Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

14. Income Taxes

Income (loss) before income taxes, as shown in the accompanying Consolidated Statements of Operations, includes the following components for the years ended December 31, 2023 and 2022:

	Year Ended December 31,
	2023		2022
Domestic	$	14,575	$	(5,074)
Foreign	(13,631)		(3,922)
Income (loss) before income taxes	$	944	$	(8,996)

Significant components of the provision for income taxes for the years ended December 31, 2023 and 2022 were as follows:

	Year Ended December 31,
	2023		2022
Current:
Federal	$	(16)	$	—
State	53		127
Foreign	1,460		769
Total current	1,497		896
Deferred:
Federal	—		28,287
State	—		9,001
Foreign	(1,852)		(1,503)
Total deferred	(1,852)		35,785
Total income tax (benefit) expense	$	(355)	$	36,681

The reconciliation of income tax computed at statutory rates to income tax expense for the years ended December 31, 2023 and 2022 is as follows:

	Year Ended December 31,
	2023				2022
	Amount		Percent		Amount		Percent
Statutory rate	$	198	21.0	%	$	(1,889)	21.0	%
Foreign tax rate differential	(520)		(55.1)		(306)		3.4
State income taxes, net of federal benefit	322		34.1		327		(3.6)
Non-deductible expenses	206		21.8		200		(2.2)
Non-deductible executive compensation	256		27.1		45		(0.5)
Income tax credits	(218)		(23.1)		(261)		2.9
Change in income tax rates	(38)		(4.0)		176		(2.0)
Tax on unremitted foreign earnings	181		19.2		439		(4.9)
Change in valuation allowance	(723)		(76.6)		37,895		(421.2)
Other	(19)		(2.0)		55		(0.6)
Total income tax (benefit) expense / Effective rate	$	(355)	(37.6)	%	$	36,681	(407.7)	%

Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2023 and 2022 were as follows:

	December 31,
	2023		2022
Deferred tax assets:
Goodwill and other intangibles	$	1,762	$	8,099
Accrued settlement	2,001		3,915
Deferred compensation	4,127		2,396
Contingent liabilities	600		613
Net operating loss / tax credit carryforwards	36,217		30,812
Pension and post-retirement liability	149		297
Inventories	852		1,790
Warranty reserve	146		202
Accounts receivable	201		181
Interest deduction carryforward	1,882		775
Capitalized research expenditures	1,599		1,292
Other	680		644
Total deferred tax assets	50,216		51,016
Less: valuation allowance	(40,125)		(40,601)
Net deferred tax assets	10,091		10,415
Deferred tax liabilities:
Goodwill and other intangibles	(2,181)		(2,803)
Depreciation	(8,596)		(9,434)
Unrealized income on interest rate swap contracts	(306)		(472)
Unremitted earnings of foreign subsidiaries	(50)		(625)
Other	(190)		(166)
Total deferred tax liabilities	(11,323)		(13,500)
Net deferred tax (liabilities) assets	$	(1,232)	$	(3,085)

A valuation allowance is required to be established or maintained when, based on currently available information and other factors, it is more likely than not that all or a portion of a deferred tax asset will not be realized. The Company has considered all available evidence, both positive and negative, in assessing the need for a valuation allowance in each jurisdiction.

The Company has reported cumulative financial losses in recent years, which is a significant piece of negative evidence that typically limits a Company’s ability to consider more subjective forms of evidence. Although many of our deferred tax assets have indefinite carryforward periods, we determined it was not appropriate to place significant weight on forecasted income in future periods given the subjective nature of such forecasts and our cumulative losses in recent years. A valuation allowance of $40,125 was recorded at December 31, 2023 to recognize only the amount of deferred tax assets more likely than not to be realized. The amount of deferred tax assets considered realizable, however, could be adjusted if objective negative evidence in the form of cumulative financial losses is no longer present, and additional weight is given to subjective evidence such as our projections for growth.

As of December 31, 2023, the Company had a federal Net Operating Loss (“NOL”) carryforward of $103,108, which is limited to 80% of taxable income annually, but may be carried forward indefinitely. The Company also has federal research tax credit carryforwards in the amount of $1,678 that will expire at various times from 2036 through 2043. Based on information available as of December 31, 2023, the Company believes it is more likely than not that the tax benefits from the federal loss carryforwards and research tax credit carryforwards will not be realized. In recognition of this risk, we have provided a full valuation allowance against deferred tax assets related to federal NOL and research tax credit carryforwards at December 31, 2023.

As of December 31, 2023 and 2022, the tax benefit of NOL carryforwards available for state income tax purposes was $10,137 and $9,574, respectively. Many state NOL carryforwards will expire in various years through 2043, while some may be carried forward indefinitely. Based on information available as of December 31, 2023, the Company believes it is more likely than not that the tax benefit from state operating loss carryforwards will not be realized. In recognition of this risk, the Company has provided a full valuation allowance against deferred tax assets related to state operating loss carryforwards as of December 31, 2023.

As of December 31, 2023, the Company has NOL carryforwards in certain foreign jurisdictions of $18,202, which may be carried forward indefinitely. The foreign jurisdictions have incurred cumulative financial losses over the three-year period ended December 31, 2023 and have projected future taxable losses. Based on information available as of December 31, 2023, the Company believes it is more likely than not that the tax benefit from these loss carryforwards will not be realized. In recognition of this risk, it

has provided a valuation allowance of $3,761, collectively, against deferred tax assets in foreign jurisdictions as of December 31, 2023.

The determination to record or not record a valuation allowance involves managements’ judgment, based on the consideration of positive and negative evidence available at the time of the assessment. Management will continue to assess the realization of its deferred tax assets based upon future evidence, and may record adjustments to valuation allowances against deferred tax assets in future periods, as appropriate, that could materially impact net income.

Each quarter, management reviews operations and liquidity needs in each jurisdiction to assess the Company’s intent to reinvest foreign earnings outside of the United States. As of December 31, 2023, management determined that a portion of the Company’s outside basis differences in its foreign subsidiaries would not be indefinitely reinvested outside of the United States. The Company has accrued foreign withholding taxes of $50 related to $1,000 of outside basis differences in its foreign subsidiaries that are not indefinitely reinvested as of December 31, 2023. It is management’s intent and practice to indefinitely reinvest all other undistributed earnings outside of the United States. Determination of the amount of any unrecognized deferred income tax liability associated with these undistributed earnings is not practicable because of the complexities of the hypothetical calculation.

The following table provides a reconciliation of unrecognized tax benefits as of December 31, 2023 and 2022:

	December 31,
	2023		2022
Unrecognized tax benefits at beginning of period:	$	354	$	365
Decreases based on tax positions for prior periods	(47)		(11)
Balance at end of period	$	307	$	354

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $307 as of December 31, 2023. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. As of December 31, 2023 and 2022, the Company had accrued interest and penalties related to unrecognized tax benefits of $332 and $356, respectively. As of December 31, 2023, the Company did not expect any material increases or decreases to its unrecognized tax benefits within the next 12 months. Ultimate realization of these tax benefits is dependent upon the occurrence of certain events, including the completion of audits by tax authorities and expiration of statutes of limitations.

The Company files income tax returns in the US and in various state, local, and foreign jurisdictions. The Company is subject to federal income tax examinations for the 2020 period and thereafter. With respect to the state, local, and foreign filings, certain entities of the Company are subject to income tax examinations for the 2019 period and thereafter.