Note 19 - Income Taxes

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

19. Income Taxes

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

Years Ended December 31,	2020			2019			2018
Domestic	$	(176,448	)	$	(72,765	)	$	14,243
Foreign		9,985			(4,313	)		(5,915	)
Total (loss) income before (benefit from) provision for income taxes	$	(166,463	)	$	(77,078	)	$	8,328

The following is a summary of the benefit from income taxes (in thousands):

Years Ended December 31,	2020			2019			2018
Federal:
Current	$	(9,017	)	$	(5,862	)	$	(15,970	)
Deferred		7,941			(17,731	)		12,037
Total federal		(1,076	)		(23,593	)		(3,933	)
State:
Current		(443	)		700			10
Deferred		2,052			(3,456	)		644
Total state		1,609			(2,756	)		654
Foreign:
Current		136			7,340			606
Deferred		(951	)		(1,367	)		(535	)
Total foreign		(815	)		5,973			71
Total benefit from income taxes	$	(282	)	$	(20,376	)	$	(3,208	)

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

Years Ended December 31,	2020					2019					2018
Federal statutory tax	$	(34,957	)	21.0	%	$	(16,186	)	21.0	%	$	1,749		21.0	%
State taxes, net of federal tax benefit		1,696		(1.0	)		(2,905	)	3.8			1,163		14.0
Foreign Taxes		(1,374	)	0.8			—		—			(182	)	(2.2	)
Percentage depletion deduction		(1,096	)	0.7			(932	)	1.2			(951	)	(11.4	)
Non-controlling interests		4,423		(2.7	)		(733	)	1.0			(2,289	)	(27.5	)
Nondeductible expenses		1,073		(0.6	)		2,171		(2.8	)		4,842		58.2
Non-cash impairment charges		32,905		(19.8	)		—		—			—		—
Company-owned life insurance		—		—			(870	)	1.1			410		4.9
Stock-based Compensation		—		—			—		—			(815	)	(9.8	)
Changes in uncertain tax positions		(1,781	)	1.1			(912	)	1.2			(772	)	(9.3	)
Capital loss expiration		—		—			—		—			8,423		101.2
Valuation allowance		4,197		(2.5	)		1,727		(2.2	)		(6,795	)	(81.6	)
Gain/Loss on Sale of Entity		(3,827	)	2.3			—		—			—		—
Purchase Price Accounting		—		—			(1,308	)	1.7			—		—
Tax Cuts and Jobs Act of 2017		—		—			—		—			(7,980	)	(95.8	)
Other		(1,541	)	0.9			(428	)	0.4			(11	)	(0.2	)
Total	$	(282	)	0.2	%	$	(20,376	)	26.4	%	$	(3,208	)	(38.5	)%

Following is a summary of the deferred tax assets and liabilities (in thousands):

December 31,	2020			2019
Long-term deferred tax assets:
Receivables	$	3,162		$	2,776
Insurance		12,720			11,340
Deferred compensation		11,187			10,498
Accrued compensation		9,860			2,574
Other accrued liabilities		1,596			1,084
Contract income recognition		15,895			22,208
Lease liabilities		16,342			19,078
Net operating loss carryforwards		55,000			72,036
Valuation allowance		(29,622	)		(30,889	)
Other		7,331			4,142
Total long-term deferred tax assets		103,471			114,847
Long-term deferred tax liabilities:
Property and equipment		48,996			49,676
Right of use assets		15,792			18,767
Total long-term deferred tax liabilities		64,788			68,443
Net long-term deferred tax assets	$	38,683		$	46,404

The following is a summary of the net operating loss carryforwards at December 31, 2020 (in thousands):

	Expiration		Gross Carryforward		Tax Effected Carryforward
Federal net operating loss carryforwards		2032-2036	$	62,361	$	13,096
Federal net operating loss carryforwards		N/A		75,376		15,829
State net operating loss carryforwards		2021-2040		237,312		12,059
Foreign tax loss carryforwards		2021-2040		47,210		14,016
Total net operating loss carryforwards at December 31, 2020					$	55,000

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 740. The federal and state net operating loss acquired during the Layne acquisition 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 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,	2020			2019
Beginning balance	$	30,889		$	31,909
(Deductions) additions due to acquisitions		—			(716	)
(Deductions) additions due to dispositions		(4,667	)		—
Additions (deductions), net		3,400			(304	)
Ending balance	$	29,622		$	30,889

The addition to the valuation allowance is mainly due to the capital loss incurred in the U.S. in 2020 which is expected to expire unused which is partially offset by deductions to the valuation allowance that are insignificant for the year ended December 31, 2020.

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. Of the $41.5 million of accumulated undistributed earnings that we consider indefinitely reinvested as of December 31, 2020, 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 2013. With few exceptions, as of December 31, 2020, we are no longer subject to state examinations by taxing authorities for years before 2012.

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 2014.

We had approximately $23.3 million and $27.3 million of total gross unrecognized tax benefits as of December 31, 2020 and 2019, respectively. There were approximately $6.0 million and $10.1 million of unrecognized tax benefits that would affect the effective tax rate in any future period at December 31, 2020 and 2019, respectively. It is reasonably possible that our unrecognized tax benefit could decrease by approximately $1.6 million in 2021, of which $1.4 million would impact our effective tax rate in 2021. 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 balance of which is included in other long-term liabilities and accrued expenses and other current liabilities in the consolidated balance sheets:

December 31,	2020			2019			2018
Beginning balance	$	27,303		$	22,383		$	3,171
Gross increases - acquisitions		—			5,812			20,153
Gross decreases – dispositions		(1,590	)		—			36
Gross decreases – current period tax positions		—			—			(3	)
Gross increases – prior period tax positions		—			157			2
Gross decreases – prior period tax positions		(608	)		(8	)		(195	)
Settlements with taxing authorities/lapse of statute of limitations		(1,785	)		(1,041	)		(781	)
Ending balance	$	23,320		$	27,303		$	22,383

We record interest on uncertain tax positions in interest expense and penalties in interest expense and other income, net in our consolidated statements of operations. During the years ended December  31, 2020, 2019 and 2018, we recognized approximately $0.4 million interest and penalty income, $0.6 million interest and penalty expense and $1.1 million interest and penalty income, respectively. 

Approximately $6.7 million and $8.8 million of accrued interest and penalties related to our uncertain tax position liability was included in other long-term liabilities and accrued expenses and other current liabilities in our consolidated balance sheets at December 31, 2020 and 2019, respectively.