Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income TaxesOn March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law in the U.S., providing for an elective five-year carryback of net operating losses (NOLs) generated in taxable years beginning after December 31, 2017 and before January 1, 2021. As a result of this change in law and since the Company incurred net operating losses in 2018, the Company carried back these 2018 losses to prior periods to receive refunds of taxes paid at the higher 35%

U.S. federal tax rate, compared to the current U.S. federal tax rate of 21%, and recognized a non-recurring benefit related to the net operating loss carryback of $7.9 million.

On December 22, 2017, House of Representatives 1 (“H.R. 1”), originally known as the Tax Cuts and Jobs Act (“U.S. Tax Reform”), was enacted and signed into legislation. Under U.S. GAAP, the effects of changes in tax rates and laws are recognized in the period in which the new legislation is enacted and the Company provisionally recognized a one-time net tax benefit totaling $11.6 million for the year ending December 31, 2017. In accordance with SEC Staff Accounting Bulletin No. 118 (SAB 118), the Company adjusted the provisional estimates during the three months ended September 30, 2018. Specifically, the Company increased its estimate of the one-time tax benefit by $1.2 million upon its completion of the earnings and profits calculations of its foreign subsidiaries. Offsetting this benefit, the Company recognized a charge of $1.0 million for deferred tax assets that will not be realized, determined after the release of IRS Notice 2018-68, clarifying deduction limitations for remunerations of covered persons. During the three months ended December 31, 2018, the Company additionally increased its one-time tax benefit by $0.2 million and completed its accounting for the tax effects of the U.S. Tax Reform.

The Company’s income before income taxes consisted of the following:

	Year Ended December 31,
	2020		2019		2018
	(In thousands)
U.S.	$	5,881	$	38,254	$	(20,066)
Non-U.S.	13,708		26,533		34,179
Total pre-tax book income	$	19,589	$	64,787	$	14,113

The Company’s income tax expense based on income before income taxes consisted of the following:

	Year Ended December 31,
	2020		2019		2018
	(In thousands)
Current
U.S. federal	$	(20,305)	$	289	$	(1,462)
U.S. state and local	930		1,527		1,365
Non-U.S.	8,059		7,965		12,292
Total current	$	(11,316)	$	9,781	$	12,195
Deferred
U.S. federal	$	13,350	$	7,636	$	1,349
U.S. state and local	886		2,715		1,816
Non-U.S.	(2,468)		(3,610)		(4,903)
Total deferred	11,768		6,741		(1,738)
Total income tax expense	$	452	$	16,522	$	10,457

Income tax expense differs from amounts computed by applying the statutory tax rate to income before income taxes as follows:

	Year Ended December 31,
	2020		2019		2018
	(In thousands)
Income tax expense at the U.K. statutory tax rate of 19% for the years ended December 31, 2020, 2019, and 2018	$	4,057	$	12,309	$	2,681
Provision to return and deferred tax adjustments	(2,857)		157		1,017
U.S. state tax, net of federal benefit	1,615		3,095		637
Permanent adjustments	107		606		738
Tax rates (less than) in excess of statutory tax rates	(1,164)		1,143		2,247
Impact of finance structure	(1,070)		(4,434)		354
Non-deductible/(non-taxable) transaction costs	1,636		(3,816)		(425)
Goodwill impairment (non-deductible)	—		1,941		—
U.S. Tax Reform (net impact)	—		764		(435)
Tax law changes	(9,665)		—		—
Share-based compensation	1,702		2,223		2,107
Capital gains	—		—		851
Other	(128)		499		48
Subtotal	(5,767)		14,487		9,820
Change in valuation allowance	6,219		2,035		637
Total income tax expense	452		16,522		10,457

The net income tax expense is attributable to a combination of (i) the mix of earnings across jurisdictions, including increased losses incurred in countries where the Company realizes no tax benefit, (ii) the additional tax expense related to share-based compensation, (iii) non-deductible acquisition related costs, (iv) non-recurring tax benefits related to U.K. deferred tax assets resulting from the U.K. tax law change maintaining the current 19% tax rate rather than reducing to 17%, as previously enacted, and (v) non-recurring tax benefits related to U.S. net operating loss carrybacks to prior years taxed at the previous higher tax rate of 35%.

The Company’s net deferred tax assets and liabilities, by segment, consisted of the following:

	Year Ended December 31, 2020
	North America		Europe & Africa		Australia & New Zealand		Corporate		Total
	(In thousands)
Noncurrent deferred tax asset	$	39,685	$	22,813	$	10,980	$	1,537	$	75,015
Valuation allowance	(11,902)		(3,547)		(3,173)		—		(18,622)
Noncurrent deferred tax liability	(78,865)		(3,823)		(7,807)		—		(90,495)
Net noncurrent deferred tax (liability) asset	$	(51,082)	$	15,443	$	—	$	1,537	$	(34,102)

	Year Ended December 31, 2019
	North America		Europe & Africa		Australia & New Zealand		Corporate		Total
	(In thousands)
Noncurrent deferred tax asset	$	38,140	$	16,466	$	11,400	$	1,730	$	67,736
Valuation allowance	(5,970)		(1,427)		(4,046)		—		(11,443)
Noncurrent deferred tax liability	(78,211)		(4,447)		(7,354)		—		(90,012)
Net noncurrent deferred tax (liability) asset	$	(46,041)	$	10,592	$	—	$	1,730	$	(33,719)

The Company’s tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities consisted of the following:

	December 31, 2020		December 31, 2019
	(In thousands)
Noncurrent deferred tax assets
Reserve for receivables	$	1,221	$	625
Accrued liabilities and inventory reserves	2,703		3,231
Net operating loss carryforward	25,615		31,555
Unrealized losses on interest rate swap contracts	12,016		1,338
Share-based compensation expense	3,808		3,044
Asset retirement obligations	819		1,101
Tangible and intangible assets	21,561		18,491
Deferred revenue	4,280		4,294
Other	2,992		4,057
Subtotal	75,015		67,736
Valuation allowance	(18,622)		(11,443)
Noncurrent deferred tax assets	$	56,393	$	56,293
Noncurrent deferred tax liabilities
Tangible and intangible assets	$	(87,539)	$	(88,017)
Asset retirement obligations	(30)		(29)
Unrealized gain on interest rate swap contracts	—		—
Other	(2,926)		(1,966)
Noncurrent deferred tax liabilities	$	(90,495)	$	(90,012)
Net deferred tax liability	$	(34,102)	$	(33,719)

The Company assesses the need for any deferred tax asset valuation allowances at the end of each reporting period. The determination of whether a valuation allowance for deferred tax assets is needed is subject to considerable judgment and requires an evaluation of all available positive and negative evidence. Based on the assessment at December 31, 2020, and the weight of all evidence, the Company concluded that maintaining valuation allowances on deferred tax assets in Australia, Mexico, Canada, and Spain is appropriate, as the Company currently believes that it is more likely than not that the related deferred tax assets will not be realized.

The deferred tax expenses and benefits associated with the Company’s net unrealized gains and losses on derivative instruments and foreign currency translation adjustments have been recorded in the Accumulated other comprehensive loss, net line in the accompanying Consolidated Balance Sheets.

As of December 31, 2020, the Company had approximately $13.5 million in U.S. federal net operating loss carryforwards, of which $0.4 million expires annually through 2036, approximately $41.7 million in Canadian net operating loss carryforwards that will begin expiring in 2031, approximately $14.6 million in Australian net operating loss carryforwards not subject to expiration, approximately $13.9 million in Spanish net operating loss carryforwards not subject to expiration, and approximately $9.5 million in net operating loss carryforwards in Mexico that are subject to expiration based on a 10 year loss carryforward limitation. The deferred tax benefits associated with such carryforwards in Canada, Australia, Spain, and Mexico, to the extent they are not offset by deferred tax liabilities, have been fully reserved for through a valuation allowance.

The Company currently believes that the unremitted earnings of certain of its subsidiaries will be reinvested for an indefinite period of time. Accordingly, no deferred taxes have been provided for the differences between the Company’s book basis and underlying tax basis in these subsidiaries or on the foreign currency translation adjustment amounts.

The Company files U.S., state, and foreign income tax returns in jurisdictions with varying statutes of limitations. With few exceptions, the Company is not subject to income tax examination by tax authorities for years before 2015. The Company has recorded an uncertain tax benefit of $2.4 million, of which $1.5 million was for net operating losses generated in prior years with an associated valuation allowance, and $0.4 million was for a deferred tax asset for the related U.S. federal tax benefit. A net amount of $0.5 million of this uncertain tax benefit was recorded to tax expense in 2019.