Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 12 – Income Taxes

The table below sets forth our income before taxes for the twelve months ended December 31:

Income before income taxes	2023		2022		2021
U.S.	$	172,781	$	221,288	$	122,127
Foreign		105,152		174,652		192,968
Total	$	277,933	$	395,940	$	315,095

The table below sets forth the components of our income tax provision (benefit) for the twelve months ended December 31:

	2023			2022			2021
Current tax provision
Federal	$	27,028		$	46,368		$	15,691
Foreign		34,408			37,598			25,489
State		54			56			(17	)
		61,490			84,022			41,163
Deferred tax provision (benefit)
Federal		(8,273	)		(6,486	)		(1,116	)
Foreign		(10,463	)		(25,537	)		31,222
State		(5	)		(8	)		-
		(18,741	)		(32,031	)		30,106
Liability for unrecognized tax benefits		4,536			4,694			7,538
Total income tax provision	$	47,285		$	56,685		$	78,807

Effective Tax Rate Reconciliation

The table below sets forth a reconciliation between the effective tax rate and the statutory tax rates for the twelve months ended December 31:

	2023						2022						2021
				Percent						Percent						Percent
				of pretax						of pretax						of pretax
	Amount			earnings*			Amount			earnings*			Amount			earnings*
Federal tax	$	58,366			21.0		$	83,147			21.0		$	66,170			21.0
State income taxes, net of federal tax    provision		49			-			33			-			(474	)		(0.2	)
Foreign income taxed at different tax rates		834			0.3			(6,527	)		(1.6	)		(2,018	)		(0.6	)
U.S. tax impact of foreign operations		(14,778	)		(5.3	)		(7,369	)		(1.9	)		(17,375	)		(5.5	)
Foreign withholding taxes		5,751			2.1			(12,441	)		(3.1	)		33,175			10.5
Research and development		(5,497	)		(2.0	)		(5,865	)		(1.5	)		(6,310	)		(2.0	)
Liability for unrecognized tax benefits		4,536			1.6			4,694			1.2			7,538			2.4
Valuation allowance		2,109			0.8			(1,986	)		(0.5	)		(1,068	)		(0.3	)
Employee stock-based compensation		627			0.2			1,784			0.4			(812	)		(0.3	)
Other		(4,712	)		(1.7	)		1,215			0.3			(19	)		-
Income tax provision	$	47,285			17.0		$	56,685			14.3		$	78,807			25.0

* The sum of the amounts in the table may not equal to the effective tax rate due to rounding.

Uncertain Tax Positions

In accordance with the provisions related to accounting for uncertainty in income taxes, we recognize the benefit of a tax position if the position is “more likely than not” to prevail upon examination by the relevant tax authority. The table below sets forth a reconciliation of the beginning and ending amount of unrecognized tax benefits:

	2023			2022			2021
Balance at January 1,	$	48,072		$	43,378		$	42,466
Additions based on tax positions related to the    current year		11,370			10,022			9,244
Additions for prior year tax positions		110			75			138
Reductions for prior year tax positions		(10,714	)		(5,403	)		(8,470	)
Balance at December 31,	$	48,838		$	48,072		$	43,378

If the $48.8 million of unrecognized tax benefits as of December 31, 2023, is recognized, approximately $46.7 million would affect the effective tax rate. It is reasonably possible that the amount of the unrecognized benefit with respect to certain of our unrecognized tax positions will significantly increase or decrease within the next 12 months. These changes may be the result of settlements of ongoing audits or competent authority proceedings. At this time, an estimate of the range of the reasonably possible outcomes cannot be made.

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations by tax authorities for tax years before 2012. We are no longer subject to China income tax examinations by tax authorities for tax years before 2013. With respect to state and local jurisdictions and countries outside of the U.S., with limited exceptions, we are no longer subject to income tax audits for years before 2017. Although the outcome of tax audits is always uncertain, we believe that adequate amounts of tax, interest and penalties, if any, have been provided for in our reserve for any adjustments that may result from future tax audits. We recognize accrued interest and penalties, if any, related to unrecognized tax benefits in interest expense. We had an immaterial amount of accrued interest and penalties at December 31, 2023, 2022 and 2021.

Deferred Taxes

The table below sets forth our deferred tax assets and liabilities as of December 31:

	2023			2022
Deferred tax assets
Inventory cost	$	32,682		$	30,322
Accrued expenses and accounts receivable		6,120			6,931
Research and development tax credits		9,613			9,613
Net operating loss carryforwards		43,616			52,599
Lease obligations		3,042			3,845
Accrued pension		3,164			2,500
Share based compensation and others		21,754			20,088
		119,991			125,898
Valuation allowances		(25,836	)		(42,405	)
Total deferred tax assets, non-current		94,155			83,493
Deferred tax liabilities
Plant, equipment and intangible assets		(8,003	)		(6,595	)
Right of use assets		(6,358	)		(3,883	)
Outside basis differences and others		(28,989	)		(36,114	)
Total deferred tax liabilities, non-current		(43,350	)		(46,592	)
Net deferred tax assets	$	50,805		$	36,901

ASU No. 2013-11 provides that an entity is required to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. The $38.0 million net deferred tax asset presented in the balance sheet as of December 31, 2023, is net of $12.8 million of unrecognized tax benefits. The $50.8 million and $36.9 million net deferred tax asset presented above for December 31, 2023 and 2022, respectively, is prior to the net balance sheet presentation required by ASU 2013-11.

At December 31, 2023, we had no federal research credit carryforward and approximately $9.6 million of state tax credit and research credit carryforwards, which are available to offset future income tax liabilities. The state tax credit carryforwards will began expiring in 2023. Consistent with prior years, we determined that it is more likely than not that our state research credit carryforwards will expire before they are utilized. The valuation allowances recorded against the related deferred tax assets totaled $8.6 million as of December 31, 2023 and 2022.

At December 31, 2023, we had state net operating loss (“NOL”) carryforwards of approximately $1.2 million, and foreign NOL carryforwards of $222.7 million which are available to offset future taxable income. The state NOL carryforward began to expire in 2022. We determined that it is more likely than not that the state NOL carryforwards will expire before they are fully utilized and recorded a full valuation allowance on the related deferred tax assets. The foreign NOL carryforwards will began expiring in 2022. We determined that it is more likely than not that a portion of the foreign NOL carryforwards will expire before they are fully utilized. The valuation allowances recorded against the related deferred tax assets totaled $16.7 million and $33.8 million as of December 31, 2023 and 2022, respectively.

Supplemental Information

Our undistributed foreign earnings continue to be indefinitely reinvested in foreign operations, with limited exceptions related to earnings of European and Asian subsidiaries. As of December 31, 2023, we had undistributed earnings from non-U.S. operations of approximately $1.3 billion (including approximately $95.7 million of restricted earnings, which are not available for dividends). Undistributed earnings of our China subsidiaries comprise $511.4 million of this total. Additional Chinese withholding taxes of approximately $52.0 million would be required should the $511.4 million of such earnings be distributed out of China as dividends.

The impact of tax holidays decreased our tax expense by approximately $0.7 million, $0.2 million and ($0.2) million for the twelve months ended December 31, 2023, 2022 and 2021, respectively. The benefit of the tax holidays on basic and diluted earnings per share was $0.02, $0.00 and $0.00 for the twelve months ended December 31, 2023, 2022 and 2021, respectively.