Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Geographic sources of income (loss) before taxes are as follows:

	For the Year Ended December 31,
	2022		2021		2020
	(In thousands)
United States	$	81,488	$	81,994	$	38,719
Foreign	775,444		633,072		347,963
Income before taxes	$	856,932	$	715,066	$	386,682

The components of the provision (benefit) for income taxes are as follows:

	For the Year Ended December 31,
	2022		2021		2020
	(In thousands)
Current:
Federal	$	40,063	$	9,649	$	4,608
State	150		198		134
Foreign	61,300		48,936		38,298
	101,513		58,783		43,040
Deferred:
Federal	(10,156)		20,478		(7,877)
State	1,458		361		(535)
Foreign	(2,925)		(10,163)		11,555
	(11,623)		10,676		3,143
Income tax expense	$	89,890	$	69,459	$	46,183

The reconciliation between the U.S. federal statutory income tax rate of 21% and our effective tax rate is as follows:

	For the Year Ended December 31,
	2022		2021 (1)		2020 (1)
U.S. federal statutory income tax rate	21.0	%	21.0	%	21.0	%
Foreign income taxed at different rates	(12.0)		(9.5)		(7.2)
Foreign exchange (loss) gain	2.2		(2.3)		1.7
Change in valuation allowance	(2.4)		0.1		(4.0)
Income tax credits generated	(6.1)		(5.1)		(5.6)
Foreign earnings and profits	9.0		5.7		6.2
Foreign derived intangible income	(0.9)		(1.1)		(1.6)
Settlements and changes in uncertain tax positions	(0.2)		0.8		1.8
Other	(0.1)		0.1		(0.4)
Income tax expense	10.5	%	9.7	%	11.9	%

(1)    Prior year amounts were reclassified and presented to conform with current year presentation.

In 2022, we reversed $17.8 million of valuation allowance recorded against U.S. foreign tax credit carryforwards previously projected to expire unused due to the limitations to utilize the credits under current tax law. In 2020, we reversed $12.4 million of valuation allowance recorded against our interest expense carryforward previously projected to expire unused due to the limitation to deduct interest expense under current tax law. Realization of these carryforwards is dependent on generating sufficient taxable income to overcome the foreign tax credit and interest limitation provisions, respectively. Although utilization of these carryforwards is not assured, in light of our current earnings and recent estimates of future taxable income, management believes sufficient positive evidence exists to conclude that the respective valuation allowances are no longer needed, resulting in the reversal of these valuation allowances.

As a result of certain capital investments, export commitments and employment levels, income from operations in Korea, the Philippines and Singapore was subject to reduced income tax rates and, in some cases, was exempt from income taxes. The most significant tax rate impact is in Singapore where we have been granted a conditional reduced tax rate that expires at the end of 2023, excluding potential renewal subject to certain conditions and commitments. We recognized $84.5 million, $56.7 million and $27.6 million in tax benefits as a result of the conditional reduced tax rates

in 2022, 2021 and 2020, respectively. The benefit of the conditional reduced tax rates on diluted earnings per share was approximately $0.34, $0.23 and $0.11 for 2022, 2021 and 2020, respectively.

The following is a summary of the components of our deferred tax assets and liabilities:

	December 31,
	2022		2021
	(In thousands)
Deferred tax assets:
NOLs	$	49,846	$	36,326
Income tax credits	92,368		93,257
Property, plant and equipment	15,328		20,181
Deferred interest expense	—		3,397
Accrued liabilities	39,929		49,554
Receivable	29,178		30,996
Unrealized foreign exchange loss	8,018		11,409
Revenue Recognition	1,564		—
Operating lease liabilities	26,955		27,446
Other	14,665		13,407
Total deferred tax assets	277,851		285,973
Valuation allowance	(101,869)		(122,357)
Total deferred tax assets net of valuation allowance	175,982		163,616
Deferred tax liabilities:
Property, plant and equipment	50,215		40,334
Deferred gain	7,839		10,873
Unrealized foreign exchange gain	5,242		3,212
Unbilled receivables	822		5,218
Operating lease right of use assets	26,241		26,120
Other	7,433		5,241
Total deferred tax liabilities	97,792		90,998
Net deferred tax assets	$	78,190	$	72,618
Recognized as:
Other assets	$	86,616	$	83,596
Other non-current liabilities	(8,426)		(10,978)
Total	$	78,190	$	72,618

We monitor on an ongoing basis our ability to utilize our deferred tax assets and whether there is a need for a related valuation allowance. In evaluating our ability to recover our deferred tax assets in the jurisdictions from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and recent results of operations.

Valuation allowance against deferred tax assets consist of the following:

	December 31,
	2022		2021
	(In thousands)
Valuation allowance:
U.S.	$	40,610	$	61,074
Foreign	61,259		61,283
Total valuation allowance	$	101,869	$	122,357

Our NOLs are as follows:

	December 31,
	2022		2021		Expiration
	(In thousands)
U.S. Federal NOLs	$	13,003	$	21,388	2023-2024
U.S. State NOLs	38,384		55,694		2023-2036
Foreign NOLs	240,740		155,323		2024-2036

At December 31, 2022 and 2021, a portion of our remaining U.S. federal NOL was reserved with a valuation allowance due to ownership change limitations from a prior year acquisition as well as certain state NOLs expected to expire unused. Also, we have a valuation allowance against a foreign NOL that we do not expect to have sufficient taxable income to realize as of December 31, 2022 and 2021.

Our tax credit carryforwards are as follows:

	December 31,
	2022		2021		Expiration
	(In thousands)
U.S. Foreign Tax Credits	$	54,130	$	57,247	2026-2032
U.S. Other Tax Credits	110		138		2026
Foreign Tax Credits	38,128		35,872		2023-2032

At December 31, 2022 and 2021, a portion of our U.S. and foreign tax credit carryforwards were reserved with a valuation allowance for the amount expected to expire unused.

Distributions of cash to the U.S. as dividends generally will not be subject to U.S. federal income tax. We have not provided foreign withholding taxes or state income taxes on the undistributed earnings of our foreign subsidiaries, over which we have sufficient influence to control the distribution of such earnings and have determined that substantially all such earnings have been reinvested indefinitely. These earnings could become subject to foreign withholding tax if they are remitted as dividends. For the year ended December 31, 2022, we estimate that repatriation of these foreign earnings would generate withholding taxes and state income taxes of approximately $131.3 million.

We operate in and file income tax returns in various U.S. and foreign jurisdictions which are subject to examination by tax authorities. We have tax returns that are open to examination in various jurisdictions for tax years 2012-2022. The open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations related to the amount and/or timing of income, deductions and tax credits. There can be no assurance that the outcome of examinations will be favorable. Our unrecognized tax benefits are subject to change as examinations of specific tax years are completed in the respective jurisdictions. In certain circumstances where we elect to appeal the results of an

examination, we may be required to make tax assessment payments to proceed with the administrative appeal process. Current examinations include 2015-2020 Malaysia income tax returns and 2021 Philippine income tax return.

A reconciliation of the beginning and ending gross amount of unrecognized tax benefits is as follows:

	For the Year Ended December 31,
	2022		2021		2020
	(In thousands)
Balance at January 1	$	37,293	$	32,598	$	26,242
Additions based on tax positions related to the current year	1,519		9,562		10,427
Additions for tax positions of prior years	1,909		1,740		1,173
Reductions for tax positions of prior years	(5,755)		(66)		(280)
Reductions related to settlements with tax authorities	(988)		(1,266)		—
Reductions from lapse of statutes of limitations	(725)		(5,275)		(4,964)
Balance at December 31	$	33,253	$	37,293	$	32,598

The net decrease in our unrecognized tax benefits was $4.0 million from December 31, 2021 to December 31, 2022. The decrease was primarily related to income attribution, settlements and the lapse of statutes of limitations. At December 31, 2022, all of our gross unrecognized tax benefits would reduce our effective tax rate, if recognized. It is reasonably possible that unrecognized tax benefits related to income attribution will decrease in the next 12 months by up to $1.9 million due to the lapse of statutes of limitations in foreign jurisdictions.

The liability related to our unrecognized tax benefits, before interest and penalties, is $24.7 million as of December 31, 2022 and is reported as a component of other non-current liabilities. The unrecognized tax benefits presented in the table above also include positions that have reduced deferred tax assets by $8.6 million. The balance of accrued and unpaid interest and penalties is $4.9 million and $5.5 million as of December 31, 2022 and 2021, respectively, and is included as a component of other non-current liabilities in connection with our unrecognized tax benefits.