Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The following table sets forth the components of the provision for income taxes:

			Year Ended December 31, 2022
	Successor				Predecessor
	Year Ended December 31, 2023		July 25, 2022 through December 31, 2022		January 1, 2022 through July 24, 2022		Year Ended December 31, 2021
Current:
Federal	$	63,036	$	14,096	$	148,371	$	219,379
State	9,692		3,307		38,814		64,509
Foreign	17,634		4,480		5,315		11,590
Total current	90,362		21,883		192,500		295,478
Deferred:
Federal	(94,580)		(31,529)		(23,867)		(43,980)
State	(33,605)		(5,632)		(4,637)		(18,363)
Foreign	(5,567)		205		1,818		2,833
Total deferred	(133,752)		(36,956)		(26,686)		(59,510)
Total income taxes	$	(43,390)	$	(15,073)	$	165,814	$	235,968

The following table sets forth a reconciliation of income tax computed at the U.S. federal statutory tax rate to the effective income tax rate:

			Year Ended December 31, 2022
	Successor				Predecessor
	Year Ended December 31, 2023		July 25, 2022 through December 31, 2022		January 1, 2022 through July 24, 2022		Year Ended December 31, 2021
Federal income tax statutory rate	21.0	%	21.0	%	21.0	%	21.0	%
State income taxes, net of federal income tax	6.1	%	3.9	%	4.0	%	3.8	%
Non-deductible expenses	0.7	%	(1.1)	%	0.6	%	0.2	%
Foreign tax and other credits	2.3	%	8.9	%	(0.2)	%	(1.6)	%
Section 1245 recapture	(2.1)	%	—	%	—	%	—	%
Uncertain tax positions	1.3	%	—	%	0.1	%	0.6	%
Compensation related expenses	(4.2)	%	(3.5)	%	0.1	%	0.3	%
Global intangible low-taxed income	—	%	(8.7)	%	—	%	0.9	%
State rate differential(1)	10.9	%	—	%	—	%	—	%
Foreign rate differential	(2.2)	%	(1.4)	%	0.2	%	0.4	%
Other	2.7	%	0.1	%	(0.3)	%	0.6	%
Effective tax rate	36.5	%	19.2	%	25.5	%	26.2	%

(1)Related to the Merger transaction and internal restructuring.

The net deferred income tax liability consists of the following:

	Successor
	December 31, 2023		December 31, 2022
Deferred tax assets:
Inventory obsolescence	$	9,215	$	9,678
Allowance for credit losses	5,170		3,341
Accrued and deferred compensation	13,090		20,942
Accrued insurance liability	12,124		9,268
Net operating loss and tax credit carryover	15,102		27,211
Defined benefit plans	2,232		2,221
Leases	82,929		84,144
Section 163(j) interest	46,274		19,371
Section 174 costs	20,942		7,219
Warranty liabilities	39,860		42,843
Other	28,928		28,903
Total deferred income tax assets	275,866		255,141
Valuation allowance	(1,578)		(3,158)
Net deferred income tax assets	274,288		251,983
Deferred income tax liabilities:
Intangible assets	(491,948)		(573,826)
Property-related items	(124,826)		(90,042)
Stock basis	(15,197)		(12,680)
Leases	(87,964)		(84,203)
Debt	(82,866)		(103,671)
Other	(24,672)		(38,612)
Total deferred income tax liabilities	(827,473)		(903,034)
Total deferred income tax liability, net	$	(553,185)	$	(651,051)

The Company carries out its business operations mainly through legal entities in the U.S., Canada and Mexico where we are subject to U.S., state and foreign tax laws. We are subject to income tax audits in multiple jurisdictions.

As of December 31, 2023, the $15.1 million net operating loss carryforward included $11.6 million for U.S federal losses, $2.7 million for U.S. state losses, and $0.8 million for foreign losses. Federal and foreign net operating losses will begin to expire in 2029, if unused, and state operating losses began to expire in 2023, if unused. There are limitations on the utilization of certain net operating losses.

Valuation allowance

The following table sets forth the changes in the valuation allowance on deferred taxes:

			Year Ended December 31, 2022
	Successor				Predecessor
	Year Ended December 31, 2023		July 25, 2022 through December 31, 2022		January 1, 2022 through July 24, 2022		Year Ended December 31, 2021
Beginning balance(1)	$	3,158	$	3,006	$	15,634	$	11,996
Additions (reductions)	(1,580)		152		(3,004)		3,638
Ending balance	$	1,578	$	3,158	$	12,630	$	15,634

(1)    In connection with the Merger, the beginning balance for the Successor period reflects acquisition-related adjustments of $9.6 million.

Uncertain tax positions

The following table sets forth the changes in unrecognized tax benefits (excluding interest and penalties):

			Year Ended December 31, 2022
	Successor				Predecessor
	Year Ended December 31, 2023		July 25, 2022 through December 31, 2022		January 1, 2022 through July 24, 2022		Year Ended December 31, 2021
Beginning balance	$	14,756	$	14,928	$	14,845	$	9,403
Additions based on tax positions related to current year	245		232		—		6,037
Additions (reductions) for tax positions of prior years	(52)		5		83		15
Reductions resulting from expiration of statute of limitations	(2,799)		(409)		—		(610)
Ending balance	$	12,150	$	14,756	$	14,928	$	14,845

Despite the Company’s expectation that its tax return positions are consistent with applicable tax laws, the Company understands that certain positions could be challenged by taxing authorities. The Company’s tax liability reflect the difference between the tax benefit claimed on tax returns and the amount recognized in the consolidated financial statements. These allowances have been established based on management’s assessment as to potential exposure attributable to permanent differences and interest and penalties applicable to both permanent and temporary differences. The tax allowances are reviewed periodically and adjusted in light of changing facts and circumstances, such as progress of tax audits, lapse of applicable statutes of limitations and changes in tax law. The Company is currently under examination by various taxing authorities.

As of December 31, 2023, the reserve was $16.8 million, which includes interest and penalties of $4.7 million and is recorded in other long-term liabilities in the accompanying Consolidated Balance Sheets. Of this amount, $12.2 million, if recognized would have an impact on the Company's effective tax rate. Interest and penalties were $1.4 million for 2023, $0.2 million for the period from July 25, 2022 through December 31, 2022, $0.6 million for the period from January 1, 2022 through July 24, 2022, $0.2 million for 2021. The Company has elected to treat interest and penalties on unrecognized tax benefits as income tax expense in its Consolidated Statement of (Loss) Income.

The Company anticipates that approximately $10.7 million of unrecognized tax benefits will be reversed during the next twelve months due to lapsing statute of limitations.