Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

19. Income Taxes

The following is a summary of income before income taxes (in thousands):

Years Ended December 31,	2023		2022		2021
Domestic	$	92,552	$	97,235	$	13,531
Foreign	(32,698)		(5,418)		8,596
Total income before income taxes	$	59,854	$	91,817	$	22,127

The following is a summary of the provision for income taxes (in thousands):

Years Ended December 31,	2023		2022		2021
Federal:
Current	$	1,579	$	255	$	1,382
Deferred	23,331		10,326		15,022
Total federal	24,910		10,581		16,404
State:
Current	3,565		5,721		(935)
Deferred	1,362		(1,691)		2,652
Total state	4,927		4,030		1,717
Foreign:
Current	(1,432)		1,951		2,663
Deferred	1,862		(3,602)		(1,071)
Total foreign	430		(1,651)		1,592
Total provision for income taxes	$	30,267	$	12,960	$	19,713

The following is a reconciliation of our provision for income taxes based on the Federal statutory tax rate to our effective tax rate (dollars in thousands):

Years Ended December 31,	2023				2022				2021
Federal statutory tax	$	12,569	21.0	%	$	19,282	21.0	%	$	4,647	21.0	%
Non-deductible debt extinguishment costs	10,360		17.3		—		—		—		—
State taxes, net of federal tax benefit	5,171		8.6		2,761		3.0		1,912		8.6
Foreign taxes	(3,473)		(5.8)		(2,695)		(2.9)		1,912		8.6
Percentage depletion deduction	(1,119)		(1.9)		(1,062)		(1.2)		(1,015)		(4.6)
Non-controlling interests	2,942		4.9		933		1.0		1,613		7.3
Nondeductible expenses	2,699		4.5		3,744		4.1		1,398		6.3
Company-owned life insurance	(466)		(0.8)		902		1.0		(736)		(3.3)
Stock-based compensation	(685)		(1.2)		(330)		(0.4)		(664)		(3.0)
Changes in uncertain tax positions	(96)		(0.2)		(54)		(0.1)		—		—
Change in valuation allowance, net	3,163		5.3		(3,212)		(3.5)		(518)		(2.3)
Assets held for sale	—		—		(14,427)		(15.7)		10,089		45.6
Nondeductible goodwill	945		1.6		8,212		9.0		—		—
Return to provision adjustments	(1,250)		(2.1)		(1,102)		(1.2)		1,153		5.2
Other	(493)		(0.8)		8		—		(78)		(0.3)
Total	$	30,267	50.6	%	$	12,960	14.1	%	$	19,713	89.1	%

The variance from the statutory tax rate in 2023 is due primarily to the tax expense associated with non-deductible debt extinguishment costs and state and local income taxes.

The following is a summary of the deferred tax assets and liabilities:

(in thousands)	December 31, 2023		December 31, 2022
Long-term deferred tax assets:
Receivables	$	1,328	$	2,818
Insurance	15,018		12,575
Deferred compensation	10,424		9,432
Convertible debt - call option amortization	11,963		3,832
Accrued compensation	3,811		3,354
Other accrued liabilities	1,218		1,536
Contract income recognition	16,986		16,181
Lease liabilities	16,272		12,572
Net operating loss carryforwards	40,541		41,388
Valuation allowance	(24,569)		(19,919)
Other	3,587		2,671
Total long-term deferred tax assets	96,579		86,440
Long-term deferred tax liabilities:
Property and equipment	76,067		53,921
Right of use assets	16,041		12,202
Total long-term deferred tax liabilities	92,108		66,123
Net long-term deferred tax assets	$	4,471	$	20,317

The following is a summary of the net operating loss carryforwards at December 31, 2023:

(in thousands)	Expiration	Gross Carryforward		Tax Effected Carryforward
Federal net operating loss carryforwards	N/A	$	67,827	$	14,243
State net operating loss carryforwards	2024-2042	$	187,314	9,458
Foreign tax loss carryforwards	2024-2042	$	57,625	16,840
Total net operating loss carryforwards at December 31, 2023				$	40,541

The federal, state and foreign net operating loss carryforwards above included unrecognized tax benefits taken in prior years and the net operating loss carryforward deferred tax asset is presented net of these unrecognized tax benefits in accordance with ASC Topic 740, Income Taxes. The federal and state net operating losses acquired during the Layne acquisition in 2018 are subject to Internal Revenue Code Section 382 limitations and may be limited in future periods and a portion may expire unused. As we expect to use the federal net operating loss carryforwards prior to expiration we believe that it is more likely than not that these deferred tax assets will be realized and no valuation allowance was deemed necessary. We have provided a valuation allowance on the net operating loss deferred tax asset or the net deferred tax assets for certain foreign, state and local jurisdictions because we do not believe it is more likely than not that they will be realized.

The following is a summary of the change in valuation allowance:

(in thousands)	December 31, 2023		December 31, 2022
Beginning balance	$	19,919	$	26,533
Additions (deductions), net	4,650		(6,614)
Ending balance	$	24,569	$	19,919

The change in the valuation allowance in 2023 is mainly due to the increase in losses and other net deferred tax assets associated with our foreign operations which we do not believe are more likely than not to be used in future years.

We intend to indefinitely reinvest certain earnings of our foreign subsidiaries and affiliates. There are generally no federal income taxes on dividends from foreign subsidiaries therefore we would only be subject to other taxes, such as withholding

and local taxes, upon distribution of these earnings. We have $51.6 million of accumulated undistributed earnings that we consider indefinitely reinvested as of December 31, 2023. It is not practicable to determine the amount of taxes that would be payable upon remittance of these earnings. Deferred foreign withholding taxes have been provided on undistributed earnings of certain foreign subsidiaries and foreign affiliates where the earnings are not considered to be invested indefinitely.

Uncertain tax positions: We file income tax returns in the U.S. and various state and local jurisdictions. We are currently under examination by various state taxing authorities for various tax years. We do not anticipate that any of these audits will result in a material change in our financial position. We are no longer subject to U.S. federal examinations by tax authorities for years before 2017. With few exceptions, as of December 31, 2023, we are no longer subject to state examinations by taxing authorities for years before 2017.

We file income tax returns in foreign jurisdictions where we operate. The returns are subject to examination which may be ongoing at any point in time and tax liabilities are recorded based on estimates of additional taxes which will be due upon settlement of those examinations. The tax years subject to examination by foreign tax authorities vary by jurisdiction, but generally we are no longer subject to examinations by taxing authorities for years before 2016.

We had approximately $22.6 million and $22.8 million of total gross unrecognized tax benefits as of December 31, 2023 and 2022, respectively. There were approximately $5.5 million of unrecognized tax benefits that would affect the effective tax rate in any future period at both December 31, 2023 and 2022. It is reasonably possible that our unrecognized tax benefit could decrease by approximately $1.5 million in 2024, of which $1.3 million would impact our effective tax rate in 2024. The decrease relates to anticipated statute expirations and anticipated resolution of outstanding unrecognized tax benefits.

The following is a tabular reconciliation of unrecognized tax benefits (in thousands). The balances in the reconciliation are the gross amounts before considering reductions related to available net operating losses. The balance of unrecognized tax benefits net of available net operating losses is included in other long-term liabilities and accrued expenses and other current liabilities in the consolidated balance sheets:

December 31,	2023		2022		2021
Beginning balance	$	22,756	$	22,724	$	23,320
Gross increases – current period tax positions	—		—		—
Gross decreases – current period tax positions	—		—		—
Gross increases – prior period tax positions	—		—		—
Gross decreases – prior period tax positions	77		(426)		(9)
Settlements with taxing authorities/lapse of statute of limitations	(242)		(60)		(69)
Reclassification of balances from (to) held for sale	—		518		(518)
Ending balance	$	22,591	$	22,756	$	22,724