INCOME TAXES

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

For the year ended December 31, 2021, our income tax provision resulted in an effective tax rate of 6.4%. For the years ended December 31, 2020 and 2019, our income tax benefit on the loss from continuing operations resulted in an effective tax rate of 5.8% and 1.3%, respectively. Our income tax provision for the year ended December 31, 2021 was $11.2 million, and an income tax benefit for December 31, 2020 and 2019 was $14.7 million and $0.4 million, respectively, and includes federal, state and foreign taxes. The components of our tax provision and benefit on continuing operations were as follows (in thousands):

	Current		Deferred		Total
Twelve months ended December 31, 2021:
U.S. Federal	$	1,460	$	(1,115)	$	345
State & local	590		150		740
Foreign jurisdictions	4,350		5,774		10,124
	$	6,400	$	4,809	$	11,209
Twelve months ended December 31, 2020:
U.S. Federal	$	(14,853)	$	(1,228)	$	(16,081)
State & local	1,113		(1,010)		103
Foreign jurisdictions	2,942		(1,679)		1,263
	$	(10,798)	$	(3,917)	$	(14,715)
Twelve months ended December 31, 2019:
U.S. Federal	$	(105)	$	(4,349)	$	(4,454)
State & local	519		(1,230)		(711)
Foreign jurisdictions	2,340		2,389		4,729
	$	2,754	$	(3,190)	$	(436)

The components of pre-tax income (loss) from continuing operations for the years ended December 31, 2021, 2020 and 2019 were as follows (in thousands):

	Twelve Months Ended December 31,
	2021		2020		2019
Domestic	$	(157,778)	$	(240,064)	$	(34,720)
Foreign	(17,032)		(11,854)		1,867
	$	(174,810)	$	(251,918)	$	(32,853)

The income tax provision in 2021 and benefit in 2020 and 2019 attributable to the loss from continuing operations differed from the amounts computed by applying the U.S. Federal income tax rate (21% in 2021, 2020 and 2019) to pre-tax loss from continuing operations as a result of the following (in thousands):

	Twelve Months Ended December 31,
	2021		2020		2019
Pre-tax loss from continuing operations	$	(174,810)	$	(251,918)	$	(32,853)
Computed income taxes at statutory rate	(36,710)		(52,903)		(6,899)
State income taxes, net of federal benefit	561		(114)		(820)
Foreign tax rate differential	613		404		(300)
Non-cash compensation	842		926		323
Deferred taxes on investment in foreign subsidiaries	(1,939)		525		18
Non-deductible expenses	767		518		658
Non-deductible compensation	(522)		89		559
Foreign withholding	1,708		1,063		670
Prior year tax adjustments	993		707		954
Convertible debt	—		(2,949)		—
Goodwill impairment	9,892		12,586		—
Valuation allowance	34,284		32,957		3,682
Cares Act rate benefit	—		(7,267)		—
Rate change	(186)		(551)		684
Other	906		(706)		35
Total expense (benefit) for income tax on continuing operations	$	11,209	$	(14,715)	$	(436)

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        The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (in thousands): 

	December 31,
	2021		2020
Deferred tax assets:
Accrued compensation and benefits	$	7,831	$	9,058
Receivables	1,345		1,551
Inventory	316		336
Share based compensation	271		256
Other accrued liabilities	3,467		2,109
Tax credit carry forward	3,613		3,642
Interest expense limitation	22,312		7,040
Goodwill and intangible costs	9,221		6,754
Net operating loss carry forwards	68,972		58,759
Other	2,428		1,013
Deferred tax assets	119,776		90,518
Less: Valuation allowance	(89,191)		(53,417)
Deferred tax assets, net	30,585		37,101
Deferred tax liabilities:
Property, plant and equipment	(20,267)		(23,783)
Unremitted earnings of foreign subsidiaries	(3,944)		(5,918)
Convertible debt	(7,359)		(1,755)
Other	(2,408)		(3,230)
Deferred tax liabilities	(33,978)		(34,686)
Net deferred tax asset (liability)	$	(3,393)	$	2,415

Management evaluates all available evidence, both positive and negative, to determine whether sufficient future taxable income will be generated to allow for the realization of the existing deferred tax assets. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. A significant factor of negative evidence evaluated was the cumulative pre-tax loss incurred over the three-year period ended December 31, 2021. This objective evidence limits the ability to consider other subjective positive evidence, such as our projections for future pre-tax income.

On the basis of this evaluation, as of December 31, 2021, a valuation allowance of $89.2 million has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized. This valuation allowance relates primarily to the deferred tax assets for federal, foreign and state tax net operating loss carryforwards. The amount of deferred tax asset considered realizable could be adjusted if there are changes to net operating loss carryforward periods or there is a change to the weight assessed on various sources of positive and negative evidence.

The current year increase in the valuation allowance is primarily attributable to our U.S. operations. In the previous quarter, we did record a significant increase in the valuation allowance on certain foreign subsidiaries that historically were profitable. In the current quarter, we were able to release $0.9 million of valuation allowance based on all available evidence, including forecasted income for these entities. The release of the valuation allowance is primarily attributable to our UK, Germany and Canada subsidiaries.

At December 31, 2021, we had net operating loss carryforwards for U.S. federal income tax purposes of $221.9 million. Of this amount, $96.2 million expires in various dates through 2037 and $125.7 million has an indefinite carryforward period. These carryforwards are available, subject to certain limitations, to offset future taxable income. Further, we have state net operating loss carryforwards of $212.7 million with $178.9 million expiring on various dates through 2041 and $33.8 million with an indefinite carryforward period.

As of December 31, 2021, we had interest expense carryforward for U.S. income tax purposes of $92.7 million. The entire $92.7 million has an indefinite carryforward period. These carryforwards are available, subject to certain limitations, to offset future taxable income.

The Company has $3.3 million of tax credits that will expire on various dates through 2037 if not utilized.

As of December 31, 2021, we had foreign net operating loss carryforwards totaling $37.9 million. Of this amount, $4.4 million will expire in various dates through 2030 and $33.5 million has an unlimited carryforward period.

At December 31, 2021, none of our undistributed earnings of foreign operations were considered to be permanently reinvested overseas. As of December 31, 2021, the deferred tax liability related to undistributed earnings of foreign subsidiaries was $3.9 million.

As of December 31, 2021, $1.9 million of unrecognized tax benefits would affect our effective tax rate. We estimate the uncertain tax benefits that may be recognized within the next twelve months will not be material. Our policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense.

We file income tax returns in the U.S. federal and state jurisdictions as well as various foreign jurisdictions. With few exceptions, we are no longer subject to U.S. Federal, state and local or non-U.S. income tax examinations by tax authorities for years prior to 2016. We are currently under audit in one of the states in which we do substantial business. We have recorded a $0.5 million tax liability in our uncertain positions related to this audit due to retroactive changes included in final regulations issued by the state this quarter. Certain Netherlands entities are also under audit. We do not anticipate any material adjustments related to these examinations.

Periodic examinations of our tax filings occur by the taxing authorities for the jurisdictions in which we conduct business. These examinations review the significant positions taken on our returns, including the timing and amount of income and deductions reported, as well as the allocation of income among multiple taxing jurisdictions. We do not expect any material adjustments to result from positions taken on our income tax returns.

The following table summarizes the Company’s reconciliation of gross unrecognized tax benefits, excluding penalties and interest, for the year ended December 31, 2021, 2020 and 2019 (in thousands):

	Twelve Months Ended December 31,
	2021		2020		2019
Unrecognized tax benefits - January 1	$	1,610	$	1,547	$	1,749
Additions based on current year tax positions	—		7		—
Additions based on tax positions related to prior years	543		89		227
Reductions based on tax positions related to prior years					(415)
Settlements	—		—		—
Reductions resulting from a lapse of the applicable statute of limitations	(868)		(33)		(14)
Unrecognized tax benefits - December 31	$	1,285	$	1,610	$	1,547

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We have recorded the unrecognized tax benefits in other long-term liabilities in the consolidated balance sheets. As of December 31, 2021, 2020 and 2019, the total amount of accrued interest and penalties related to unrecognized tax benefits was $0.6 million, $0.4 million and $0.3 million, respectively. There were approximately $0.2 million, $0.1 million and $(0.1) million, respectively, of interest and penalties related to unrecognized tax benefits that are recorded in income tax expense for the periods ended December 31, 2021, 2020 and 2019.