Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 14 - INCOME TAXES

Income/(loss) before income taxes from domestic and international jurisdictions is comprised of the following:

Year Ended December 31,	2020			2019
(Dollars in thousands)
Income (loss) before income taxes:
Domestic	$	(74,151	)	$	(60,170	)
Foreign		(154,529	)		(32,867	)
	$	(228,680	)	$	(93,037	)

The benefit/(provision) for income taxes is comprised of the following:

Year Ended December 31,	2020			2019
(Dollars in thousands)
Current taxes
Federal	$	1,970		$	3,834
State		(29	)		(146	)
Foreign		(9,333	)		(10,615	)
Total current taxes		(7,392	)		(6,927	)
Deferred taxes
Federal		(4,756	)		(3,174	)
State		(3,622	)		1,014
Foreign		889			5,664
Total deferred taxes		(7,489	)		3,504
Income tax benefit (provision)	$	(14,881	)	$	(3,423	)

The following is a reconciliation of the U.S. federal tax rate to our effective income tax rate:

Year Ended December 31,	2020			2019
Statutory rate		21.0	%		21.0	%
State tax provisions, net of federal income tax benefit		0.6			2.7
Tax credits		(0.1	)		6.6
Foreign income taxes at rates other than the statutory rate		10.9			17.7
Valuation allowance		(10.4	)		(6.9	)
Changes in tax liabilities, net		(0.2	)		(0.3	)
Share based compensation		(0.2	)		(1.8	)
Unremitted non-U.S. Earnings		(1.7	)		—
US Tax on non-US income		0.8			(6.7	)
Non taxable income		—			2.4
Impairment of Goodwill		(25.3	)		(34.0	)
Other		(1.9	)		(4.4	)
Effective income tax rate		(6.5	)%		(3.7	)%

Tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:

Year Ended December 31,	2020			2019
(Dollars in thousands)
Deferred income tax assets:
Accrued liabilities	$	3,688		$	4,695
Hedging and foreign currency gains (losses)		3,323			2,386
Deferred compensation		8,473			8,018
Inventory reserves		5,114			4,609
Net loss carryforwards and credits		48,924			38,342
Interest carryforwards		14,972			19,632
Competent authority deferred tax assets and    other foreign timing differences		4,465			3,954
Other		1,714			782
Total before valuation allowance		90,673			82,418
Valuation allowance		(46,490	)		(22,879	)
Net deferred income tax assets		44,183			59,539
Deferred income tax liabilities:
Intangibles, property, plant and equipment and other		(17,959	)		(33,301	)
Unremitted earnings		(4,468	)		—
Deferred income tax liabilities		(22,427	)		(33,301	)
Net deferred income tax assets	$	21,756		$	26,238

The classification of our net deferred tax asset is shown below:

Year Ended December 31,	2020			2019
(Dollars in thousands)
Long-term deferred income tax assets	$	30,860		$	38,607
Long-term deferred income tax liabilities		(9,104	)		(12,369	)
Net deferred tax asset	$	21,756		$	26,238

The increase in the valuation allowance of $23.6 million to reduce the U.S. federal and state deferred tax assets is due to the assessment that the Company is not more likely than not to realize these deferred tax assets.

As of December 31, 2020, we have cumulative tax effected U.S. federal and Germany NOL carryforwards of $22.3 million that carryforward indefinitely and U.S. state NOL carryforwards of $11.5 million that expire in the years 2021 to 2041. Also, we have $17.7 million of tax credit carryforwards, primarily in Poland, which expire in the years 2021 to 2027.

The transition tax substantially eliminated the basis difference on foreign subsidiaries that existed previously for purposes of Accounting Standards Codification topic 740 (“ASC 740”).  However, there are limited other taxes that could continue to apply such as foreign withholding and certain state taxes. Provisions are made for income tax liabilities on the undistributed earnings of non-U.S. subsidiaries.  

We account for our uncertain tax positions in accordance with U.S. GAAP. A reconciliation of the beginning and ending amounts of these tax benefits is as follows:

Year Ended December 31,	2020			2019
(Dollars in thousands)
Beginning balance	$	30,368		$	31,036
Increases (decreases) due to foreign currency translations	$	2,265			(632	)
Increases (decreases) as a result of positions    taken during:
Prior periods		(1,147	)		(36	)
Current period		372			—
Expiration of applicable statutes of limitation		—			—
Ending balance (1)	$	31,858		$	30,368

Our policy regarding interest and penalties related to uncertain tax positions is to record interest and penalties as an element of income tax expense. At the end of 2020 and 2019, the Company had liabilities of $4.7 million and $3.9 million of potential interest and penalties associated with uncertain tax positions.  Included in the unrecognized tax benefits is $4.5 million that, if recognized, would favorably affect our annual effective tax rate. Within the next twelve-month period we expect no decrease in unrecognized tax benefits.

Income tax returns are filed in multiple jurisdictions and are subject to examination by tax authorities in various jurisdictions where the Company operates. The Company has open tax years from 2014 to 2019 with various significant tax jurisdictions, including ongoing tax audits in the U.S. for 2015 to 2018 and Germany for 2017 and 2018.