Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Components of income (loss) before income taxes—Domestic and foreign components of income before income taxes were as follows:

	Years Ended December 31,
(in thousands)	2021		2020		2019
Domestic	$	(2,099)	$	(811,995)	$	51,073
Foreign	154,784		49,246		8,113
Income (loss) before income taxes	$	152,685	$	(762,749)	$	59,186

Provision for (benefit from) income taxes—The provision for (benefit from) income taxes consisted of:

	Years Ended December 31,
(in thousands)	2021		2020		2019
Current:
U.S. federal	$	14,895	$	1,578	$	15,327
State and local	4,867		1,579		1,196
Foreign	40,149		20,264		4,264
Total current	59,911		23,421		20,787
Deferred:
U.S. federal	(24,962)		(32,454)		(12,815)
State and local	(862)		(6,738)		(1,156)
Foreign	4,358		(4,625)		(590)
Total deferred	(21,466)		(43,817)		(14,561)
Provision for (benefit from) income taxes	$	38,445	$	(20,396)	$	6,226

Effective income tax rate reconciliation—The effective income tax rate was different from the statutory U.S. federal income tax rate due to the following:

	Years Ended December 31,
	2021		2020		2019
Statutory U.S. federal income tax rate	21.0	%	21.0	%	21.0	%
Net difference resulting from:
State and local taxes, net of federal income tax benefit	2.1		0.5		3.2
Foreign withholding tax	8.5		(1.2)		1.8
Foreign derived intangible income	(0.7)		—		(0.8)
Foreign operations tax effect	(1.3)		(0.4)		—
Research and experimentation tax credits	(2.5)		0.4		(1.2)
Foreign tax credit	(9.9)		—		(8.0)
Nondeductible expenses	1.6		(0.6)		2.5
Branch income	7.6		(0.7)		0.6
Tax return to accrual adjustments	(7.3)		0.1		(9.4)
State deferred taxes	—		0.2		(7.9)
Goodwill impairment	—		(15.5)		—
Foreign inclusions (including global intangible low-taxed income)	6.6		(0.7)		—
Transaction costs	—		(0.6)		—
Change in valuation allowance	1.8		(0.5)		9.0
Stock compensation	(3.7)		—		—
Nondeductible officer compensation	2.1		—		—
Other	(0.7)		0.7		(0.3)
Effective income tax rate	25.2	%	2.7	%	10.5	%

Deferred tax assets and liabilities—Significant components of deferred tax assets and liabilities were as follows:

	December 31,
(in thousands)	2021		2020
Deferred tax assets attributable to:
Accrued compensation	$	12,395	$	13,437
Accrued expenses	8,020		3,950
Inventories	830		—
Net operating loss and other carryforwards	32,420		25,879
Accounts receivable	18,301		19,930
Lease liability	16,573		17,180
Long-term liabilities	—		1,470
Other assets	7,687		2,110
Deferred tax assets	96,226		83,956
Valuation allowance	(38,716)		(26,786)
Deferred tax assets, net of valuation allowance	$	57,510	$	57,170
Deferred tax liabilities attributable to:
Inventories	$	—	$	(2,124)
Intangible assets, including goodwill	(70,799)		(80,634)
Property, plant and equipment	(69,971)		(73,507)
Foreign withholding taxes	(20,239)		(15,673)
Lease asset	(18,346)		(18,293)
Investment in subsidiary	(2,014)		(10,189)
Long-term liabilities	(1,100)		—
Deferred tax liabilities	(182,469)		(200,420)
Net deferred tax liabilities	$	(124,959)	$	(143,250)
Classified as follows in the consolidated balance sheets:
Other non-current assets	$	13,012	$	13,033
Deferred income taxes	(137,971)		(156,283)
Net deferred tax liabilities	$	(124,959)	$	(143,250)

Effective Tax Rate. Our effective tax rate was 25.2% for 2021 compared to 2.7% for 2020. The effective tax rate for 2021 was primarily impacted by the effects of foreign earnings and withholding taxes.

Net operating loss carryforwards. As of December 31, 2021, our deferred tax asset balance included non-U.S. net operating loss carryforwards of $18.7 million. This entire balance is available to be carried forward; non-U.S. carryforwards will expire during the years 2025 through 2041.

Foreign tax credit carryforwards. As of December 31, 2021, our deferred tax asset balance included U.S. foreign tax credit carryforwards of $14.3 million. This entire balance is available to be carried forward and will expire during 2029.

Valuation allowance. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. With respect to foreign net operating losses, a significant piece of objective negative evidence evaluated was the cumulative loss incurred in various international jurisdictions over the three-year period ended December 31, 2021. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. In addition, we analyzed our foreign income classification and determined we would not generate sufficient general limitation income to utilize our general limitation foreign tax credits. Based on this evaluation, as of December 31, 2021, we recorded a valuation allowance of $28.5 million relating to net operating losses and $10.2 million relating to foreign tax credits to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased if objective negative evidence in the form of cumulative losses are no longer present and additional weight is given to subjective evidence such as our projections of future growth. In addition, if we increase our general limitation income, we could utilize and thus recognize additional foreign tax credit deferred tax assets.

Unrecognized tax benefits. We file federal, state, and local tax returns in the United States as well as foreign tax returns. We are routinely audited by the tax authorities in these jurisdictions, and a number of audits are currently underway. We believe all income tax uncertainties have been properly accounted for and, accordingly, the Company has no unrecognized tax benefits as of December 31, 2021.

The Company accounts for uncertain tax positions in accordance with guidance in ASC 740, “Income Taxes (Topic 740)”, which prescribes the minimum recognition threshold a tax position taken or expected to be taken in a tax return is required to meet before being recognized in the financial statements. The Company does not have any material uncertain tax positions, individually or in totality.

The Company is subject to U.S. federal income tax as well as income tax in multiple state jurisdictions. The earliest period the Company is subject to examination of federal income tax returns by the Internal Revenue Service is 2018. The state income tax returns and other state tax filings of the Company are subject to examination by the state taxing authorities for various periods, generally up to four years after they are filed.

Undistributed Earnings. As of December 31, 2021, the Company has $20.2 million of deferred tax liabilities primarily associated with withholding taxes on undistributed earnings generated by foreign subsidiaries. The Company continues to assert permanent reinvestment of the remaining undistributed earnings for which deferred taxes have not been provided for as of December 31, 2021. If there are policy changes, the Company would record the applicable taxes in the period of change. No deferred taxes have been provided for withholding taxes and other taxes on the remaining earnings as of December 31, 2021 as computation of the potential deferred tax liability associated with these undistributed earnings and any other basis differences is not practicable.

Tax Holidays. The Company has a tax incentive awarded by the Singapore Economic Development Board. This incentive provides 0% tax rate on manufacturing profits generated at the Company’s facility located on Jurong Island which expires in December 2024.