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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The following table summarizes the income (loss) from continuing operations before benefit (provision) for income taxes and share of net income from joint venture.
| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
United States | $ | (64,394) |  |  | $ | (40,543) |  |  | $ | (35,325) |
Foreign | 10,723 |  |  | 9,474 |  |  | 12,883 |
Loss from continuing operations before benefit (provision) for income taxes and share of net income from joint venture | $ | (53,671) |  |  | $ | (31,069) |  |  | $ | (22,442) |
The following table summarizes total income tax expense (benefit) recognized in each year.
| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
Current taxes: |  |  |  |  |
U.S. Federal | $ | (580) |  |  | $ | (545) |  |  | $ | (19) |
State | 126 |  |  | (625) |  |  | (615) |
Foreign | 3,901 |  |  | 4,576 |  |  | 3,014 |
Total current tax expense | 3,447 |  |  | 3,406 |  |  | 2,380 |
Deferred taxes: |  |  |  |  |
U.S. Federal | $ | (9,057) |  |  | $ | (6,245) |  |  | $ | (8,421) |
State | (1,833) |  |  | 70 |  |  | (1,099) |
Foreign | (721) |  |  | (986) |  |  | (154) |
U.S. federal, state and foreign valuation allowance | 10,449 |  |  | 5,376 |  |  | 5,538 |
Total deferred tax benefit | (1,162) |  |  | (1,785) |  |  | (4,136) |
Total income tax expense (benefit) | $ | 2,285 |  |  | $ | 1,621 |  |  | $ | (1,756) |
The following table presents a reconciliation of income taxes based on the U.S. federal statutory income tax rate.
| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
U.S federal statutory income tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Change in valuation allowance, exclusive of state | (16.1) | % |  | (17.5) | % |  | (20.0) | %
State taxes, net of federal taxes, exclusive of tax reform | (0.2) | % |  | 1.6 | % |  | 4.5 | %
Non-U.S. earnings taxed at different rates | 1.1 | % |  | 0.7 | % |  | 3.0 | %
Global intangible low-taxed income | (2.3) | % |  | (3.9) | % |  | (6.0) | %
Deferred true-up | (0.8) | % |  | (6.4) | % |  | — | %
Research and development tax credit | 0.2 | % |  | 0.3 | % |  | 1.0 | %
Change in uncertain tax positions | — | % |  | — | % |  | 0.7 | %
Interest on CARES Act refund | 1.1 | % |  | 1.8 | % |  | — | %
Return to provision | 0.1 | % |  | 1.3 | % |  | 0.8 | %
Taxes on unremitted foreign earnings | (2.4) | % |  | (3.9) | % |  | 2.0 | %
Intercompany lending | (1.3) | % |  | (2.7) | % |  | (5.3) | %
Warrant revaluation | (4.3) | % |  | 3.6 | % |  | 6.5 | %
Other adjustments, net | (0.4) | % |  | (1.1) | % |  | (0.4) | %
Effective tax rate | (4.3) | % |  | (5.2) | % |  | 7.8 | %
Our effective tax rate was (4.3)% and (5.2)% for the years ended December 31, 2023 and 2022, respectively. The effective tax rates differed from the U.S. federal statutory tax rate of 21% primarily due to the impact of our valuation allowance change during the year. Our effective tax rate for continuing operations was 7.8% for the year ended December 31, 2021, which differed from the U.S. federal statutory tax rate of 21% primarily due to the impact of our valuation allowance change during the year. In 2021, we filed a refund claim with the IRS as a result of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). During the years ended December 31, 2023 and 2022, we accrued $0.6 million and $0.6 million, respectively, of interest on the CARES Act refund. Including interest accrued on the initial refund amount, we have a $11.6 million tax refund receivable at December 31, 2023, which is in the process of IRS review and approval. The timing of the receipt of the refund remains uncertain at December 31, 2023. The following table summarizes the principal components of the deferred tax assets and liabilities.
| As of December 31,
| 2023 |  | 2022
Deferred income tax liabilities: |  |  |
Tax in excess of book depreciation | $ | 21,497 |  |  | $ | 24,045 |
Intangible assets | 13,659 |  |  | 16,978 |
Operating leases | 9,970 |  |  | 10,669 |
Interest rate swap | — |  |  | 754 |
Taxes on unremitted foreign earnings | 4,658 |  |  | 4,961 |
Other deferred tax liabilities | 725 |  |  | 761 |
Total deferred income tax liabilities | 50,509 |  |  | 58,168 |
Deferred income tax assets: |  |  |
Interest expense limitation | 14,920 |  |  | 10,723 |
Goodwill | 20,419 |  |  | 22,277 |
Inventories | 2,456 |  |  | 2,292 |
Section 174 research and development costs | 2,400 |  |  | 1,859 |
Pension and personnel accruals | 1,818 |  |  | 1,717 |
Operating leases | 12,238 |  |  | 12,852 |
Net operating loss carryforwards | 32,043 |  |  | 24,299 |
Interest rate swap | 251 |  |  | — |
Credit carryforwards | 3,235 |  |  | 2,803 |
Accruals and reserves | 904 |  |  | 978 |
Other deferred tax assets | 3,099 |  |  | 3,086 |
Deferred income tax assets before valuation allowance | 93,783 |  |  | 82,886 |
Valuation allowance on deferred tax assets | (47,528) |  |  | (30,212) |
Total deferred income tax assets | 46,255 |  |  | 52,674 |
Net deferred income tax liabilities | $ | 4,254 |  |  | $ | 5,494 |
As of December 31, 2023, we had a $37.9 million U.S. federal net operating loss (“NOL”) carryover. The federal NOL has an indefinite life, but utilization within any tax year is limited to 80% of taxable income. Management has determined it is more likely than not this NOL will not be realized and has established a full valuation allowance against the deferred tax asset. As of December 31, 2023, we had $16.2 million of tax effected, state NOL carryovers, which begin to expire in 2030. Management has determined it is more likely than not these state NOL’s will not be realized and has established a full valuation allowance against these deferred tax assets. We also have $11.3 million, tax-effected, of foreign NOL carryovers at December 31, 2023. The foreign NOLs have an indefinite life; however, management believes that benefit for certain of the foreign NOLs may not be realized. Therefore, we have established a valuation allowance of $8.1 million to reduce the carrying value of the asset related to foreign NOLs to the amount that has been determined to be more likely than not realized. We have $0.4 million and $2.9 million of U.S. federal tax credits and tax credits in foreign jurisdictions, respectively, as of December 31, 2023. We have recognized a full valuation allowance against these tax credits. In addition, we have other federal and state deferred tax assets of $2.0 million that we believe it is more likely than not will not be realized for which we have established a full valuation allowance. We have a U.S. federal and state deferred tax asset related to interest expense carryforwards. Management believes it is more likely than not that the benefit for this asset will not be realized. We have established a valuation allowance of $14.9 million to eliminate the carrying value of this asset. Management assesses available positive and negative evidence to estimate whether it is more likely than not sufficient future taxable income will be generated to provide use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated is cumulative losses incurred over the three-year period ended December 31, 2023. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future earnings growth. On the basis of this evaluation, as of December 31, 2023, a valuation allowance of $47.5 million has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized without consideration of future earnings growth. Management believes all remaining tax assets will more likely than not be realized. However, the amount of the deferred tax asset realized will change based on future conditions, and the amount considered realizable will be adjusted if objective negative evidence in the form of cumulative losses is no longer present allowing additional weight to be given to subjective evidence such as our projections for growth. During 2023, the valuation allowance increased by $17.3 million, primarily due to allowances recorded against U.S. federal net operating loss carryforwards, foreign net operating loss carryforwards, and carryforwards of disallowed interest expense which are subject to certain annual deduction limitations. The increase was partially offset by the release of valuation allowance in Brazil. As of December 31, 2023, Brazil had emerged from a recent history of cumulative losses and management has confidence in the operations ability to sustain profits in the future. As a result of the deemed mandatory repatriation provisions in the U.S. Tax Cuts and Jobs Act of 2017 and subsequent recognition in income of GILTI, we do not have material basis differences related to cumulative unremitted earnings for U.S. income tax purposes. However, we continue to evaluate the impact that repatriation of foreign earnings would have on withholding and other taxes. As of December 31, 2023, we have recorded a liability of $4.7 million for the anticipated withholding taxes that would be due upon repatriation of the unremitted earnings of those subsidiaries for which management does not intend to permanently reinvest. In 2021, the Company asserted that it was permanently reinvested in certain jurisdictions for which it previously was unable to assert permanent reinvestment. Prior to the Company’s debt refinancing in 2021, the Company had recorded a liability on all unremitted earnings. However, upon completion of the debt refinancing, the Company reevaluated repatriation plans, changed its assertion for certain jurisdictions and recorded the resulting tax benefit of $2.4 million. We are subject to U.S. federal income tax as well as tax in several foreign jurisdictions. We are also subject to tax by various state authorities. The tax years subject to examination vary by jurisdiction. We are no longer subject to U.S. federal examination for periods before 2017. We are currently under federal examination for tax years 2017, 2018 and 2019. We regularly assess the outcomes of both ongoing and future examinations for the current or prior years to ensure our provision for income taxes is sufficient. We recognize liabilities based on estimates of whether additional taxes will be due, and we believe our reserves are adequate in relation to any potential assessments. The outcome of any one examination, some of which may conclude during the next twelve months, is not expected to have a material impact on our financial position or results of operations. Interest and penalties related to federal, state, and foreign income tax matters are recorded as a component of the provision for income taxes in our Consolidated Statements of Operations and Comprehensive Income (Loss). Accrued interest and penalties of $0.5 million and $0.5 million are included in other non-current liabilities as of December 31, 2023 and 2022, respectively. The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding interest and penalties.
| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
Balance at beginning of year | $ | 118 |  |  | $ | 125 |  |  | $ | 247 |
Additions for tax positions of prior years | 3 |  |  | — |  |  | — |
Reductions for tax positions of prior years | — |  |  | (7) |  |  | (122) |
Balance at end of year | $ | 121 |  |  | $ | 118 |  |  | $ | 125 |
The increase to unrecognized tax benefits in 2023 is related to the foreign currency remeasurement of previously unrecognized tax benefits. As of December 31, 2023, the unrecognized tax benefits would, if recognized, impact our effective tax rate by $0.7 million, inclusive of the impact of interest and penalties. Management believes that it is reasonably possible that the amount of unrecognized income tax benefits, including interest and penalties, may not decrease during the next twelve months as no statutes are expected to lapse within the period. We operate under tax holidays in other countries, which are effective through December 31, 2026, and may be extended if certain additional requirements are satisfied. The tax holidays are conditional upon our meeting certain employment and investment thresholds. The tax holidays did not impact our 2023 or 2022 foreign taxes and decreased foreign taxes by $0.2 million for the year ended December 31, 2021.

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