XML 30 R16.htm IDEA: XBRL DOCUMENT v3.23.1
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of the Company’s income (loss) before provision for income taxes are as follows (in thousands):
Year Ended December 31,
202220212020
U.S.$34,344 $(61,332)$77,778 
Foreign(39,296)211 — 
Income (loss) before provision for income taxes$(4,952)$(61,121)$77,778 

The provision for income taxes charged to operations consists of the following (in thousands):
Year Ended December 31,
202220212020
Current expense (benefit):
Federal$12,826 $(8)$17,248 
State1,630 (668)4,196 
Foreign7,725 60 — 
22,181 (616)21,444 
Deferred expense (benefit):
Federal(6,160)(9,085)(2,799)
State(960)(1,017)60 
Foreign(24,445)— — 
(31,565)(10,102)(2,739)
Total income tax expense (benefit)$(9,384)$(10,718)$18,705 
Significant components of the Company’s deferred tax assets and liabilities were as follows (in thousands):
December 31,
20222021
Deferred tax assets:
Bad debts$234 $32 
Inventories2,780 2,411 
Accrued warranties3,575 1,242 
Accrued compensation637 315 
Net operating loss1,014 1,944 
Equity-based compensation2,240 948 
Lease liabilities4,588 2,661 
Premium on capped call10,792 12,356 
Interest expense carryforward6,750 5,301 
Capitalized research and development expenses1,752 — 
Other2,435 275 
Deferred tax assets36,797 27,485 
Valuation allowance(1,449)(222)
Deferred tax assets, net35,348 27,263 
Deferred tax liabilities:
Property, plant, and equipment(1,592)(1,083)
Intangible assets(85,927)(14,165)
ROU assets(3,969)(2,670)
Deferred tax liabilities(91,488)(17,918)
Deferred tax asset (liability), net$(56,140)$9,345 
A reconciliation of income tax expense computed at the federal statutory rate of 21% to actual income tax expense at the Company’s effective rate is as follows (in thousands):
Year Ended December 31,
202220212020
Income tax rate reconciliation
Income tax expense (benefit) at U.S. statutory rate$(1,040)$(12,835)$16,333 
State income taxes
530 (1,545)3,375 
Officer’s compensation740 435 — 
Equity-based compensation712 1,542 852 
Contingent consideration(947)567 5,553 
Tax credits(421)(620)(79)
Effect of CARES Act— — (6,608)
Non-U.S. income taxed at different rate than U.S. statutory rate (4,274)— — 
Non-U.S. tax incentives(4,183)— — 
Foreign derived intangible income benefit(1,668)— (1,201)
Transaction costs1,628 950 — 
Change in valuation allowance(534)14 — 
Nondeductible expenses10 69 437 
Other63 705 43 
Total income tax expense (benefit)
$(9,384)$(10,718)$18,705 

The Company operates under a non-U.S. tax incentive which reduces the overall effective tax rate of the Company. As of December 31, 2022, the Company had satisfied the conditions enumerated in these agreements. Included in the accompanying Consolidated Financial Statements are tax benefits of $4.2 million for 2022 from the non-U.S. tax incentive.

As of December 31, 2022, the Company has federal income tax net operating loss (“NOL”) carryforwards of approximately $4.8 million that do not expire, state income tax NOL carryforwards of approximately $4.5 million that will expire in future years beginning in 2029, and foreign NOLs are immaterial. As of December 31, 2021, the Company has federal income tax NOL carryforwards of approximately $5.1 million that do not expire, state income tax NOL carryforwards of approximately $9.7 million that will expire in future years beginning in 2029, and foreign NOLs are immaterial.

Realization of deferred tax assets is dependent upon generating sufficient taxable income of the appropriate type and in the appropriate jurisdictions. In assessing the ability to realize a portion of the deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized. It is not more likely than not that deferred tax assets from certain U.S. Federal, state and foreign net operating loss would be realized due to type and location of future earnings and as such the Company has a valuation allowance of $1.4 million and $0.2 million for the years ended years ended December 31, 2022 and 2021. A valuation allowance of $1.8 million was recorded as of the acquisition date of STI for deferred tax assets.
ASC 740 addresses the determination of how tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. In accordance with ASC 740, the Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The Company’s assessments of its tax positions in accordance with ASC 740 did not result in changes that had a material impact on results of operations, financial condition or liquidity. The Company had no unrecognized income tax benefits at either December 31, 2022 or 2021.

The Company files income tax returns in the U.S. federal jurisdiction, in multiple U.S. states, as well as in non-U.S. jurisdictions. Through global expansion and the acquisition of STI, the Company has a significant presence in Spain and Brazil. The Company and its subsidiaries are routinely examined by various U.S. and non-U.S. taxing authorities. The Company is not subject to U.S. federal, state and non-U.S. income tax examinations by tax authorities for years before 2017. There are currently no income tax audits in any material jurisdictions.

The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries' operational activities and future foreign investments. Repatriation of funds could result in an adjustment to the tax liability for foreign withholding taxes, foreign and/or state income taxes and the impact of foreign currency movements. At December 31, 2022, management believed that sufficient liquidity was available in the U.S. The Company will consider repatriating certain funds from its non-U.S. subsidiaries that are not needed to finance local operations; however, these particular repatriation activities have not and are not expected to result in a significant incremental tax liability to the Company.

As of December 31, 2022, the Company has accumulated deficits in undistributable earnings in material non-U.S. jurisdictions. As such, no deferred taxes have been recorded.

The Company does not receive tax basis for payments made related to the Tax Receivable Agreement (“TRA”) payable to the former owner. Refer to Note 15 - Commitments and Contingencies, for detail on the TRA, which was a contingent consideration at the time of the Array acquisition.