Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

For financial reporting purposes, income before income taxes includes the following components:

	Years Ended December 31,
(in millions)	2021		2020		2019
United States	$	14.1	$	42.1	$	26.7
Foreign	2.4		3.6		(1.5)
Income before income taxes	$	16.5	$	45.7	$	25.2

The (benefit) provision for income taxes consists of the following:

	Years Ended December 31,
(in millions)	2021		2020		2019
Current (benefit) provision:
Federal	$	(0.2)	$	(14.0)	$	(0.5)
State	(0.6)		2.4		0.8
Foreign	0.7		1.8		1.0
Total current (benefit) provision	(0.1)		(9.8)		1.3
Deferred (benefit) provision:
Federal	(0.1)		12.3		2.8
State	1.1		(1.4)		(1.0)
Foreign	(2.3)		(2.3)		(0.1)
Total deferred (benefit) provision	(1.3)		8.6		1.7
Total (benefit) provision:
Federal	(0.3)		(1.7)		2.3
State	0.5		1.0		(0.3)
Foreign	(1.6)		(0.5)		0.9
Total income tax (benefit) provision	$	(1.4)	$	(1.2)	$	3.0

The Company's "Income tax (benefit) provision" is computed based on the domestic and foreign federal statutory rates and the average state statutory rates, net of related federal benefit.

The (benefit) provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before income taxes. A reconciliation of the (benefit) provision for income taxes at the statutory federal income tax rate to the amount provided is as follows:

	Years Ended December 31,
(in millions)	2021		2020		2019
Tax expense at the statutory federal income tax rate	$	3.5	$	9.6	$	5.3
State income tax, net of federal income tax	1.4		0.3		(2.3)
Research and development tax credits	(4.1)		(4.3)		(6.7)
FIN 48 impact	1.8		4.0		3.2
Liquidation of subsidiary	(0.8)		—		(0.9)
Change in foreign subsidiary net operating loss carryforward	4.4		(0.3)		(1.4)
Valuation allowance impact	(8.1)		(1.0)		5.8
Changes in tax rates	0.7		0.3		0.1
Effects of Cares Act - 2018 NOL carryback	—		(9.5)		—
Share-based compensation	0.4		0.3		1.2
Other items	(0.6)		(0.6)		(1.3)
Total income tax (benefit) provision	$	(1.4)	$	(1.2)	$	3.0

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company's deferred tax assets and liabilities are as follows:

	December 31,
(in millions)	2021		2020
Deferred tax assets:
Inventory reserves	$	3.7	$	3.2
Warranty reserves	2.0		2.0
Credit loss reserves	0.5		0.3
State tax loss carryforwards	11.9		11.6
Accrued vacation	1.4		1.4
Deferred compensation	1.4		1.5
Share-based compensation	2.0		1.5
Goodwill	2.0		2.1
Outside basis difference	—		4.7
Foreign net operating loss	4.3		9.5
Lease obligation	0.4		0.9
Employee & Iinsurance accruals	0.8		0.7
Domestic credit carryforwards	1.4		1.6
Deferred revenue	1.3		1.2
Deferred payroll tax - CARES Act	1.1		2.4
Pension and post-employment benefits	—		1.0
Valuation allowances	(6.0)		(14.1)
Other	1.6		0.8
Total deferred tax assets	29.8		32.3
Deferred tax liabilities:
Property and equipment	13.0		14.7
Intangibles	1.1		0.9
Right-of-use assets	0.5		0.9
Pension	0.6		1.3
Total deferred tax liabilities	15.2		17.8
Total net deferred assets	$	14.6	$	14.5

As of December 31, 2021, the Company has gross state NOL carryforwards of $235.4 million and has gross foreign NOL carryforwards of approximately $13.0 million, which will be available to offset future taxable income. If not used, these carryforwards will expire between 2022 and 2033. The Company does not have a federal net operating loss carryforward.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security ("CARES") Act was passed which modified the NOL carryback provisions allowing the Company to carryback its 2018 NOL to prior years. The tax provision for the year ended December 31, 2020 includes a $9.5 million tax benefit related to the NOL carryback which occurred due to a change in rates from 35% to 21%.

A significant portion of the valuation allowance for deferred tax assets relates to the future utilization of state and foreign net operating loss and state tax credit carryforwards. Future utilization of these net operating loss and state tax credit carryforwards is evaluated by the Company on a periodic basis, and the valuation allowance is adjusted accordingly. In 2021, the valuation allowance on these carryforwards decreased by $8.1 million mainly due to the release of the $3.4 million valuation allowance as the NOLs are expected to be fully utilized by the Company's Brazilian subsidiary and the release of the $3.8 million valuation allowance associated with AMM whose dissolution was completed during 2021. The remaining change in valuation allowances is due to the unrealizable portion of certain entities’ state and foreign net operating loss carryforwards and certain other deferred tax assets in foreign jurisdictions.

The following table represents a rollforward of the deferred tax asset valuation allowance for the years ended December 31, 2021, 2020 and 2019:

	Years Ended December 31,
(in millions)	2021		2020		2019
Allowance balance, beginning of year	$	14.1	$	14.6	$	8.5
Provision	0.6		1.5		5.8
Reversals	(8.1)		(1.5)		—
Other	(0.6)		(0.5)		0.3
Allowance balance, end of year	$	6.0	$	14.1	$	14.6

Undistributed foreign earnings are considered to be indefinitely reinvested outside the U.S. as of December 31, 2021. Because those earnings are considered to be indefinitely reinvested, no deferred income taxes have been provided thereon. If the Company were to make a distribution of any portion of those earnings in the form of dividends or otherwise, any such amounts would be subject to withholding taxes payable to various foreign jurisdictions; however, the amounts would not be subject to any additional U.S. income tax. As of December 31, 2021, the cumulative amount of undistributed U.S. GAAP earnings for the Company's foreign subsidiaries was $52.2 million.

The Company files income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by authorities for years prior to 2014. With few exceptions, the Company is no longer subject to state and local or non-U.S. income tax examinations by authorities for years prior to 2017.

The Company has a liability for unrecognized tax benefits of $10.8 million and $9.7 million (excluding accrued interest and penalties) as of December 31, 2021 and 2020, respectively. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in tax expense. The Company did not recognize any tax benefits for penalties and interest related to amounts that were settled for less than previously accrued in 2021 or 2020. The net total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate is $11.9 million and $10.5 million at December 31, 2021 and 2020, respectively. The Company does not expect a significant increase or decrease to the total amount of unrecognized tax benefits within the next twelve months.

A reconciliation of the beginning and ending unrecognized tax benefits excluding interest and penalties is as follows:

	Years Ended December 31,
(in millions)	2021		2020		2019
Balance, beginning of year	$	9.7	$	5.7	$	2.1
Additions for tax positions taken in current year	1.0		0.5		3.0
Additions for tax positions taken in prior period	0.8		3.5		0.7
Decreases related to sustained tax positions	(0.7)		—		(0.1)
Balance, end of year	$	10.8	$	9.7	$	5.7

The tax positions in the December 31, 2021 balance of unrecognized tax benefits are expected to reverse through income in future years.