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Income taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income taxes | Income taxes The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. Valuation allowances are recorded as appropriate to reduce deferred tax assets to the amount considered likely to be realized. The Company establishes valuation allowances for deferred income tax assets in accordance with U.S. GAAP, which provides that such valuation allowances shall be established unless realization of the income tax benefits is more likely than not. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. As of December 31, 2022, the Company reassessed the valuation allowance and considered negative evidence, including its significant losses in the current year and the substantial doubt about the Company’s ability to continue as a going concern through one year from the date that these financial statements are issued, positive evidence, scheduled reversal of deferred tax liabilities, available taxes in carryback periods, tax planning strategies and projected future taxable income. After assessing both the negative and positive evidence, the Company concluded that it should record an additional valuation allowance of $37.8 million on its global net operating losses, credits and other deferred tax assets. The global intangible low-tax income (“GILTI”) provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company is subject to incremental U.S. tax on GILTI income. The Company has elected to account for GILTI tax in the period in which it is incurred, and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for the year ended December 31, 2022 and 2021. BEAT provisions do not have material impact on the consolidated financial statements. For the year ended December 31, 2022, the Company has evaluated its historical indefinite reinvestment assertion in connection with the Company’s going concern uncertainty. The Company recognized a deferred withholding tax liability for the undistributed earnings of the Company’s international subsidiaries available cash and net working capital in the amount of $4.7 million. All other international subsidiaries’ outside basis differences are indefinitely reinvested. Significant components of income taxes attributable to operations consist of the following:
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
| (As Restated) |  | (As Revised) |  | (As Revised)
Current |  |  |  |  |
Federal | $ | (9.4) |  |  | $ | (3.1) |  |  | $ | 64.6 |
State | 1.9 |  |  | 14.9 |  |  | 28.4 |
International | 33.8 |  |  | 28.9 |  |  | 16.5 |
Total current | 26.3 |  |  | 40.7 |  |  | 109.5 |
Deferred |  |  |  |  |
Federal | (37.7) |  |  | 37.1 |  |  | 0.5 |
State | (3.2) |  |  | 4.2 |  |  | 0.1 |
International | 7.2 |  |  | 1.6 |  |  | (3.9) |
Total deferred | (33.7) |  |  | 43.0 |  |  | (3.4) |
Income tax (benefit) provision | $ | (7.4) |  |  | $ | 83.7 |  |  | $ | 106.1 |
The Company's net deferred tax liability consists of the following:
| December 31,
| 2022 |  | 2021
| (As Restated) |  | (As Revised)
Deferred tax assets |  |  |
Federal losses carryforward | $ | 14.8 |  |  | $ | 7.6 |
State losses carryforward | 13.0 |  |  | 5.9 |
R&D carryforward | 18.4 |  |  | 16.6 |
Stock compensation | 10.4 |  |  | 9.1 |
Foreign losses carryforward | 9.1 |  |  | 10.2 |
Deferred revenue | 2.0 |  |  | 0.4 |
Inventory reserves | 10.9 |  |  | 3.2 |
Lease liability | 4.7 |  |  | 6.6 |
IRC 263A capitalized costs | 5.2 |  |  | 4.0 |
Capitalized R&D | 27.3 |  |  | — |
IRC 163(j) Interest Limitation | 7.9 |  |  | — |
Other | 1.2 |  |  | 6.0 |
Gross deferred tax assets | 124.9 |  |  | 69.5 |
Valuation allowance | (65.1) |  |  | (27.3) |
Total deferred tax assets | 59.8 |  |  | 42.2 |
Deferred tax liabilities |  |  |
Fixed assets | (63.6) |  |  | (75.9) |
Intangible assets | (46.1) |  |  | (47.6) |
Right-of-use asset | (4.5) |  |  | (6.3) |
Foreign Withholding Tax | (4.7) |  |  | — |
Other | (0.7) |  |  | (0.9) |
Total deferred tax liabilities | (119.6) |  |  | (130.7) |
Net deferred tax liabilities | $ | (59.7) |  |  | $ | (88.5) |
As of December 31, 2022, the Company has approximately $70.5 million in U.S. federal net operating loss ("NOL") carryforwards, $36.0 million of NOL’s which will expire in varying amounts in 2031 through 2035 and $34.5 million which will carryforward indefinitely, although, limited to eighty percent of taxable income annually. The Company has U.S. federal tax credit carryforwards of $13.4 million which will expire in 2027 through 2042. As of December 31, 2022, the Company had pre-apportionment state NOLs totaling approximately $1.7 billion primarily in Maryland which will begin to expire in 2025 and post-apportionment NOLs totaling approximately $146.5 million that will begin to expire in 2028. The Company has state R&D tax credit carryforwards of $5.0 million which will expire in 2027 through 2038. The deductibility of such US federal and state net operating losses and credits may be limited. Under Section 382/383 of the Internal Revenue Code of 1986, as amended (the “Code”), and corresponding provisions of state law, if a corporation undergoes an "ownership change," which generally occurs if the percentage of the corporation's stock owned by 5% stockholders increases by more than 50% over a three-year period, the corporation's ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited. Certain of the net operating loss carryforwards and the credit carryforwards are subject to an annual limitation pursuant to Internal Revenue Code Section 382 and 383 as a result of historical acquisitions. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control, which may further limit our carryforwards. If we determine that an ownership change has occurred and our ability to use our historical NOL and credit carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations. The Company has approximately $51.5 million in net operating losses from foreign jurisdictions as of December 31, 2022, $14.5 million of losses which will expire in varying amounts in 2022 through 2028 and $37.0 million will carryforward indefinitely. The Company’s valuation allowance increased by $37.8 million due to the Company’s determination that it is not more likely than not to realize its global net deferred income tax assets and the current year losses incurred within the U.S. The valuation allowance has been recorded primarily against the Company's net operating loss and credit carryforwards. Income taxes differ from the amount of taxes determined by applying the U.S. federal statutory rate to income before taxes as a result of the following:
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
| (As Restated) |  | (As Revised) |  | (As Revised)
U.S. | $ | (442.6) |  |  | $ | 100.1 |  |  | $ | 368.2 |
International | 224.0 |  |  | 203.3 |  |  | 43.7 |
Earnings (Losses) before taxes on income | (218.6) |  |  | 303.4 |  |  | 411.9 |
Federal tax at statutory rates | $ | (46.0) |  |  | $ | 63.5 |  |  | $ | 86.5 |
State taxes, net of federal benefit | (13.5) |  |  | 14.1 |  |  | 23.7 |
Impact of foreign operations | (7.2) |  |  | (18.7) |  |  | (7.7) |
Change in valuation allowance | 37.8 |  |  | 8.2 |  |  | 1.6 |
Tax credits | (3.5) |  |  | (4.7) |  |  | (7.4) |
Stock compensation | 4.7 |  |  | (3.9) |  |  | (6.3) |
Goodwill Impairments | 1.8 |  |  | 8.3 |  |  | — |
Adjustment of prior year taxes | (1.8) |  |  | 0.8 |  |  | (2.2) |
Transaction costs | — |  |  | 0.1 |  |  | 6.0 |
Compensation limitation | 0.7 |  |  | 2.9 |  |  | 2.2 |
Unrecognized tax benefit | (9.0) |  |  | 1.2 |  |  | 2.2 |
GILTI, net | 20.7 |  |  | 13.0 |  |  | 5.4 |
Foreign withholding tax | 4.7 |  |  | — |  |  | — |
Permanent differences | 3.2 |  |  | (1.2) |  |  | 2.1 |
Income tax (benefit) provision | $ | (7.4) |  |  | $ | 83.7 |  |  | $ | 106.1 |
The effective annual tax rate for the years ended December 31, 2022, 2021, and 2020 was 3%, 28% and 26%, respectively. The effective annual tax rate of 3% in 2022 is lower than the statutory rate primarily due to the impact of a valuation allowance charge in the US, state and Foreign Jurisdictions, a charge due the Company’s indefinite reinvestment assertion, goodwill impairment, GILTI, and other permanent items. This is partially offset by tax credits, favorable rates in foreign jurisdictions, and the release of an indemnified unrecognized tax benefit. The effective annual tax rate of 28% in 2021 is higher than the statutory rate primarily due to the impact of goodwill impairment, state taxes, GILTI and other non-deductible items. This is partially offset by stock option deduction benefits, tax credits, and favorable rates in foreign jurisdictions. The jurisdictional mix of profit has changed from the prior year largely due to lower U.S. CDMO margins, the termination of the CIADM arrangement in the U.S. and an increase in sales of NARCAN in which a portion of the profit is attributable to a foreign subsidiary. The effective annual tax rate of 26% in 2020 is higher than the statutory rate primarily due to the impact of state taxes, GILTI, contingent consideration, other non-deductible items and the jurisdictional mix of earnings. This is partially offset by stock option deduction benefits, tax credits, and favorable rates in foreign jurisdictions. The total unrecognized tax benefits recorded at December 31, 2022 and 2021 of $6.8 million and $12.7 million, respectively, is classified primarily as a non-current liability on the consolidated balance sheets. The table below presents the gross unrecognized tax benefits activity for the years ended December 31, 2022, 2021 and 2020:
| Year Ended December 31,
2022 |  | 2021 |  | 2020
(As Restated) |  | (As Revised) |  | (As Revised)
Gross unrecognized tax benefits, beginning of period | $ | 12.7 |  |  | $ | 12.2 |  |  | $ | 8.9 |
Increases (decreases) for tax positions for prior years | (1.5) |  |  | 0.3 |  |  | — |
Increases for tax positions for current year | 0.7 |  |  | 0.2 |  |  | 5.1 |
Settlements | — |  |  | — |  |  | (1.8) |
Lapse of statute of limitations | (5.1) |  |  | — |  |  | — |
Gross unrecognized tax benefits, end of period | $ | 6.8 |  |  | $ | 12.7 |  |  | $ | 12.2 |
The total gross unrecognized tax benefit of $6.8 million, includes the release of $8.0 million of liability that related to the 2018 acquisition of PaxVax Holdings Company, Ltd. The liability was offset by an indemnification receivable, both of which were released due to a lapse of the statute of limitation during the year. The Company includes interest and potential penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2022 and 2021, the total amount of interest and penalties accrued was $1.6 million and $3.7 million, respectively. The Company recognized interest and penalty expense (benefit) in 2022, 2021 and 2020 of $(2.1) million, $1.1 million and $0.4 million, respectively. The Company does not anticipate a significant change within the next twelve months for unrecognized tax benefits and when resolved, all of these liabilities would impact the effective tax rate. However, the Company maintains a full valuation allowance as of December 31, 2022 and the recognition of any unrecognized tax benefits would be offset with a change in the valuation allowance and therefore there would be no income statement impact. The Company's federal and state income tax returns for the tax years 2019 and onwards remain open to examination. The Company's tax returns for Canada remain open to examination for the tax years 2014 through 2021. The Company's Irish tax returns remain open to examination for the tax years 2016 through 2021. As of December 31, 2022, the Company’s 2018 Canadian Scientific Research and Experimental Development Claim is under appeal and the Company’s 2020 Canadian Scientific Research and Experimental Development Claim is under audit. The Company's 2016 and 2017 Canadian income tax returns for the Adapt entities are under audit. The Company’s Irish group is under Level 1 Compliance Intervention review for 2021. In addition, the Company’s 2019 and 2020 New York state income tax returns are under audit.

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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 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
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