XML 35 R25.htm IDEA: XBRL DOCUMENT
v3.24.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Note 14 – Income Taxes The components of income tax expense (benefit) for the years ended December 31, 2023, 2022 and 2021 are as follows:
(In thousands) |  | 2023 |  |  | 2022 |  |  | 2021 |
Current |  |  |  |  |  |  |  |  |
Federal |  | $ | 2,545 |  |  | $ | 4,572 |  |  | $ | 11 |
State |  |  | 26 |  |  |  | 88 |  |  |  | (63 | )
International |  |  | 10,004 |  |  |  | (4,347 | ) |  |  | 4,166 |
Total Current |  |  | 12,575 |  |  |  | 313 |  |  |  | 4,114 |
Deferred |  |  |  |  |  |  |  |  |
Federal |  |  | 46,252 |  |  |  | (47,429 | ) |  |  | — |
State |  |  | 6,607 |  |  |  | (6,776 | ) |  |  | — |
International |  |  | (37,301 | ) |  |  | (8,183 | ) |  |  | (1,784 | )
Total Deferred |  |  | 15,558 |  |  |  | (62,388 | ) |  |  | (1,784 | )
Total Income Tax Expense (Benefit) |  | $ | 28,133 |  |  | $ | (62,075 | ) |  | $ | 2,330 |
The effective income tax rate differs from the federal statutory rate due to the following:
|  | 2023 |  |  | 2022 |  |  | 2021 |
Tax provision computed at the federal statutory rate |  |  | 21.00 | % |  |  | 21.00 | % |  |  | 21.00 | %
State income tax provision, net of federal benefit |  |  | 1.34 |  |  |  | 2.60 |  |  |  | 13.33 |
Federal research credits |  |  | 3.26 |  |  |  | 6.74 |  |  |  | 53.77 |
Foreign taxes |  |  | 3.52 |  |  |  | 6.29 |  |  |  | (4.69 | )
Tax-exempt income |  |  | 0.06 |  |  |  | 0.21 |  |  |  | 3.75 |
Change in valuation allowance |  |  | (35.19 | ) |  |  | 63.92 |  |  |  | (75.26 | )
Non-deductible transaction costs |  |  | — |  |  |  | (2.74 | ) |  |  | (39.48 | )
Foreign tax credits |  |  | 2.45 |  |  |  | (0.40 | ) |  |  | 0.14 |
Stock-based compensation |  |  | (0.57 | ) |  |  | (2.09 | ) |  |  | 10.74 |
Withholding taxes |  |  | 0.01 |  |  |  | 0.03 |  |  |  | 0.14 |
Alabama law change |  |  | — |  |  |  | — |  |  |  | (25.39 | )
Adtran Networks tax exempt income |  |  | 1.42 |  |  |  | — |  |  |  | — |
Return to accrual |  |  | 0.62 |  |  |  | 0.24 |  |  |  | 9.48 |
Global intangible low-taxed income ("GILTI") |  |  | (5.87 | ) |  |  | (8.08 | ) |  |  | (4.29 | )
Adtran Networks Goodwill Impairment |  |  | (4.62 | ) |  |  | — |  |  |  | — |
Other, net |  |  | 0.40 |  |  |  | (0.24 | ) |  |  | (0.19 | )
Effective Tax Rate |  |  | (12.17 | )% |  |  | 87.48 | % |  |  | (36.95 | )%
Loss before expense (benefit) for income taxes for the years ended December 31, 2023, 2022 and 2021 is as follows:
(In thousands) |  | 2023 |  |  | 2022 |  |  | 2021 |
U.S. entities |  | $ | (113,951 | ) |  | $ | (33,720 | ) |  | $ | (14,982 | )
International entities |  |  | (117,259 | ) |  |  | (37,243 | ) |  |  | 8,677 |
Total |  | $ | (231,210 | ) |  | $ | (70,963 | ) |  | $ | (6,305 | )
Loss before expense (benefit) for income taxes for international entities reflects loss based on statutory transfer pricing agreements. This amount does not correlate to consolidated international revenue, which occurs from our U.S. entity. Deferred income taxes on t he Consolidated Balance Sheets result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes. The significant components of current and non-current deferred taxes as of December 31, 2023 and 2022 consist of the following:
(In thousands) |  | 2023 |  |  | 2022 |
Deferred tax assets: |  |  |  |  |  |
Inventory |  | $ | 19,623 |  |  | $ | 5,818 |
Accrued expenses |  |  | 3,533 |  |  |  | 7,865 |
Deferred compensation |  |  | 6,284 |  |  |  | 5,792 |
Stock-based compensation |  |  | 2,023 |  |  |  | 1,373 |
Uncertain tax positions related to state taxes and related interest |  |  | 105 |  |  |  | 102 |
Pensions |  |  | 8,607 |  |  |  | 5,952 |
Foreign losses |  |  | 2,705 |  |  |  | 4,744 |
State losses and credit carry-forwards |  |  | 4,259 |  |  |  | 3,516 |
Federal loss and research carry-forwards |  |  | 78,450 |  |  |  | 64,995 |
Lease liabilities |  |  | 7,701 |  |  |  | 4,093 |
Capitalized research and development expenditures |  |  | 48,192 |  |  |  | 31,248 |
Investments |  |  | — |  |  |  | 160 |
Valuation allowance |  |  | (86,567 | ) |  |  | (5,201 | )
Total Deferred Tax Assets |  |  | 94,915 |  |  |  | 130,457 |
Deferred tax liabilities: |  |  |  |  |  |
Property, plant and equipment |  |  | (9,093 | ) |  |  | (8,982 | )
Intellectual property |  |  | (86,572 | ) |  |  | (108,671 | )
Right of use lease assets |  |  | (8,424 | ) |  |  | (6,594 | )
Investments |  |  | (694 | ) |  |  | — |
Total Deferred Tax Liabilities |  |  | (104,783 | ) |  |  | (124,247 | )
Net Deferred Tax (Liabilities) Assets |  | $ | (9,868 | ) |  | $ | 6,210 |
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. Subsequently, the Internal Revenue Service (“IRS”) released its final GILTI regulations on July 9, 2020. The passage of the CARES Act and subsequent issuance of the GILTI final regulations together resulted in the Company’s recognition of a tax benefit in the amount of $10.8 million during 2020, $7.9 million of which related to the utilization of deferred tax assets which had previously been offset with a valuation allowance and $2.9 million primarily related to the tax rate differential on carrying back losses from 2018 and 2019 tax years to prior years in which the U.S. Corporate tax rate was 35% versus the current 21% federal tax rate. On February 12, 2021, the Alabama Business Tax Competitiveness Act (the "Alabama Act") was signed into law. As a result of the Alabama Act, we recognized an expense of $1.6 million in the three months ended March 31, 2021 related to the revaluation of our deferred tax assets, which was offset by changes in our valuation allowance previously recorded against our domestic deferred tax assets. During the three months ended September 30, 2021, Management decided to pursue a claim for refund related to the revocation of our IRC Section 59(e) election that was made on our originally filed 2018 U.S. federal tax return. The Company filed a related carryback claim of net operating losses generated in 2018 to prior years as allowed under the CARES Act that was passed in 2020. An IRS Section 59(e) election is generally non-revocable except in cases for which IRS Commissioner’s approval is given. Approval is granted only in rare and unusual circumstances. We filed a private letter ruling (“PLR”) request to revoke our election. During the three months ended December 31, 2021, a response to our PLR was published denying our request to revoke the previously made 59(e). As a result of these filings, and Management’s initial position was to pursue them through appeals; therefore, we have established a receivable in the amount of $15.2 million and a deferred tax asset related to additional research and development credit carryforward in the amount of $1.8 million that would be available if our revocation request is successful, offset with an uncertain tax liability of $17.0 million. As of the year ended December 31, 2023, management no longer wishes to pursue the appeals process; therefore, the receivable, the deferred tax asset and the offsetting uncertain tax liability have been released. As of December 31, 2023 and 2022, non-current deferred taxes reflected deferred taxes on net unrealized gains and losses on available-for-sale investments and deferred taxes on unrealized losses in our pension plan. The net change in non-current deferred taxes associated with these items, which resulted in a deferred tax benefit of $0.3 million and $2.0 million in 2023 and 2022, respectively, was recorded as an adjustment to other comprehensive income (loss), presented in the Consolidated Statements of Comprehensive Income (Loss). The Company continually reviews the adequacy of our valuation allowance and recognizes the benefits of deferred tax assets only as the reassessment indicates that it is more likely than not that the deferred tax assets will be realized in accordance with ASC 740, Income Taxes (ASC 740). Due to our recent decrease in revenue and profitability for 2023 and all other positive and negative objective evidence considered as part of our analysis, our ability to consider other subjective evidence such as projections for future growth is limited when evaluating whether our deferred tax assets will be realized. As such, the Company is no longer able to conclude that it is more likely than not that our domestic deferred tax assets will be realized and a valuation allowance against our domestic deferred tax assets was established in the fourth quarter of 2023. The amount of the deferred tax assets considered realizable, however, could be adjusted in future periods in the event sufficient evidence is present to support a conclusion that it is more likely than not that all or a portion of our domestic deferred tax assets will be realized. As of December 31, 2023 and 2022, the Company had gross deferred tax assets totaling $76.7 million offset by a valuation allowance totaling $86.6 million and gross deferred tax assets totaling $11.4 million offset by a valuation allowance of $5.2 million, respectively. Of the current valuation allowance, $84.8 million was established against our domestic deferred tax assets and the remaining $1.8 million is related to foreign net operating loss and research and development credit carryforwards where we lacked sufficient activity to realize those deferred tax assets. The change in our valuation allowance for the year ending December 31, 2023 was an increase of $81.4 million. The change in the valuation allowance was primarily related to the previously mentioned establishment of the valuation allowance in the fourth quarter of 2023. The large increase during the year in our international deferred tax liabilities was primarily related to purchase price accounting, partially offset with acquired deferred tax assets as a result of the Adtran Networks acquisition, that was completed in the third quarter of 2022. Supplemental balance sheet information related to deferred tax assets (liabilities) as of December 31, 2023 and 2022 were as follows:
|  | December 31, 2023 |
(In thousands) |  | Deferred Tax Assets (Liabilities) |  |  | Valuation Allowance |  |  | Deferred Tax Assets (Liabilities), net |
Domestic |  | $ | 101,120 |  |  | $ | (84,767 | ) |  | $ | 16,353 |
International |  |  | (24,421 | ) |  |  | (1,800 | ) |  |  | (26,221 | )
Total |  | $ | 76,699 |  |  | $ | (86,567 | ) |  | $ | (9,868 | )
|  | December 31, 2022 |
(In thousands) |  | Deferred Tax Assets |  |  | Valuation Allowance |  |  | Deferred Tax Assets, net |
Domestic |  | $ | 61,726 |  |  | $ | (3,177 | ) |  | $ | 58,549 |
International |  |  | (50,315 | ) |  |  | (2,024 | ) |  |  | (52,339 | )
Total |  | $ | 11,411 |  |  | $ | (5,201 | ) |  | $ | 6,210 |
As of December 31, 2023 and 2022, the deferred tax assets for foreign and domestic loss carry-forwards, research and development tax credits, unamortized research and development costs and state credit carry-forwards totaled $135.1 million and $104.5 million, respectively. As of December 31, 2023, $87.2 million of these deferred tax assets will expire at various times between 2024 and 2039. The remaining deferred tax assets will either amortize through 2039 or carryforward indefinitely. As of December 31, 2023 and 2022, respectively, our cash and cash equivalents were $87.2 million and $108.6 million and short-term investments were $0.0 million and $0.3 million, which provided available short-term liquidity of $87.2 million and $108.9 million. Of these amounts, our foreign subsidiaries held cash of $76.5 million and $86.3 million, respectively, representing approximately 88% and 79% of available short-term liquidity, which is used to fund ongoing liquidity needs of these subsidiaries. As part of our restructuring plan, the Company’s assertion on being indefinitely reinvested changed in a particular jurisdiction in a previous year. The Company has a withholding tax liability of $0.4 million and $0.4 million as of December 31, 2023 and 2022, respectively. The Company maintains its assertion in all other jurisdictions that it is indefinitely reinvesting its funds held in foreign jurisdictions outside of the U.S., except to the extent any of these funds can be repatriated without withholding tax. However, if all of these funds were repatriated to the U.S., or used for U.S. operations, certain amounts could be subject to tax. Due to the timing and circumstances of repatriation of such earnings, if any, it is not practicable to determine the amount of funds subject to unrecognized deferred tax liability. During 2023, 2022 and 2021, no income tax benefit or expense was recorded for stock options exercised as an adjustment to equity. The change in the unrecognized income tax benefits for the years ended December 31, 2023, 2022 and 2021 were as follows:
(In thousands) |  | 2023 |  |  | 2022 |  |  | 2021 |
Balance at beginning of period |  | $ | 17,885 |  |  | $ | 17,836 |  |  | $ | 1,078 |
Increases for tax position related to: |  |  |  |  |  |  |  |  |
Prior years |  |  | — |  |  |  | — |  |  |  | 17,025 |
Current year |  |  | 129 |  |  |  | 123 |  |  |  | 136 |
Decreases for tax positions related to: |  |  |  |  |  |  |  |  |
Prior years |  |  | (17,025 | ) |  |  | (13 | ) |  |  | (27 | )
Expiration of applicable statute of limitations |  |  | — |  |  |  | (61 | ) |  |  | (376 | )
Balance at end of period |  | $ | 989 |  |  | $ | 17,885 |  |  | $ | 17,836 |
As of December 31, 2023, 2022 and 2021, our total liability for unrecognized tax benefits was $1.0 million, $17.9 million and $17.8 million, respectively, of which $1.0 million, $17.9 million and $17.8 million, respectively, would reduce our effective tax rate if we were successful in upholding all of the uncertain positions and recognized the amounts recorded. We classify interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense. As of December 31, 2023, 2022 and 2021, the balances of accrued interest and penalties were $0.1 million, $0.1 million and $0.2 million, respectively. We do not anticipate a single tax position generating a significant increase or decrease in our liability for unrecognized tax benefits within 12 months of this reporting date, unless a resolution is reached regarding the appeal of our PLR denial noted above. We file income tax returns in the U.S. for federal and various state jurisdictions and several foreign jurisdictions. We are not currently under audit by the Internal Revenue Service. Generally, we are not subject to changes in income taxes by any taxing jurisdiction for the years prior to 2018.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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 -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 13 -Publisher FASB -URI https://asc.fasb.org//1943274/2147480990/946-20-50-13 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//740/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 14 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-14 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-21 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 270 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482526/740-270-50-1 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 17 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-17 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 30 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482603/740-30-50-2 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration