Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

Income (loss) before income taxes consisted of the following:

	Year Ended December 31,
	2021			2020			2019
	(In thousands)
Domestic	$	(135,403	)	$	(76,056	)	$	(51,041	)
Foreign		10,353			14,007			61,470
Total	$	(125,050	)	$	(62,049	)	$	10,429

The income tax provision (benefit) consists of the following:

	Year Ended December 31,
	2021			2020			2019
	(In thousands)
Current:
Federal	$	833		$	(44,752	)	$	(569	)
Foreign		10,579			8,454			8,513
Total current		11,412			(36,298	)		7,944
Deferred:
Federal		(56	)		-			-
Foreign		(8,410	)		5,017			765
Total deferred		(8,466	)		5,017			765
Total	$	2,946		$	(31,281	)	$	8,709

The Company’s effective income tax rate fluctuates from the U.S. statutory tax rate based on, among other factors, changes in pretax income in jurisdictions with varying statutory tax rates, impact of valuation allowances, changes in tax legislation, and other

permanent differences related to the recognition of income and expense between U.S. GAAP and applicable tax rules. The difference between the effective income tax rate reflected in the provision for income taxes and the U.S. federal statutory rate was as follows:

	Year Ended December 31,
	2021			2020			2019
Federal income tax statutory rate		21.00	%		21.00	%		21.00	%
CARES Act NOL rate differential (2019 and 2020)		-			32.60			-
Accrual for undistributed earnings		0.79			(5.15	)		-
Foreign income tax rate differential		-			(1.03	)		16.20
Foreign development tax incentive		(0.24	)		(0.38	)		(0.91	)
Nondeductible goodwill impairment		-			(2.42	)		-
Exempt income		0.54			1.25			(24.02	)
Foreign taxes and inclusions (net of FTC)		(1.15	)		(9.26	)		21.00
Nondeductible expenses		(2.82	)		(5.35	)		15.51
Manufacturing benefit		-			(7.32	)		-
Change in valuation allowance		(21.87	)		28.26			24.96
Changes to prior year accruals		0.23			(3.15	)		6.28
Deferred tax rate change		0.11			(0.10	)		(0.36	)
Change in uncertain tax positions		(0.19	)		(0.83	)		4.31
Interest on net equity		0.41			-			-
General business credits		1.31			2.32			(11.14	)
Branch income		(0.29	)		(0.31	)		9.64
Other		(0.19	)		0.28			1.03
Effective tax rate		-2.36	%		50.41	%		83.50	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred tax assets (liabilities) are as follows:

	As of December 31,
	2021			2020
	(In thousands)
Deferred tax assets:
Foreign tax credit carryforward	$	9,190		$	4,202
General business credit carryforward		3,853			2,347
Inventory		22,178			13,536
Net operating losses		21,348			1,250
Allowance for doubtful accounts		1,043			490
Reserve for accrued liabilities		3,161			4,029
Stock options		868			1,670
Unrealized gain/loss		1,217			1,554
Disallowed interest carryforward		2,071			1,912
Other		221			1,939
Total deferred tax assets		65,150			32,929
Valuation allowance		(44,235	)		(17,049	)
Deferred tax liabilities:
Property, plant and equipment		(7,233	)		(6,048	)
Goodwill & Intangibles		(1,796	)		(1,903	)
Deferred revenue		(1,258	)		(3,415	)
Reserve for unremitted earnings		(2,586	)		(3,608	)
Other		(586	)		(1,917	)
Total deferred tax liability		(13,459	)		(16,891	)
Net deferred tax asset	$	7,456		$	(1,011	)

The Company has $9.2 million of excess foreign tax credits of which $4.7 million will expire in years ending 2024-2031 and $4.5 million are carried forward indefinitely. The Company has $3.9 million of general business credits which expire in tax year ending 2037-2041.

Tax operating loss carryforwards totaled $100.9 million (gross) at December 31, 2021. These operating losses will expire as shown in the table below.

Tax operating losses		Expiration
(in thousands)
$	2,228	2022-2027
	-	2028-2034
	1,843	2035-2040
	96,837	Indefinite
$	100,908

The United States gross loss carryforwards of approximately $95.8 million, includes $94.7 million of losses which are indefinite and the remaining are in relation to various foreign jurisdictions.

In assessing the realizability of our deferred tax assets, the Company has assessed whether it is more likely than not that 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. In making this determination, the Company considered taxable income in prior years, if carryback is permitted, the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. The Company has a three-year cumulative loss at December 31, 2021 in the United States and certain foreign jurisdictions and has recorded a valuation allowance at December 31, 2021 of $44.2 million against deferred tax assets in those jurisdictions.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020 and includes tax relief provisions and incentives for businesses impacted by COVID-19. The CARES Act includes provisions relating to net operating loss carryback periods. The Company has $14.8 million in outstanding NOL carryback claims as of December 31, 2021 including the estimated carryback claim relating to the 2020 tax year, which is reflected in Prepaids and other current assets on the consolidated balance sheet. The Company expects to receive carryback claims by the end of 2022.

As the Company no longer asserts the indefinite reinvestment assertion, we maintain a deferred foreign tax liability, which had a balance of $2.6 million as of December 31, 2021. It is primarily related to estimated foreign withholding tax associated with repatriating all non-U.S. earnings back to the United States.

U.S. Tax Reform subjects a U.S. shareholder to tax on Global Intangible Low-Taxed Income (GILTI). We have elected to account for GILTI in the year that the tax is incurred as a period expense.

The Company operates in multiple jurisdictions with complex tax and regulatory environments and our tax returns are periodically audited or subjected to review by tax authorities. We monitor tax law changes and the potential impact to our results of operations.

The Company evaluates uncertain tax positions for recognition and measurement in the consolidated financial statements. To recognize a tax position, the Company determines whether it is more likely than not that the tax positions will be sustained upon examination, including resolution of any related appeals or litigation, based on the technical merits of the position. A tax position that meets the more likely than not threshold is measured to determine the amount of benefit to be recognized in the consolidated financial statements. The amount of tax benefit recognized with respect to any tax position is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. The Company had an accrual for uncertain tax position of $18.6 million at December 31, 2021 due to uncertainty in tax positions taken in the U.S. and certain foreign tax jurisdictions. The tax years which remain subject to examination by major tax jurisdictions are the years ended December 31, 2016 through December 31, 2021.

A reconciliation of the beginning and ending amount of liabilities associated with uncertain tax positions is as follows:

	2021			2020			2019
	(In thousands)
Balance at beginning of year	$	18,665		$	18,665		$	18,648
Additions for tax positions related to the current year		3			3			-
Reductions for tax positions related to the prior year		(50	)		(3	)		17
Balance at end of year	$	18,618		$	18,665		$	18,665

The amounts above exclude accrued interest and penalties of $2.4 million, $2.1 million and $1.6 million at December 31, 2021, 2020 and 2019 respectively. The Company classifies interest and penalties relating to uncertain tax positions within Tax expense(benefit) in the Consolidated Statements of Income (Loss).

It is reasonably possible that the Company's existing liabilities for unrecognized tax benefits may increase or decrease in the year ending December 31, 2021, primarily due to the progression of any audits and the expiration of statutes of limitation. However, the Company cannot reasonably estimate a range of potential changes in its existing liabilities for unrecognized tax benefits due to various uncertainties, such as the unresolved nature of any possible audits. As of December 31, 2021, if recognized, $7.3 million of the Company's unrecognized tax benefits would favorably impact the effective tax rate.

The Company paid net income taxes of $2.0 million in 2021 and received net income tax refunds of $18.2 million and $10.9 million in 2020 and 2019, respectively.