XML 41 R25.htm IDEA: XBRL DOCUMENT
v3.25.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Note 12 – Income Taxes The components of income tax expense (benefit) for the years ended December 31, 2024, 2023 and 2022 are as follows:
(In thousands) |  | 2024 |  |  | 2023 |  |  | 2022 |
Current |  |  |  |  |  |  |  |  |
Federal |  | $ | (1,456 | ) |  | $ | 2,545 |  |  | $ | 4,572 |
State |  |  | 575 |  |  |  | 26 |  |  |  | 88 |
International |  |  | 7,419 |  |  |  | 10,004 |  |  |  | (4,347 | )
Total Current |  |  | 6,538 |  |  |  | 12,575 |  |  |  | 313 |
Deferred |  |  |  |  |  |  |  |  |
Federal |  |  | 332 |  |  |  | 46,252 |  |  |  | (47,429 | )
State |  |  | (405 | ) |  |  | 6,607 |  |  |  | (6,776 | )
International |  |  | 2,320 |  |  |  | (37,301 | ) |  |  | (8,183 | )
Total Deferred |  |  | 2,247 |  |  |  | 15,558 |  |  |  | (62,388 | )
Total Income Tax Expense (Benefit) |  | $ | 8,785 |  |  | $ | 28,133 |  |  | $ | (62,075 | )
The effective income tax rate differs from the federal statutory rate due to the following:
|  | 2024 |  |  | 2023 |  |  | 2022 |
Tax provision computed at the federal statutory rate |  |  | 21.00 | % |  |  | 21.00 | % |  |  | 21.00 | %
State income tax provision, net of federal benefit |  |  | 0.06 |  |  |  | 1.34 |  |  |  | 2.60 |
Federal research credits |  |  | 0.68 |  |  |  | 3.26 |  |  |  | 6.74 |
Foreign taxes |  |  | 0.50 |  |  |  | 3.52 |  |  |  | 6.29 |
Tax-exempt income |  |  | 0.04 |  |  |  | 0.06 |  |  |  | 0.21 |
Change in valuation allowance |  |  | (5.88 | ) |  |  | (35.19 | ) |  |  | 63.92 |
Non-deductible transaction costs |  |  | — |  |  |  | — |  |  |  | (2.74 | )
Foreign tax credits |  |  | 0.86 |  |  |  | 2.45 |  |  |  | (0.40 | )
Stock-based compensation |  |  | (0.40 | ) |  |  | (0.57 | ) |  |  | (2.09 | )
Withholding taxes |  |  | (0.08 | ) |  |  | 0.01 |  |  |  | 0.03 |
Adtran Networks tax exempt income |  |  | — |  |  |  | 1.42 |  |  |  | — |
Return to accrual |  |  | (0.50 | ) |  |  | 0.62 |  |  |  | 0.24 |
Global intangible low-taxed income ("GILTI") |  |  | (3.14 | ) |  |  | (5.87 | ) |  |  | (8.08 | )
Adtran Networks Goodwill Impairment |  |  | (14.17 | ) |  |  | (4.62 | ) |  |  | — |
Other, net |  |  | (1.00 | ) |  |  | 0.40 |  |  |  | (0.24 | )
Effective Tax Rate |  |  | (2.03 | )% |  |  | (12.17 | )% |  |  | 87.48 | %
Loss before expense (benefit) for income taxes for the years ended December 31, 2024, 2023 and 2022 is as follows:
(In thousands) |  | 2024 |  |  | 2023 |  |  | 2022 |
U.S. entities |  | $ | (71,684 | ) |  | $ | (113,951 | ) |  | $ | (33,720 | )
International entities |  |  | (360,579 | ) |  |  | (117,259 | ) |  |  | (37,243 | )
Total |  | $ | (432,263 | ) |  | $ | (231,210 | ) |  | $ | (70,963 | )
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, 2024 and 2023 consist of the following:
(In thousands) |  | 2024 |  |  | 2023 |
Deferred tax assets: |  |  |  |  |  |
Inventory |  | $ | 14,121 |  |  | $ | 19,623 |
Accrued expenses |  |  | 845 |  |  |  | 3,533 |
Deferred compensation |  |  | 7,093 |  |  |  | 6,284 |
Stock-based compensation |  |  | 1,770 |  |  |  | 2,023 |
Uncertain tax positions related to state taxes and related interest |  |  | 105 |  |  |  | 105 |
Pensions |  |  | 5,121 |  |  |  | 8,607 |
Foreign losses |  |  | 70,666 |  |  |  | 2,705 |
State losses and credit carry-forwards |  |  | 4,901 |  |  |  | 4,259 |
Federal loss and research carry-forwards |  |  | 20,874 |  |  |  | 78,450 |
Lease liabilities |  |  | 6,153 |  |  |  | 7,701 |
Capitalized research and development expenditures |  |  | 43,574 |  |  |  | 48,192 |
Interest expense limitation |  |  | 6,815 |  |  |  | — |
Valuation allowance |  |  | (110,960 | ) |  |  | (86,567 | )
Total Deferred Tax Assets |  |  | 71,078 |  |  |  | 94,915 |
Deferred tax liabilities: |  |  |  |  |  |
Property, plant and equipment |  |  | (8,368 | ) |  |  | (9,093 | )
Intellectual property |  |  | (67,923 | ) |  |  | (86,572 | )
Right of use lease assets |  |  | (6,175 | ) |  |  | (8,424 | )
Investments |  |  | (1,476 | ) |  |  | (694 | )
Total Deferred Tax Liabilities |  |  | (83,942 | ) |  |  | (104,783 | )
Net Deferred Tax Liabilities |  | $ | (12,864 | ) |  | $ | (9,868 | )
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 December 20, 2021, the Organization for Economic Co-operation and Development (“OECD”) published Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large corporations at a minimum rate of 15%. The OECD has since issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax. Many non-U.S. tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 (including the European Union Member States) with the adoption of additional components in later years or announced their plans to enact legislation in future years. The Pillar Two Model Rules did not have a material impact on the Company’s financial statements for the 2024 tax year. We are still closely monitoring developments and evaluating the potential impact on future periods. On August 16, 2022, the Inflation Reduction Act of 2022 (“Inflation Reduction Act”) was signed into law, with tax provisions primarily focused on implementing a 15% minimum tax on global adjusted financial statement income (“AFSI”) for corporations with average AFSI exceeding $1 billion over a three-year period, a 1% excise tax on share repurchases and various climate and clean energy tax incentives. The Inflation Reduction Act did not have a material impact on the Company’s financial statements for the 2024 tax year. As of December 31, 2024 and 2023, 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 $0.2 million and $0.3 million in 2024 and 2023, respectively, was recorded as an adjustment to other comprehensive (loss) income, presented in the Consolidated Statements of Comprehensive (Loss) Income. 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. Due to the decrease in revenue and profitability for 2023 and 2024 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 continues to be limited when evaluating whether our deferred tax assets will be realized. As such, the Company maintains its conclusion from 2023 that it is not more likely than not that our domestic deferred tax assets will be realized and a valuation allowance against certain domestic deferred tax assets remains through 2024. Additional valuation allowance was recorded against certain deferred tax assets on our foreign entities as not more likely than not realizable in the fourth quarter of 2024. 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 deferred tax assets will be realized. As of December 31, 2024 and 2023, the Company had gross deferred tax assets totaling $98.1 million offset by a valuation allowance totaling $111.0 million and gross deferred tax assets totaling $76.7 million offset by a valuation allowance of $86.6 million, respectively. Of the current valuation allowance, $87.0 million was established against our domestic deferred tax assets and the remaining $24.0 million is related to foreign tax assets where we lacked sufficient future source of taxable income to realize those deferred tax assets. The change in our valuation allowance for the year ending December 31, 2024 was an increase of $24.4 million. The change in the valuation allowance was primarily related to the decrease in deferred tax liabilities remaining from the step up in book basis from purchase accounting and the increase in deferred tax assets associated with net operating losses and interest expense limitation during the year. Supplemental balance sheet information related to deferred tax assets (liabilities) as of December 31, 2024 and 2023 were as follows:
|  | December 31, 2024 |
(In thousands) |  | Deferred Tax Assets (Liabilities) |  |  | Valuation Allowance |  |  | Deferred Tax Assets (Liabilities), net |
Domestic |  | $ | 102,447 |  |  | $ | (87,030 | ) |  | $ | 15,417 |
International |  |  | (4,351 | ) |  |  | (23,930 | ) |  |  | (28,281 | )
Total |  | $ | 98,096 |  |  | $ | (110,960 | ) |  | $ | (12,864 | )
|  | 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 | )
As of December 31, 2024 and 2023, 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 $140.0 million and $135.1 million, respectively. As of December 31, 2024, $27.7 million of these deferred tax assets will expire at various times between 2025 and 2045. The remaining deferred tax assets will either amortize through 2040 or carryforward indefinitely. As of December 31, 2024 and 2023, respectively, our cash and cash equivalents were $77.6 million and $87.2 million. Of these amounts, our foreign subsidiaries held cash of $54.2 million and $73.0 million, respectively, representing approximately 78% and 88% 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 as of December 31, 2024 and 2023. 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 2024, 2023 and 2022, 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, 2024, 2023 and 2022 were as follows:
(In thousands) |  | 2024 |  |  | 2023 |  |  | 2022 |
Balance at beginning of period |  | $ | 989 |  |  | $ | 17,885 |  |  | $ | 17,836 |
Increases for tax position related to: |  |  |  |  |  |  |  |  |
Prior years |  |  | — |  |  |  | — |  |  |  | — |
Current year |  |  | — |  |  |  | 129 |  |  |  | 123 |
Decreases for tax positions related to: |  |  |  |  |  |  |  |  |
Prior years |  |  | (121 | ) |  |  | (17,025 | ) |  |  | (13 | )
Expiration of applicable statute of limitations |  |  | (616 | ) |  |  | — |  |  |  | (61 | )
Balance at end of period |  | $ | 252 |  |  | $ | 989 |  |  | $ | 17,885 |
As of December 31, 2024, 2023 and 2022, our total liability for unrecognized tax benefits was $0.3 million, $1.0 million and $17.9 million, respectively, of which $0.3 million, $1.0 million and $17.9 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 and 2022, the balances of accrued interest and penalties $0.1 million and $0.1 million, respectively. There was no accrued interest and penalties as of December 31, 2024. 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. 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 2019.

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 tax. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482685/740-10-50-12 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 231 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482663/740-10-55-231 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12C -Publisher FASB -URI https://asc.fasb.org/1943274/2147482685/740-10-50-12C Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12B -Publisher FASB -URI https://asc.fasb.org/1943274/2147482685/740-10-50-12B Reference 5: 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/1943274/2147477891/740-270-50-1 Reference 6: 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 7: 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 8: 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 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/740/tableOfContent Reference 10: 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 11: 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 12: 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 13: 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 14: 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