XML 33 R17.htm IDEA: XBRL DOCUMENT v3.20.4
Income Taxes
 12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
In 2020, 2019 and 2018, pre-tax income (loss) was attributed to the following jurisdictions: 
 Year Ended December 31,
(In thousands)202020192018
Domestic operations$(15,711)$(28,929)$(28,482)
Foreign operations59,616 39,331 54,648 
Total$43,905 $10,402 $26,166 
The provision for income taxes charged to operations was as follows: 
 Year Ended December 31,
(In thousands)202020192018
Current tax expense:
U.S. federal$(193)$(188)$(1,074)
State and local(54)82 83 
Foreign6,525 8,217 10,829 
Total current6,278 8,111 9,838 
Deferred tax (benefit) expense:
U.S. federal— — 3,961 
State and local— — 1,930 
Foreign(945)(1,339)(1,487)
Total deferred(945)(1,339)4,404 
Total provision for income taxes$5,333 $6,772 $14,242 

Net deferred tax assets were comprised of the following: 
December 31,
(In thousands)20202019
Deferred tax assets:
Accrued liabilities$— $4,070 
Amortization of intangible assets1,904 2,169 
Capitalized inventory costs2,945 3,156 
Depreciation2,530 426 
Income tax credits15,558 11,800 
Inventory reserves3,383 2,887 
Net operating losses2,844 2,644 
Operating lease obligations4,639 7,878 
Stock-based compensation4,600 4,018 
Other409 71 
Total deferred tax assets38,812 39,119 
Deferred tax liabilities:
Accrued liabilities(1,939)— 
Allowance for credit losses(710)(270)
Right of use assets(4,577)(7,480)
Other(29)(3,866)
Total deferred tax liabilities(7,255)(11,616)
Net deferred tax assets before valuation allowance31,557 27,503 
Less: Valuation allowance(27,906)(24,797)
Net deferred tax assets$3,651 $2,706 
The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pre-tax income from operations as a result of the following: 
 Year Ended December 31,
(In thousands)202020192018
Tax provision at statutory U.S. rate$9,220 $2,185 $5,495 
Increase (decrease) in tax provision resulting from:
Federal research and development credits(2,119)(884)(713)
Foreign permanent benefit(2,842)(856)(7,077)
Foreign tax rate differential(1,595)(1,810)(2,079)
Foreign undistributed earnings, net of credits3,319 1,181 5,329 
Non-deductible items1,637 1,236 1,197 
Non-territorial income(2,493)(1,806)(1,079)
Provision to return(343)584 — 
State and local taxes, net(1,932)(1,903)(1,792)
Stock-based compensation(266)262 213 
Tax rate change(1,527)(412)466 
Uncertain tax positions(1,565)(294)(159)
Valuation allowance3,109 7,524 8,057 
Withholding tax2,320 1,082 5,454 
Other410 683 930 
Tax provision$5,333 $6,772 $14,242 

At December 31, 2020, we had federal and state Research and Experimentation ("R&E") income tax credit carryforwards of $3.7 million and $11.3 million, respectively. The federal R&E income tax credits begin expiring in 2038. The state R&E income tax credits do not have an expiration date.

At December 31, 2020, we had state and foreign net operating loss carryforwards of $37.3 million and $0.5 million, respectively. The state and foreign net operating loss carryforwards begin to expire in 2026 and 2023, respectively.

At December 31, 2020, we assessed the realizability of our deferred tax assets by considering whether it is "more likely than not" some portion or all of the deferred tax assets will not be realized. 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. We considered taxable income in carryback years, the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. Due to uncertainties surrounding the realization of some of our deferred tax assets, we established a valuation allowance against certain deferred tax assets. Our historic valuation allowance primarily relates to state R&E income tax credits generated during the prior years and current year. We had cumulative operating losses for the three years ended in 2020 for our U.S. federal and state operations and accordingly, have provided a full valuation allowance on our U.S. federal and state deferred tax assets of $13.3 million and $14.4 million, respectively, as we have determined that it is more likely than not that the tax benefits will not be realized in the future. Additionally, we recorded a valuation allowance of $0.3 million at December 31, 2020 related to certain deferred tax assets in our Argentina office due to sustained losses in that jurisdiction. If and when recognized, the tax benefits relating to any reversal of the valuation allowance will be recorded as a reduction of income tax expense. The valuation allowance increased by $3.1 million and $7.5 million during the years ended December 31, 2020 and 2019, respectively.

Uncertain Tax Positions

At December 31, 2020 and 2019, we had unrecognized tax benefits of approximately $3.1 million and $4.3 million, respectively, including interest and penalties. We have elected to classify interest and penalties as components of tax expense. Interest and penalties were immaterial for the year ended December 31, 2020. Interest and penalties were $0.2 million and $0.5 million for the years ended December 31, 2019 and 2018, respectively. Interest and penalties are included in the unrecognized tax benefits.
Changes to our gross unrecognized tax benefits were as follows: 
Year Ended December 31,
(In thousands)202020192018
Balance at beginning of period$4,094 $4,040 $5,081 
Additions as a result of tax provisions taken during the current year274 473 702 
Foreign currency translation20 (100)(51)
Lapse in statute of limitations(51)(92)(80)
Settlements— (227)(1,612)
Other(1,317)— — 
Balance at end of period$3,020 $4,094 $4,040 

Approximately $3.0 million, $4.3 million and $4.3 million of the total amount of unrecognized tax benefits at December 31, 2020, 2019 and 2018, respectively, if not for the state R&E income tax credit valuation allowance, would affect the annual effective tax rate, if recognized. We are unaware of any positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase within the next twelve months. We do not anticipate a decrease in unrecognized tax benefits within the next twelve months based on federal, state, and foreign statute expirations in various jurisdictions. We have classified uncertain tax positions as non-current income tax liabilities unless expected to be paid within one year.

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. As of December 31, 2020, the open statutes of limitations for our significant tax jurisdictions are as follows: federal for 2017 through 2019, state for 2016 through 2019, and foreign for 2014 through 2019.

U.S. Tax Cuts and Jobs Act

The Tax Act was enacted in the U.S. on December 22, 2017. The Tax Act reduced the U.S. federal corporate income tax rate to 21% from 35%, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and created new taxes on certain foreign-sourced earnings. For the year ended December 31, 2018, we completed our analysis and accounting for the Tax Act, recording tax expense for the one-time transition tax liability related to undistributed earnings of certain foreign subsidiaries that were not previously taxed, adjusting deferred tax assets and liabilities, and recognizing the effects of electing to account for GILTI as a period cost.

Indefinite Reinvestment Assertion

Beginning in 2018, the Tax Act generally provides a 100% federal deduction for dividends received from foreign subsidiaries. Nevertheless, companies must still apply the guidance of ASC Topic 740 to account for the tax consequences of outside basis differences and other tax impacts of their investments in foreign subsidiaries, including potential foreign withholding taxes on distributions. Historically, the undistributed earnings of our foreign subsidiaries were considered to be indefinitely reinvested and no provision for U.S. federal and state income taxes or foreign withholding taxes had been provided on U.S. earnings. This assertion was changed in 2018. For the years ended December 31, 2020, 2019 and 2018, we recorded a deferred tax liability of $2.1 million, $1.7 million and $1.2 million, respectively, relating to state tax and foreign tax withholding liabilities on future distributions.

Coronavirus Aid, Relief and Economic Security Act

On March 27, 2020, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security ("CARES") Act was signed into law. The CARES Act provides economic stimulus and relief to address the impact of the COVID-19 pandemic. For the year ended December 31, 2020, our income tax expense was not significantly impacted by the CARES Act. We will continue to closely monitor the impact of the COVID-19 pandemic, as well as any effects from future legislation.