Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Tax Disclosure

The Company's income (loss) before income taxes and income tax expense (benefit), each by tax jurisdiction, consists of the following (dollars in thousands):

	Year ended December 31,
	2022		2021		2020
Income (loss) before income taxes:
Domestic	$	56,750	$	28,380	$	(134,630)
Foreign	30,920		40,730		31,920
Total income (loss) before income taxes	$	87,670	$	69,110	$	(102,710)
Current income tax expense:
Federal	$	13,300	$	940	$	200
State and local	3,470		530		810
Foreign	6,170		8,840		7,750
Total current income tax expense	22,940		10,310		8,760
Deferred income tax expense (benefit):
Federal	(1,780)		5,450		(16,900)
State and local	50		670		(4,430)
Foreign	290		(4,630)		(10,380)
Total deferred income tax expense (benefit)	(1,440)		1,490		(31,710)
Income tax expense (benefit)	$	21,500	$	11,800	$	(22,950)

The components of deferred taxes are as follows (dollars in thousands):

	December 31, 2022		December 31, 2021
Deferred tax assets:
Accounts receivable	$	1,290	$	950
Inventories	5,640		5,330
Accrued liabilities and other long-term liabilities	14,580		15,320
Operating lease liability	12,670		13,440
Research and experimentation costs (a)	4,130		—
Tax loss and credit carryforwards	27,310		30,690
Other	110		340
Gross deferred tax asset	65,730		66,070
Valuation allowances	(17,180)		(19,960)
Net deferred tax asset	48,550		46,110
Deferred tax liabilities:
Property and equipment	(25,100)		(23,920)
Right of use asset	(12,170)		(13,130)
Goodwill and other intangible assets	(22,050)		(20,160)
Investment in foreign affiliates, including withholding tax	(770)		(420)
Gross deferred tax liability	(60,090)		(57,630)
Net deferred tax liability	$	(11,540)	$	(11,520)

__________________________

(a) Effective for tax years beginning after December 31, 2021, research and experimentation expenditures are to be capitalized and amortized for tax-purposes as part of the Tax Cuts and Jobs Act of 2017.

The following is a reconciliation of income tax expense (benefit) computed at the U.S. federal statutory rate to income tax expense (benefit) allocated to income (loss) before income taxes (dollars in thousands):

	Year ended December 31,
	2022			2021			2020
U.S. federal statutory rate	21		%	21		%	21		%
Tax at U.S. federal statutory rate	$	18,380		$	14,550		$	(21,570)
State and local taxes, net of federal tax benefit	2,790			960			(2,850)
Differences in statutory foreign tax rates	1,150			(1,690)			(1,500)
Change in recognized tax benefits	(600)			(550)			(920)
Goodwill and other intangible assets impairment	—			—			13,430
Tax credits and incentives	(1,260)			(5,060)			(2,130)
Net change in valuation allowance	340			2,100			(6,390)
Nondeductible compensation	990			2,280			260
Other, net	$	(290)		$	(790)		$	(1,280)
Income tax expense (benefit)	$	21,500		$	11,800		$	(22,950)

During 2020, the Company undertook certain tax-planning actions with respect to intercompany debt restructuring within the group. These actions resulted in the recognition of a $6.4 million deferred tax benefit related to an interest limitation carryforward.

The Company has recorded deferred tax assets on $21.3 million of various state operating loss carryforwards and $54.3 million of various foreign operating loss carryforwards. The majority of the state tax loss carryforwards expire between 2026 and 2032 and the majority of the foreign losses have indefinite carryforward periods.

The Company has not made a provision for U.S. or additional foreign withholding taxes related to investments in foreign subsidiaries that are indefinitely reinvested since any excess of the amount for financial reporting over the tax basis in these investments is not significant as of December 31, 2022.

Unrecognized Tax Benefits

The Company had $1.1 million and $1.3 million of unrecognized tax benefits ("UTBs") as of December 31, 2022 and 2021, respectively. If the UTBs were recognized, the impact to the Company's effective tax rate would be to reduce reported income tax expense for the years ended December 31, 2022 and 2021 by $1.1 million and $1.1 million, respectively.

A reconciliation of the change in the UTBs for the years ended December 31, 2022 and 2021 is as follows (dollars in thousands):

	Unrecognized Tax Benefits
Balance at December 31, 2020	$	1,640
Tax positions related to current year:
Additions	130
Tax positions related to prior years:
Additions	20
Reductions	—
Settlements	—
Lapses in the statutes of limitations	(540)
Balance at December 31, 2021	$	1,250
Tax positions related to current year:
Additions	140
Tax positions related to prior years:
Additions	—
Reductions	(50)
Settlements	—
Lapses in the statutes of limitations	(230)
Balance at December 31, 2022	$	1,110

In addition to the UTBs summarized above, the Company has recorded $0.8 million and $0.8 million in potential interest and penalties associated with uncertain tax positions as of December 31, 2022 and 2021, respectively.

The Company is subject to U.S. federal, state and local, and certain non-U.S. income tax examinations for tax years 2015 through 2022. In addition, there are currently several state and foreign income tax examinations in process. The Company does not believe that the results of these examinations will have a significant impact on the Company's tax position or its effective tax rate.

Management monitors changes in tax statutes and regulations and the issuance of judicial decisions to determine the potential impact to UTBs and is not aware of, nor does it anticipate, any subsequent events that could have a significant impact on the Company's financial position during the next twelve months.