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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
 
The domestic and foreign components of income (loss) before income taxes for our operations consist of the following for the years ended December 31:
 202420232022
Domestic$(161,340)$16,181 $(302)
Foreign20,350 33,698 23,511 
Total (loss) income before income taxes$(140,990)$49,879 $23,209 
 
The components of the provision (benefit) for income taxes consist of the following for the years ended December 31:
 
 202420232022
Current – Federal$484 $3,522 $2,288 
Current – State571 733 927 
Current – Foreign5,696 9,895 6,760 
Current income tax expense6,751 14,150 9,975 
Deferred – Federal3,230 87 (1,024)
Deferred – State877 587 (175)
Deferred – Foreign112 296 600 
Deferred income tax expense (benefit)4,219 970 (599)
Income tax provision$10,970 $15,120 $9,376 
 
Our deferred tax assets and liabilities consist of the following at December 31:
 
 20242023
Deferred tax assets:  
Net operating loss carryforward$5,589 $6,168 
Inventory differences1,127 1,043 
Equity compensation1,231 1,421 
Investment in joint venture20,254 677 
Restructuring206 104 
Purchased intangible assets and goodwill243 389 
Accrued employee compensation and benefits3,881 4,362 
Lease liabilities3,204 2,514 
Interest expense2,249 737 
Research and development costs1,239 752 
Other, net1,603 388 
Gross deferred tax assets40,826 18,555 
Less valuation allowances(32,121)(6,167)
Total deferred tax assets8,705 12,388 
Deferred tax liabilities:
Depreciation and amortization(4,481)(5,278)
Right-of-use assets(2,813)(2,276)
Other, net(892)(52)
Total deferred tax liabilities(8,186)(7,606)
Net deferred tax assets$519 $4,782 

As of December 31, 2024, we had loss carryforwards for tax purposes totaling approximately $39,238, comprised of $33,267 foreign and $5,971 domestic state loss carryforwards, which will be available to offset future taxable income in certain jurisdictions. The significant majority of foreign losses can be carried forward indefinitely, while all other losses generally have carryforward periods of 5 to 20 years, depending on jurisdiction. We have analyzed the net operating losses and established valuation allowances on those where we have determined the realization is not more likely than not to occur.    

We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use existing deferred tax assets. Additionally, a three-year cumulative loss at a Consolidated Financial Statement level may be viewed as negative evidence impacting a jurisdiction that by itself is not in a three-year cumulative loss position. As of
December 31, 2024, we were in a three-year cumulative loss position at the consolidated financial statement level, driven by losses in the U.S. primarily related to the impairment of Arcadia Products’ goodwill in the third quarter of 2024. Accordingly, during the year ended December 31, 2024, we evaluated the impact on all jurisdictions and have recorded a valuation allowance against the corresponding net deferred tax assets in the U.S. The Company will continue to monitor the realizability of deferred tax assets and the need for valuation allowances and will record adjustments in the periods in which facts support such changes. Changes in our valuation allowance in 2023 and 2022 are primarily attributable to changes in currency revaluation and movements in the underlying deferred tax assets.

A reconciliation of our income tax provision computed by applying the Federal statutory income tax rate of 21% to income (loss) before income taxes is as follows for the years ended December 31:
 202420232022
Statutory U.S. federal income tax$(29,608)$10,475 $4,874 
Foreign rate differential2,086 3,562 2,868 
Permanent items566 975 980 
U.S. state income tax, net of federal benefit(1,665)1,275 569 
(Income) loss attributable to noncontrolling interest12,072 (1,793)(333)
Equity compensation413 1,080 202 
Return to provision adjustments195 (247)134 
Deemed repatriation of foreign earnings463 90 64 
Other166 2 (14)
Change in valuation allowances26,282 (299)32 
Income tax provision$10,970 $15,120 $9,376 

DMC files income tax returns in the U.S. federal jurisdiction, as well as various U.S. state and foreign jurisdictions. In 2024, tax audits in Germany of both our NobelClad and DynaEnergetics subsidiaries commenced for the years 2019 through 2021. Our tax provisions reflect our best estimate of state, local, federal, and foreign taxes. While the audits are not unexpected, the outcome cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with our expectations, the Company could be required to adjust its provisions for income taxes in the period such resolution occurs.

DMC’s U.S. federal tax returns are open for examination for the tax years 2018 and 2021 onward. Most of DMC’s state tax returns remain open to examination for the tax years 2020 onward. DMC’s foreign tax returns generally remain open to examination for the tax years 2020 onward, depending on jurisdiction.
 
At December 31, 2024 and 2023, the balance of unrecognized tax benefits was $5,240 and $5,017, respectively. Included in the balance of unrecognized tax benefits as of December 31, 2024 are $4,483 of tax benefits that, if recognized, would affect the effective tax rate. We recognize interest and penalties related to uncertain tax positions in operating expense. As of December 31, 2024 and 2023, our accrual for interest and penalties related to uncertain tax positions were $81 and $0, respectively.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
20242023
Unrecognized tax benefits, beginning balance$5,017 $2,106 
Additions based on tax positions related to the current year558 2,841 
Additions for tax positions of prior years— 70 
Reductions for tax positions of prior years(335)— 
Settlements— — 
Unrecognized tax benefits, ending balance$5,240 $5,017 
The Tax Cuts and Jobs Act (“TCJA”), enacted in December 2017, provides that foreign earnings generally can be repatriated to the U.S. without federal tax consequence; however, if any such earnings were ultimately distributed to the U.S. in the form of dividends or otherwise, or if the shares of our international subsidiaries were sold or transferred, we could be subject to additional U.S. federal and state income taxes, as well as foreign withholding taxes. We continually reassess the assertion that cumulative earnings by our foreign subsidiaries are indefinitely reinvested. The simultaneous downturns in two of our businesses in 2024 has led to the determination that we may need to access previously reinvested earnings of our international subsidiaries. As such, in the fourth quarter of 2024, we recorded a deferred tax liability of $168, representing potential taxes that could result from the distribution of foreign earnings to the U.S. parent.