Income Taxes (Tables)

12 Months Ended

Dec. 31, 2021

Consolidated Income Before Provision for Income Taxes

Consolidated income before provision for income taxes consists of the following for the years ended December 31, 2021, 2020 and 2019 (U.S. dollars in thousands):

	2021		2020		2019
U.S.	$	45,371	$	71,138	$	24,211
Foreign		187,088		185,094		230,961
Total	$	232,459	$	256,232	$	255,172

Current and Deferred Taxes

The provision for current and deferred taxes for the years ended December 31, 2021, 2020 and 2019 consists of the following (U.S. dollars in thousands):

	2021			2020			2019
Current
Federal	$	—		$	—		$	—
State		1,458			1,629			2,213
Foreign		77,393			77,079			79,694
		78,851			78,708			81,907
Deferred
Federal		3,705			(14,430	)		(8,878	)
State		(38	)		(563	)		(473	)
Foreign		2,675			1,162			9,063
		6,342			(13,831	)		(288	)
Provision for income taxes	$	85,193		$	64,877		$	81,619

Deferred Tax Assets and Liabilities

The principal components of deferred taxes are as follows (U.S. dollars in thousands):

	Year Ended December 31,
	2021			2020
Deferred tax assets:
Inventory differences	$	5,859		$	6,181
Foreign tax credit and other foreign benefits		69,401			57,720
Stock-based compensation		9,392			8,925
Accrued expenses not deductible until paid		36,401			42,694
Foreign currency exchange		605			1,403
Net operating losses		9,479			8,667
Capitalized research and development		22,962			23,019
R&D credit carryforward		1,451			1,229
Other		34			45
Gross deferred tax assets		155,584			149,883
Deferred tax liabilities:
Foreign withholding taxes		15,412			20,207
Intangibles step-up		4,446			4,623
Overhead allocation to inventory		3,373			2,684
Amortization of intangibles		21,936			18,551
Other		6,133			1,690
Gross deferred tax liabilities		51,300			47,755
Valuation allowance		(80,186	)		(67,340	)
Deferred taxes, net	$	24,098		$	34,788

Deferred Tax Asset Valuation Adjustments

The deferred tax asset valuation adjustments for the years ended December 31, 2021, 2020 and 2019 are as follows (U.S. dollars in thousands):

	Year Ended December 31,
	2021			2020			2019
Balance at the beginning of period	$	67,340		$	77,042		$	68,697
Additions charged to cost and expenses		12,674	⁽¹⁾		2,154	⁽⁴⁾		10,913	⁽⁶⁾
Decreases		—	⁽²⁾		(12,100	)⁽⁵⁾		(3,343	)⁽⁷⁾
Adjustments		172	⁽³⁾		244	⁽³⁾		775	⁽³⁾
Balance at the end of the period	$	80,186		$	67,340		$	77,042

(1)	Increase in valuation is due primarily to $11.9 million that was recorded on the foreign tax credit carryforward due to the disposal of the Companies Grow Tech segment. The additional amount is due to net operating losses in foreign markets.

(2)	No decreases in 2021.

(3)	Represents the net currency effects of translating valuation allowances at current rates of exchange.

(4)	Increase in valuation is due primarily to net operating losses in foreign markets.

(5)	The decrease was due to the utilization of prior year foreign tax credits that had previously had a valuation allowance recorded against the asset.

(6)	Increase in valuation is due primarily to $9.8 million that was recorded on the foreign tax credit carryforward. The additional amount is due to net operating losses in foreign markets.

(7)	The decrease was due primarily to the utilization of foreign tax credits, and expiration of foreign net operating losses.

Deferred Taxes, Net on a Jurisdiction Basis

The components of deferred taxes, net on a jurisdiction basis are as follows (U.S. dollars in thousands):

	Year Ended December 31,
	2021		2020
Net noncurrent deferred tax assets	$	26,483	$	35,414
Net noncurrent deferred tax liabilities		2,385		626
Deferred taxes, net	$	24,098	$	34,788

Reconciliation of Statutory to Effective Tax Rate

The actual tax rate for the years ended December 31, 2021, 2020 and 2019 compared to the statutory U.S. Federal tax rate is as follows:

	Year Ended December 31,
	2021			2020			2019
Income taxes at statutory rate		21.00	%		21.00	%		21.00	%
Excess tax benefit from equity award		(0.19	)%		0.70	%		0.02	%
Non-U.S. income taxed at different rates		6.06	%		3.37	%		3.09	%
Foreign withholding taxes		4.71	%		5.21	%		4.10	%
Change in reserve for uncertain tax positions		(0.06	)%		1.98	%		1.07	%
Valuation allowance recognized foreign tax credit & others		5.12	%		(4.59	)%		2.56	%
Foreign-Derived Intangible Income (FDII)		(0.87	)%		(2.78	)%		(0.70	)%
Other		0.88	%		0.43	%		0.85	%
		36.65	%		25.32	%		31.99	%