XML 31 R18.htm IDEA: XBRL DOCUMENT v3.22.4
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income (loss) before income taxes were as follows (in thousands):
Year ended December 31,
20222021
U.S.$(43,587)$(98,445)
Non-U.S.53,936 16,436 
Income (loss) before income taxes$10,349 $(82,009)
The components of income tax expense (benefit) were as follows (in thousands):
Year ended December 31,
20222021
Current
U.S. federal and state$196 $1,235 
Non-U.S.6,571 (3,384)
Total current6,767 (2,149)
Deferred
U.S. federal and state26 (169)
Non-U.S.(156)2,960 
Total deferred(130)2,791 
Income tax expense (benefit)$6,637 $642 
The reconciliation between the actual provision for income taxes and that computed by applying the U.S. statutory rate to loss before income taxes are outlined below (in thousands):
Year ended December 31,
20222021
Income tax benefit at the statutory rate$2,173 21.0 %$(17,222)(21.0)%
State taxes, net of federal tax benefit879 8.5 %22 — %
Non-U.S. operations(7,242)(70.0)%(7,594)(9.3)%
Domestic incentives166 1.6 %(264)(0.3)%
Prior year federal, non-U.S. and state tax(591)(5.7)%(7,183)(8.8)%
Nondeductible expenses3,157 30.5 %3,006 3.7 %
U.S. CARES Act— — %113 0.1 %
Valuation allowance8,077 78.0 %31,079 37.9 %
Other18 0.2 %(1,315)(1.5)%
Income tax benefit$6,637 64.1 %$642 0.8 %
Our effective tax rate was 64.1% and 0.8% for the years ended December 31, 2022 and 2021, respectively.
The tax benefit for the years ended December 31, 2022 and 2021 includes an increase in our valuation allowance of $8.1 million and $31.1 million, respectively, consisting of a full valuation allowance against our deferred tax assets in the U.S., U.K., Germany, Singapore, China and Saudi Arabia as further described below under the primary components of deferred taxes.
The primary components of deferred taxes include (in thousands):
December 31, 2022December 31, 2021
Deferred tax assets
Reserves and accruals$3,940 $3,978 
Operating lease liabilities17,596 11,176 
Inventories12,964 14,692 
Stock awards1,862 2,340 
Net operating loss and other tax carryforwards124,024 109,402 
Goodwill and intangible assets26,607 32,513 
Fair value discount on 2025 Notes26,301 22,250 
Property and equipment4,570 6,424 
Other3,991 1,912 
Gross deferred tax assets221,855 204,687 
Valuation allowance(208,139)(198,366)
Total deferred tax assets$13,716 $6,321 
Deferred tax liabilities
Operating lease assets$(13,989)$(6,490)
Prepaid expenses and other(445)(462)
Total deferred tax liabilities(14,434)(6,952)
Net deferred tax liabilities$(718)$(631)
Goodwill from certain acquisitions is tax deductible due to the acquisition structure as an asset purchase or due to tax elections made by the Company and the respective sellers at the time of acquisition.
We have deferred tax assets related to net operating loss and other tax carryforwards in the U.S., and in certain states and foreign jurisdictions. We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized.
At December 31, 2022, we had $279.7 million of U.S. net operating loss carryforwards and $10.6 million of state net operating losses. Of these losses, $44.1 million will expire no later than 2037 if they are not utilized prior to that date. The remaining $246.2 million will not expire. We also had $200.0 million of non-U.S. net operating loss carryforwards with indefinite expiration dates. In addition to our net operating loss carryforwards, we also had U.S. interest limitation carryforwards of $105.6 million with indefinite expiration dates. The ultimate realization of income tax benefits for these net operating loss and interest limitation carryforwards depends on our ability to generate sufficient taxable income in the respective taxing jurisdictions. Because of the change of ownership provisions of the Tax Reform Act of 1986, use of a portion of our domestic net operating losses may be limited in future periods depending upon future changes in ownership. Where we have unrecognized tax benefits in jurisdictions with existing net operating losses, we utilize the unrecognized tax benefits as a source of income to offset such losses. We do not anticipate being able to fully utilize all of the losses prior to their expiration in the following jurisdictions: the U.S, the U.K, Germany, Singapore, China and Saudi Arabia.
During 2022, we recognized $8.1 million of tax expense related to the increase in our valuation allowance provided against our deferred tax assets to write down our deferred tax assets in these jurisdictions to what is more likely than not realizable. We increased our valuation allowance related to our U.S. and foreign deferred tax assets by $4.6 million and $3.5 million, respectively. In making such a determination for each of these jurisdictions, we considered all available positive and negative evidence, including our recent history of pretax losses over the prior three year period, the goodwill and intangible asset impairments for various reporting units, the future reversals of existing taxable temporary differences, the projected future taxable income or loss and tax-planning.
Deferred tax liabilities arising from the difference between the financial reporting and income tax bases inherent in our foreign subsidiaries, referred to as outside basis differences, have not been provided for U.S. income tax purposes because we do not intend to sell, liquidate or otherwise trigger the recognition of U.S. taxable income with
regard to our investment in these foreign subsidiaries. Determining the amount of U.S. deferred tax liabilities associated with outside basis differences is not practicable at this time.
We file income tax returns in the U.S. as well as in various states and non-U.S. jurisdictions. With few exceptions, we are no longer subject to income tax examination by tax authorities in these jurisdictions prior to 2016.
We account for uncertain tax positions in accordance with guidance in ASC Topic 740, which prescribes the minimum recognition threshold a tax position taken or expected to be taken in a tax return is required to meet before being recognized in the financial statements. A reconciliation of the beginning and ending amount of uncertain tax positions is as follows (in thousands):
2022 ActivityAmount
Balance at January 1, 2022$8,358 
Additional based on tax positions related to prior years2,906 
Additional based on tax positions related to current year1,478 
Reduction based on tax positions related to prior years(822)
Settlement with tax authorities— 
Lapse of statute of limitations(1,408)
Balance at December 31, 2022$10,512 
The total amount of unrecognized tax benefits at December 31, 2022 was $10.5 million, of which it is reasonably possible that $4.4 million could be settled during the next twelve-month period as a result of the conclusion of various tax audits or due to the expiration of the applicable statute of limitations. We estimate that $7.6 million of the unrecognized tax benefits at December 31, 2022, excluding consideration of valuation allowance, would impact our future effective income tax rate, if recognized.
We recognize interest and penalties related to uncertain tax positions within the provision for income taxes in the consolidated statements of comprehensive income (loss). As of December 31, 2022 and 2021, we had accrued approximately $0.4 million and $0.5 million in interest and penalties, respectively. During the years ended December 31, 2022 and 2021, we recognized no material change in the interest and penalties related to uncertain tax positions.