Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company is subject to income tax in multiple jurisdictions and the use of estimates is required to determine the provision for income taxes. For the three months ended September 30, 2023 and 2022, the Company recorded an income tax provision of $2.8 million and $2.1 million, respectively. For the nine months ended September 30, 2023 and 2022, the Company recorded an income tax provision of $7.8 million and $7.2 million, respectively. The income tax provision is based on the estimated annual effective tax rate for the year applied to pre-tax income. The effective income tax rate for the three months ended September 30, 2023 was 25.9 percent compared to 34.5 percent in the same period of the prior year. The effective tax rate decreased by 8.6 percent for the three months ended September 30, 2023 when compared to the same period in 2022, primarily due to a decrease in losses in jurisdictions that are not eligible for tax benefits due to valuation allowances. The effective income tax rate for the nine months ended September 30, 2023 was 43.2 percent compared to 38.4 percent in the same period of the prior year. The effective tax rate increased by 4.8 percent for the nine months ended September 30, 2023 when compared to the same period in 2022, primarily due to the tax impact of the foreign currency translation loss from the substantial completion on the closure of our Japan business.

The effective income tax rate for the three and nine months ended September 30, 2023 differs from the U.S. federal statutory rate of 21.0 percent due to various factors, including operating in multiple state and foreign jurisdictions and tax credits for which the Company qualifies.

The Company had unrecognized tax benefits totaling $3.9 million as of September 30, 2023 and $3.2 million as of December 31, 2022, respectively, that if recognized would result in a reduction of the Company’s effective tax rate. The liabilities are classified as other long-term liabilities in the accompanying consolidated balance sheets. The Company recognizes interest and penalties related to income tax matters in income tax expense and reports the liability in current or long-term income taxes payable as appropriate.