Note 7 - Income Taxes

3 Months Ended

Mar. 31, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(7) Income Taxes

The Company maintains a valuation allowance for substantially all of its deferred tax assets. A valuation allowance is established or maintained when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. As of March 31, 2021, the significant doubt about the Company's going concern has been alleviated which the Company believes is sufficient evidence to warrant reversal of $7.7 million of valuation allowance on its net deferred tax assets of certain foreign subsidiaries. The Company will continue to record a valuation allowance for the substantial majority of its deferred tax assets until there is sufficient evidence to warrant reversal.

The tax provision for the three months ended March 31, 2021 has been calculated using the Company’s overall estimated annual effective tax rate based on projected 2021 full year results. The Company’s effective tax rates for the three months ended March 31, 2021 and 2020 were negatively impacted by the change in valuation allowance related to U.S. operating losses for which the Company cannot currently recognize a tax benefit. The Company’s effective tax rates for the three months ended March 31, 2021 was positively impacted by the reversal of valuation allowance related to certain foreign subsidiaries as further described below. Due to the impact of the valuation allowances on tax expense, the Company’s effective tax rates are not meaningful for all periods presented. The Company’s income tax benefit for the three months ended March 31, 2021 of $6.8 million primarily relates to the reversal of valuation allowance of $7.7 million on its net deferred tax assets of certain foreign subsidiaries resulting from the removal of the substantial doubt that the Company will continue as a going concern. The Company’s income tax expense for the three months ended March 31, 2020 of $5.9 million primarily relates to results from the Company’s non-U.S. businesses, including $2.2 million of valuation allowance. The valuation allowance was established as a result of a change in the expectation of future revenues after entering into the settlement agreement with WesternGeco described in Footnote 9 “Litigations” to the Company's Annual Report on Form 10-K for the year ended December 31, 2020. 

In response to the global pandemic related to COVID-19, the President of the United States signed into law the CARES Act on March 27, 2020. The CARES Act provides numerous relief provisions for corporate taxpayers, including modifications of the utilization limitations on net operating losses, favorable expansions of the deduction for business interest expense under Internal Revenue Code Section 163(j), and the ability to accelerate timing of refundable AMT credits. For the three months ended March 31, 2021 and 2020, there were no material tax impacts to our condensed consolidated financial statements as it relates to COVID-19 measures. The Company continues to monitor additional guidance issued by the U.S. Treasury Department, the Internal Revenue Services ("IRS") and others.

At March 31, 2021, the Company has approximately $0.4 million of unrecognized tax benefits and does not expect to recognize significant increases in unrecognized tax benefits during the next twelve-month period. Interest and penalties, if any, related to unrecognized tax benefits are recorded in income tax expense.

At March 31, 2021, the Company’s U.S. federal tax returns for 2017 and subsequent years remain subject to examination by tax authorities. In the Company’s foreign tax jurisdictions, tax returns for 2016 and subsequent years generally remain open to examination.