Note I — Income Taxes

Coronavirus Aid, Relief and Economic Security Act

In response to the COVID-

pandemic, the CARES Act was signed into law in

March 2020.

The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of

2017

(

“2017

Tax Act”). Under the CARES Act, corporate taxpayers

may

carryback net operating losses (“ NOLs”) realized during

2018

through

2020

for up to

five

years, which was

not

previously allowed under the

2017

Tax Act. The CARES Act also eliminates the

80%

of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in

2018,

2019

2020.

Taxpayers

may

generally deduct interest up to the sum of

50%

of adjusted taxable income plus business interest income (

30%

limit under the

2017

Tax Act) for tax years beginning

January 1, 2019

and

2020.

The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in

2020

for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the

2017

Tax Act. In addition, the CARES Act raises the corporate charitable deduction limit to

25%

of taxable income and makes qualified improvement property generally eligible for

-year cost-recovery and

100%

bonus depreciation.

The components of income tax (benefit) expense are as follows:

	Year Ended December 31,
In thousands	2020			2019
Current
Federal	$	(17,286	)	$	216
State and local		696			504
Foreign		219			37
Total current	$	(16,371	)	$	757

Deferred
Federal	$	1,398		$	623
State and local		(2,163	)		(96	)
Foreign		521			469
Total deferred	$	(244	)	$	996

Total income tax (benefit) expense	$	(16,615	)	$	1,753

The U.S. and foreign components of loss before income taxes were as follows:

	Year Ended December 31,
In thousands	2020			2019
United States	$	(20,683	)	$	(29,003	)
Foreign		2,374			4,492
Total loss before income taxes	$	(18,309	)	$	(24,511	)

The differences between total income tax (benefit) expense and the amount computed by applying the statutory federal income tax rate of

21%

to loss before income taxes were as follows:

	Year Ended December 31,
In thousands	2020			2019
Computed expected income tax benefit	$	(3,845	)	$	(5,147	)

Net effect of state income taxes		(223	)		(509	)
Foreign subsidiary dividend inclusions		1,208			1,083
Foreign tax rate differential		281			(268	)
Change in valuation allowance		(7,538	)		6,085
CARES Act NOL Carryback		(6,816	)		—
Stock-based compensation shortfalls		296			238
Return to Provision		—			216
Other, net		22			55
Income tax (benefit) expense for the period	$	(16,615	)	$	1,753

Total income tax (benefit) expense was allocated as follows:

	Year Ended December 31,
In thousands	2020			2019
(Loss) income from operations	$	(16,615	)	$	1,753
Stockholders' deficit		—			—
Total	$	(16,615	)	$	1,753

We expect to receive tax refunds of

$17.1

million from NOL Carrybacks pursuant to the CARES Act. This amount is comprised of

$9.6

million already received for carryback claims filed during the year, and an expected

$7.5

million refund from the carryback of the loss generated in

2020.

The U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”) was enacted on

December 22, 2017.

The legislation significantly changed U.S. tax law by, among other things, lowering the corporate income tax rate from

35%

21%,

implementing a territorial tax system.

The Tax Reform Act subjects a U.S. shareholder to tax on Global Intangible Low Tax Income (GILTI) earned by certain foreign subsidiaries. The FASB Staff Q&A Topic

740,

No.

“Accounting for Global Intangible Low-Taxed Income”, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. We elected to account for GILTI as a current period expense when incurred.

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:

	Year Ended December 31,
In thousands	2020			2019
Deferred tax assets
Deferred compensation and retirement plan	$	16,541		$	18,067
Accrued expenses not deductible until paid		237			2,331
Lease liability		6,346			4,217
Employee stock-based compensation		440			736
Accrued payroll not deductible until paid		108			196
Accounts receivable, net		53			156
Investment in foreign subsidiaries, outside basis difference		1,124			1,336
Goodwill		581			649
Interest Expense limitations		1,530			—
Other, net		440			156
Foreign net operating loss carryforwards		1,771			2,364
State net operating loss carryforwards		4,763			4,387
Foreign tax credit carryforwards		3,653			3,653
Federal net operating loss carryforwards		—			5,394
Total gross deferred tax assets		37,587			43,642
Less valuation allowances		(30,841	)		(38,379	)
Net deferred tax assets	$	6,746		$	5,263

Deferred tax liabilities
Property, plant and equipment	$	(625	)	$	(1,159	)
Right-of-use asset		(5,583	)		(3,785	)
Prepaid Expenses		(318	)		(279	)
Other, net		(220	)		(284	)
Total gross deferred tax liabilities		(6,746	)		(5,507	)
Net deferred tax assets (liabilities)	$	—		$	(244	)

A reconciliation of the beginning and ending balance of deferred tax valuation allowance is as follows:

In thousands
Balance at December 31, 2018	$	31,170
Deferred Income Tax Expense		6,086
Return to Provision Impact		(364	)
Other Comprehensive Income		1,487
Balance at December 31, 2019		38,379
Deferred Income Tax Benefit		(7,534	)
Return to Provision Impact		12
Other Comprehensive Income		(16	)
Balance at December 31, 2020	$	30,841

In assessing the realizability of deferred tax assets, we consider whether it is more likely than

not

that some portion or all of the deferred tax assets will

not

be realized. The valuation allowance for deferred tax assets was

$30.8

million and

$38.4

million at

December 31, 2020

and

2019

, respectively. The amount of the deferred tax asset considered realizable could be adjusted if estimates of future taxable income during the carryforward period are increased, or if objective negative evidence in the form of cumulative losses is

longer present, and additional weight

may

be given to subjective evidence such as changes in our growth projections.

We or

one

of our subsidiaries file income tax returns in the U.S. federal, U.S. state, and foreign jurisdictions. For U.S. state returns, we are

longer subject to tax examinations for years prior to

2014.

For U.S. federal and foreign returns, we are

longer subject to tax examinations for years prior to

2016.

The Company is currently under federal audit for the tax years ended

December 31, 2018

and

2016,

however we expect

material adjustments.

There is

balance of unrecognized tax benefits as of

December 31, 2020

and

2019.

Any adjustments to this liability as a result of the finalization of audits or potential settlements would

not

be material.

Effective

January 1, 2019

we adopted ASU

2018

which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the reduction of the U.S. federal statutory income tax rate from

35%

21%

due to the enactment of the Tax Reform Act. As a result of the adoption, we reclassified

$11.4

million of stranded tax effects from accumulated other comprehensive income to retained earnings.

We have elected to classify any interest and penalties related to income taxes within income tax expense in our Consolidated Statements of Comprehensive Loss.

For U.S. tax return purposes, net operating losses and tax credits are normally available to be carried forward to future years, subject to limitations as discussed below. As of

December 31, 2020

, the Company has federal net operating loss carryforward of

$21.6

million, which the company is expecting to carry back pursuant to CARES Act. Federal Foreign tax carryforward credit of

$3.7

million will expire on various dates from

2023

2026.

The Company has state NOL carryforwards of

$90.3

million, for

which a full valuation allowance has been recorded, and foreign NOL carryforwards of

$6.2

million, for which a valuation allowance of

$6.2

million has been recorded.

Deferred income taxes have

not

been provided on the undistributed earnings of our foreign subsidiaries as these earnings have been, and under current plans will continue to be, permanently reinvested in these subsidiaries. It is

not

practicable to estimate the amount of additional taxes which

may

be payable upon the distribution of these earnings. However, because of the provisions in the Tax Reform Act, the tax cost of repatriation is immaterial and limited to foreign withholding taxes, currency translation and state taxes.