Note 10 - Taxes on Income

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

10. TAXES ON INCOME

The Company’s effective tax rate in the quarter and nine month period ended September 30, 2019 was a benefit of 1.8% on pre-tax income and an expense of 143.3% on a pre-tax loss, respectively.  The effective rate for the third quarter of 2019 was positively impacted by a $1.7 million return-to-provision true-up primarily related to foreign tax credits applied to the mandatory deemed repatriation from the Tax Cuts and Jobs Act (“TCJA”).  This adjustment provided a 27.0% benefit to the effective tax rate during the third quarter of 2019.  Partially offsetting this were negative impacts from: (i) significant pre-tax charges related to currency translation adjustments, which were not deductible for tax purposes; and (ii) valuation allowances recorded on certain net operating losses in foreign jurisdictions for which no income tax benefits are expected to be recognized.  The effective rate for the nine-month period was negatively impacted by: (i) significant pre-tax charges primarily related to impairments of held for sale assets and currency translation adjustments, which were not deductible for tax purposes; (ii) a $2.1 million charge for foreign withholding taxes on the repatriation of foreign earnings; and (iii) valuation allowances recorded on certain net operating losses in foreign jurisdictions for which no income tax benefits are expected to be recognized.  Partially offsetting the negative factors was the $1.7 million of return-to-provision true-ups noted in the quarterly discussion above.

The Company’s effective tax rate in the quarter and nine-month period ended September 30, 2018 was a benefit of 1,275% on a pre-tax loss and an expense of 22.9% on pre-tax income, respectively.  These effective rates were positively impacted by a $1.5 million adjustment to the mandatory deemed repatriation tax on foreign earnings and a $1.5 million net tax benefit related to employee share-based awards that vested during the first quarter of 2018.  In total, these two adjustments had a 39.3% benefit to the effective tax rate during the first nine months of 2018.  Offsetting these positive impacts were valuation allowances recorded on certain net operating losses in foreign jurisdictions for which no income tax benefit can be recognized.