49,645 37,208 37,086 
$91,310 $(22,189)$57,581 
Components of the Company’s income tax provision are as follows:
Year ended December 31,
(in thousands)202420232022
Current taxes
Federal$43,115 $25,713 $21,744 
State9,402 5,407 5,639 
Foreign14,374 11,318 10,961 
Total current taxes66,891 42,438 38,344 
Deferred taxes:
Federal(16,615)(19,151)1,841 
State(1,331)(798)2,834 
Foreign67 150 (1,652)
Total deferred taxes(17,879)(19,799)3,023 
Total tax provision$49,012 $22,639 $41,367 
The tax effects of temporary differences that have resulted in the creation of deferred tax assets and deferred tax liabilities at December 31, 2024 and 2023 are as follows:
December 31,
(in thousands)
20242023
Deferred tax assets:
Tax credits$3,411 $5,023 
Accounts receivable and allowances1,063 1,093 
Net operating loss carryforwards14,662 9,803 
Accrued expenses8,133 6,420 
Interest expense limitation carryforwards27,095 16,776 
Lease liabilities49,988 46,167 
Inventory10,911 8,818 
Stock based compensation6,050 4,380 
Capitalized research & development expenses9,474 4,245 
Capital loss on sale of Crosman11,260 — 
Other1,866 3,568 
Total deferred tax assets$143,913 $106,293 
Valuation allowance (1)
(36,599)(6,816)
Net deferred tax assets$107,314 $99,477 
Deferred tax liabilities:
Intangible assets$(159,174)$(154,025)
Property and equipment(22,672)(23,276)
Repatriation of foreign earnings(38)(38)
Prepaid and other expenses(1,256)(842)
Right of use assets(44,122)(40,178)
Total deferred tax liabilities$(227,262)$(218,359)
Total net deferred tax liability$(119,948)$(118,882)

(1)Primarily relates to the Trust and 5.11, Arnold and Velocity operating segments.
As of December 31, 2024 and 2023, the Company had approximately $227.3 million and $218.4 million, respectively in deferred tax liabilities. A significant portion of the balance in deferred tax liabilities reflects temporary
differences in the basis of property and equipment and intangible assets related to the Company’s purchase accounting adjustments in connection with the acquisition of certain of its businesses. For financial accounting purposes the Company has recognized a significant increase in the fair values of the intangible assets and property and equipment in certain of the businesses it acquired. For income tax purposes the existing, pre-acquisition tax basis of the intangible assets and property and equipment is utilized. In order to reflect the increase in the financial accounting basis over the existing tax basis, a deferred tax liability was recorded. This liability will decrease in future periods as these temporary differences reverse but may be replaced by deferred tax liabilities generated as a result of future acquisitions.
At December 31, 2024 and 2023, the Company had U.S. Federal net operating loss carryforwards of approximately $40.6 million and $19.2 million, respectively. Approximately $10.6 million of these carryforwards will expire, if not utilized, beginning in 2036. The remaining balance of the Company's U.S. Federal net operating loss carryforwards do not expire and are subject to utilization limitations based on a percentage of taxable income in a given year. As of December 31, 2024 and 2023, the Company had net operating loss carryforwards for state income tax purposes of $50.6 million and $46.1 million, respectively. The Company’s state net operating loss carryforwards will expire, if not utilized, beginning in 2026. As of December 31, 2024 and 2023, the Company had foreign net operating loss carryforwards of $11.0 million and $10.2 million, respectively. The foreign net operating loss carryforwards will expire, if not utilized, beginning in 2024. As of December 31, 2024, the Company had Federal capital loss carryforwards of $47.5 million. The Federal capital loss carryforwards will expire in 2029 if not utilized. As of December 31, 2024, the Company had State capital loss carryforwards of $0.5 million. The State capital loss carryforwards will expire in 2044 if not utilized.
As of December 31, 2024 and 2023, the Company had federal research and development tax credit carryforwards of $0.2 million and $1.7 million, respectively. The research and development tax credit carryforwards will expire beginning in 2044 if not utilized. As of December 31, 2024 and 2023, the Company had foreign tax credit carryforwards of $2.0 million and $2.8 million, respectively. The foreign tax credit carryforwards will expire beginning in 2031 if not utilized. As of December 31, 2024 and 2023, the Company had state tax credit carryforwards, consisting mostly of California business tax credits of $0.8 million and $1.1 million, respectively. The California business tax credit carryforwards will expire, if not utilized, beginning in 2025.
As of December 31, 2024 and 2023, the Company had a valuation allowance related to the realization of domestic and foreign net operating losses, domestic and foreign tax credits and the limitation on the deduction of interest expense of $36.6 million and $6.8 million, respectively. A valuation allowance is provided whenever it is more likely than not that some or all of deferred assets recorded may not be realized.
The reconciliation between the Federal Statutory Rate and the effective income tax rate for 2024, 2023 and 2022 are as follows:
Year ended December 31,
202420232022
United States Federal Statutory Rate21.0 %21.0 %21.0 %
State income taxes (net of Federal benefits)5.6 (14.3)7.7 
Foreign income taxes 4.4 (19.3)3.8 
Impact of subsidiary employee stock options0.5 16.0 0.2 
Non-deductible acquisition costs0.5 0.1 0.9 
Impairment expense1.6 (70.7)— 
Non-recognition of various carryforwards at subsidiaries22.4 (6.7)27.6 
United States tax on foreign income(1.9)(1.2)0.6 
Dividend (net of dividend received deduction)(0.8)(42.1)5.5 
Utilization of tax credits(5.4)20.0 (13.0)
Tax effect – loss on sale of Crosman5.7 — — 
Effect of classification of assets held for sale— — 14.9 
Other0.1 (4.8)2.6 
Effective income tax rate53.7 %(102.0)%71.8 %
A reconciliation of the amount of unrecognized tax benefits for 2024, 2023 and 2022 are as follows (in thousands):
Balance at January 1, 2022$1,254 
Additions for current years’ tax positions91 
Additions for prior years’ tax positions 15 
Reductions for prior years’ tax positions (71)
Reductions for expiration of statute of limitations$(73)
Balance at December 31, 2022$1,216 
Additions for current years’ tax positions28,325 
Additions for prior years’ tax positions 33 
Reductions for prior years' tax positions(184)
Reductions for expiration of statute of limitations(68)
Balance at December 31, 2023$29,322 
Additions for current years’ tax positions7,802 
Additions for prior years’ tax positions — 
Reductions for prior years' tax positions(25)
Reductions for expiration of statute of limitations(73)
Balance at December 31, 2024$37,026 
The unrecognized tax benefits are recorded in the consolidated balance sheet in other noncurrent liabilities. Included in the unrecognized tax benefits at December 31, 2024 and 2023 is $1.6 million and $1.3 million, respectively, of tax benefits that, if recognized, would affect the Company’s effective tax rate. Also included in the unrecognized tax benefits at December 31, 2024 and 2023 are $7.4 million and $27.9 million, respectively, of unrecognized tax benefits that, if recognized, would not affect the Company's effective tax rate but would result in an adjustment to discontinued operations in future periods. The $7.4 million in unrecognized tax benefits is recorded as a reduction to the gain on sale related to the sale of our Ergobaby subsidiary in the year ended December 31, 2024. The $27.9 million in unrecognized tax benefits is recorded as a reduction to the gain on sale related to the sale of our ACI and Marucci subsidiaries in the year ended December 31, 2023. If recognized, the tax benefit would result in additional gain on sale of discontinued operations.
The Company accrues interest and penalties related to uncertain tax positions. The amounts accrued at December 31, 2024, 2023 and 2022 are not material to the Company. Such amounts are included in the provision (benefit) for income taxes in the accompanying consolidated statements of operations. It is expected that the amount of unrecognized tax benefits will change in the next twelve months. However, we do not expect the change to have a significant impact on the consolidated results of operations or financial position.
Each of the Company’s businesses file U.S. Federal, state and foreign income tax returns in multiple jurisdictions with varying statutes of limitations. The 2019 through 2024 tax years generally remain subject to examinations by the taxing authorities.