Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

    The provision (benefit) for income taxes was as follows:

	Year Ended December 31,
(In thousands)	2020		2019		2018
Current:
U.S. Federal	$	1,591	$	1,892	$	805
State	365		706		1,384
Foreign	5,011		11,440		12,572
Total current	6,967		14,038		14,761
Deferred:
U.S. Federal	(16,309)		(2,926)		(331)
State	598		1,181		66
Foreign	(3,139)		(2,505)		501
Total deferred	(18,850)		(4,250)		236
Total provision for income taxes	$	(11,883)	$	9,788	$	14,997

 Income (loss) before income taxes was as follows:

	Year Ended December 31,
(In thousands)	2020		2019		2018
U.S.	$	(92,838)	$	(15,270)	$	4,084
Foreign	259		12,112		43,194
Income (loss) before income taxes	$	(92,579)	$	(3,158)	$	47,278

The effective income tax rate is reconciled to the statutory federal income tax rate as follows:

	Year Ended December 31,
(In thousands)	2020		2019		2018
Income tax expense (benefit) at federal statutory rate	$	(19,442)	$	(663)	$	9,929
Recognition of Brazil cumulative foreign currency translation losses	2,456		—		—
Nondeductible goodwill impairment	—		2,401		—
Nondeductible executive compensation	170		756		1,165
Other nondeductible expenses	616		1,506		1,216
Stock-based compensation	1,602		(248)		(786)
Different rates on earnings of foreign operations	274		463		912
Dividend taxes on unremitted earnings	322		1,609		3,023
U.S. tax on foreign earnings	—		1,215		333
Change in valuation allowance	2,226		1,272		(790)
State tax expense (benefit), net	196		430		1,298
Net impact of Tax Act	—		—		(1,613)
Other items, net	(303)		1,047		310
Total provision (benefit) for income taxes	$	(11,883)	$	9,788	$	14,997

The benefit for income taxes was $11.9 million for 2020, reflecting an effective tax benefit rate of 13%. This result primarily reflects the impact of the $11.7 million non-cash recognition of cumulative foreign currency translation losses related to the substantial liquidation of our subsidiary in Brazil and other nondeductible expenses, as well as the impact of the geographic composition of our pretax loss, where the tax benefit from losses in the U.S was partially offset by the tax expense related to earnings from our international operations. The provision for income taxes was $9.8 million for 2019 despite reporting a small pretax loss for the year. This result reflects the impact of the $11.4 million nondeductible goodwill impairment and other nondeductible expenses, as well as the impact of the geographic composition of our pretax loss, where tax expense related to earnings from our international operations is only partially offset by the tax benefit from losses in the U.S. The provision for income taxes was $15.0 million for 2018. The provision for income taxes for 2018 includes a $1.6 million net benefit related to U.S. tax reform.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in March 2020 in the United States. The CARES Act contains several tax provisions, including additional carryback opportunities for net operating losses, temporary increases in the interest deductibility threshold, and the acceleration of refunds for any remaining alternative minimum tax (“AMT”) carryforwards. There was no material impact from the CARES Act in our provision for income taxes for 2020. In addition, we filed an amendment to our 2018 U.S. federal income tax return in the second quarter of 2020 and received a refund of $0.7 million for AMT carryforwards in July 2020.

The CARES Act also permits most companies to defer paying their portion of certain applicable payroll taxes from the date the CARES Act was signed into law through December 31, 2020. The deferred amount will be due in two equal installments on December 31, 2021 and December 31, 2022. The deferred amount of applicable payroll taxes was $3.2 million at December 31, 2020.

Temporary differences and carryforwards which give rise to deferred tax assets and liabilities consisted of the following at December 31:

(In thousands)	2020		2019
Deferred tax assets:
Net operating losses	$	25,990	$	14,205
Foreign tax credits	6,690		5,651
Accruals not currently deductible	5,121		4,928
Unrealized foreign exchange losses, net	3,750		3,837
Stock-based compensation	2,238		3,380
Capitalized inventory costs	3,111		1,611
Alternative minimum tax carryforwards	—		369
Other	9,456		6,709
Total deferred tax assets	56,356		40,690
Valuation allowance	(26,250)		(23,962)
Total deferred tax assets, net of allowances	30,106		16,728
Deferred tax liabilities:
Accelerated depreciation and amortization	(29,587)		(28,703)
Tax on unremitted earnings	(9,765)		(13,645)
Original issue discount on Convertible Notes	(804)		(2,311)
Other	(1,612)		(2,716)
Total deferred tax liabilities	(41,768)		(47,375)
Total net deferred tax liabilities	$	(11,662)	$	(30,647)
Noncurrent deferred tax assets	$	1,706	$	3,600
Noncurrent deferred tax liabilities	(13,368)		(34,247)
Net deferred tax liabilities	$	(11,662)	$	(30,647)

We have state income tax net operating loss carryforwards (“NOLs”) of approximately $142.9 million available to reduce future state taxable income, which expire in varying amounts beginning in 2021 through 2040. U.S. federal NOLs of approximately $58.4 million are available to reduce future U.S. taxable income, which do not expire. Foreign NOLs of approximately $20.0 million are available to reduce future taxable income, some of which expire beginning in 2021.

The realization of our net deferred tax assets is dependent on our ability to generate taxable income in future periods. At December 31, 2020 and 2019, we have recorded a valuation allowance in the amount of $26.3 million and $24.0 million, respectively, primarily related to certain U.S. state and foreign NOL carryforwards, including Australia, as well as for certain tax credits recognized related to the accounting for the impact of the 2017 U.S. Tax Cuts and Jobs Act (“Tax Act”), which may not be realized.

We file income tax returns in the United States and several non-U.S. jurisdictions and are subject to examination in the various jurisdictions in which we file. We are no longer subject to income tax examinations for U.S. federal and substantially all state jurisdictions for years prior to 2013 and for substantially all foreign jurisdictions for years prior to 2008.

Following an audit in 2015, the treasury authority in Mexico issued a tax assessment (inclusive of interest and penalties) in the amount of 60 million pesos (approximately $3.3 million) to our Mexico subsidiary primarily in connection with the export of mats from Mexico which took place in 2010.  The mats that are the subject of this assessment were owned by a U.S. subsidiary and leased to our Mexico subsidiary for matting projects in the Mexican market. In 2010, we made the decision to move these mats out of Mexico to markets with higher demand. The Mexican treasury authority determined the export of the mats was the equivalent of a sale and assessed taxes on the gross declared value of the exported mats to our Mexico subsidiary. We retained outside legal counsel and filed administrative appeals with the treasury authority, but we were notified in April 2018 that the last administrative appeal had been rejected. In response, we filed an appeal in the Mexican Federal Tax Court in the second quarter of 2018, which required that we post a bond in the amount of the assessed taxes (plus additional interest). In the fourth quarter of 2018, the Mexican Federal Tax Court issued a favorable judgment nullifying in full the tax assessment which was subsequently appealed by the treasury authority in Mexico. Following a judgment by the Mexican Court of Appeals, in the third quarter of 2019, the Mexican Federal Tax Court confirmed the full nullification of the tax assessment based on a due process violation and recognized the treasury authority's right to cure the due process violation by starting a new tax audit, and in the fourth quarter of 2020, the Mexican Court of Appeals confirmed this ruling resolving the appeals process in favor of our Mexico subsidiary. While the treasury authority in Mexico still has the right to start a new audit, we believe our tax position has been properly reported in accordance with applicable tax laws and regulations in Mexico.

We are also under examination by various tax authorities in other countries, and certain foreign jurisdictions have challenged the amounts of taxes due for certain tax periods. These audits are in various stages of completion. We fully cooperate with all audits, but defend existing positions vigorously. We evaluate the potential exposure associated with various filing positions and record a liability for uncertain tax positions as circumstances warrant. Although we believe all tax positions are reasonable and properly reported in accordance with applicable tax laws and regulations in effect during the periods involved, the final determination of tax audits and any related litigation could be materially different than that which is reflected in historical income tax provisions and accruals.

A reconciliation of the beginning and ending provision for uncertain tax positions is as follows: 

(In thousands)	2020		2019		2018
Balance at January 1	$	291	$	223	$	257
Additions (reductions) for tax positions of prior years	(6)		68		(3)
Additions (reductions) for tax positions of current year	—		—		—
Reductions for settlements with tax authorities	—		—		—
Reductions for lapse of statute of limitations	(72)		—		(31)
Balance at December 31	$	213	$	291	$	223

Approximately $0.2 million of unrecognized tax benefits at December 31, 2020, if recognized, would favorably impact the effective tax rate.

We recognize accrued interest and penalties related to uncertain tax positions in operating expenses. The amount of interest and penalties was immaterial for all periods presented.