Income Taxes:

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

INCOME TAXES

Income from continuing operations before taxes consisted of the following (in thousands): 

	Year Ended December 31,
	2023		2022		2021
United States	$	(136,980)	$	(135,646)	$	81,484
Foreign	58,681		21,237		41,702
	$	(78,299)	$	(114,409)	$	123,186

The provision (benefit) for income taxes consisted of the following (in thousands):

	Year Ended December 31,
	2023		2022		2021
Current:
Federal	$	(8,235)	$	4,128	$	20,646
State	5,035		3,799		3,444
Foreign	26,035		12,924		7,236
	$	22,835	$	20,851	$	31,326
Deferred:
Federal	$	(43,042)	$	(42,012)	$	(8,154)
State	(14,657)		(11,239)		(1,815)
Foreign	(13,780)		(7,723)		(1,306)
	(71,479)		(60,974)		(11,275)
	$	(48,644)	$	(40,123)	$	20,051

We have accrued for tax contingencies for potential tax assessments, and in 2023 we recognized a $24.5 million net increase, most of which related to various federal, state and foreign tax reserves.

A reconciliation of the provision for income taxes at the statutory rate to our effective tax rate is as follows (dollars in thousands):

	Year Ended December 31,
	2023				2022				2021
	Amount		Percent		Amount		Percent		Amount		Percent
Federal tax at the expected statutory rate	$	(16,443)	21.0	%	$	(24,026)	21.0	%	$	25,869	21.0	%
State income tax, net of federal effect	(6,057)		7.7	%	(5,050)		4.4	%	2,907		2.4	%
Tax credits	(9,824)		12.5	%	(3,636)		3.2	%	(2,443)		(2.0)	%
Global intangible low-taxed income	(2,658)		3.4	%	2,303		(2.0)	%	711		0.6	%
Foreign income tax differential	(2,506)		3.2	%	(2,943)		2.5	%	(2,983)		(2.4)	%
Stock-based compensation	(289)		0.4	%	(3,721)		3.2	%	(4,263)		(3.5)	%
Foreign-derived intangible income	(3,299)		4.2	%	(2,269)		2.0	%	(3,775)		(3.1)	%
Transaction cost	—		—	%	2,299		(2.0)	%	—		—	%
Contingent consideration	(3,407)		4.4	%	(6,830)		6.0	%	(29)		—	%
Section 162(m)	3,268		(4.2)	%	3,942		(3.4)	%	1,812		1.5	%
Tax reserve releases	(6,884)		8.8	%	(1,834)		1.6	%	—		—	%
Other	(545)		0.7	%	1,642		(1.4)	%	2,245		1.8	%
	$	(48,644)	62.1	%	$	(40,123)	35.1	%	$	20,051	16.3	%

Tax credits in 2023, 2022 and 2021 consist principally of research and developmental tax credits. 

The components of our deferred income tax assets (liabilities) are as follows (in thousands):

	As of December 31,
	2023		2022
Deferred tax asset:
Accruals/other	$	30,190	$	17,351
Acquired future tax deductions	10,877		14,186
Stock-based compensation	6,987		6,240
Foreign currency translation adjustments	—		—
Tax credits	15,095		12,906
Inventory reserves	25,592		25,100
Warranty reserve	13,788		13,241
Section 163(j) - interest expense limitation	25,467		9,166
Chargebacks, discounts, customer concessions	39,077		39,508
Capitalized research and development	43,313		16,587
Valuation allowance	(8,452)		(11,166)
	$	201,934	$	143,119
Deferred tax liability:
State income taxes	$	4,465	$	1,816
Depreciation and amortization	212,429		226,274
Section 481(a) adjustment - change in accounting method	—		—
Foreign currency translation and derivative instrument adjustments	3,630		9,581
	$	220,524	$	237,671
Deferred tax (liability) asset, net	$	(18,590)	$	(94,552)

Tax Holidays and Carryforwards

Net operating loss ("NOL") carryforwards consist of: (a) federal NOL carryforwards of $1.4 million which will expire at various dates from 2031 to indefinite carryforward periods, (b) state NOL carryforwards of $4.1 million which will expire at

various dates from 2026 to indefinite carryforward periods and (c) foreign NOL carryforwards of $32.6 million which will expire at various dates from 2024 to indefinite carryforward periods. We believe that it is more likely than not that the benefit from certain foreign NOL carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance of $9.0 million on the $9.5 million deferred tax assets related to these foreign NOL carryforwards. Under Section 382 of the Internal Revenue Code, certain ownership changes limit the utilization of the NOL carryforwards, and the amount of federal NOL carryforwards recorded is the net federal benefit available.

Other carryforwards include state research and development (“R&D”) tax credit carryforwards of $20.4 million, which have an indefinite carryforward period.

A substantial portion of our manufacturing operations in Costa Rica operate under various tax holiday and tax incentive programs due to expire in whole or in part in 2029. Certain of the holidays may be extended if specific conditions are met. The net impact of these tax holiday and tax incentives was an increase to our net earnings by $8.0 million or $0.33 per diluted share in 2023 and by $8.1 million or $0.34 per diluted share in 2022.

Foreign currency translation and derivative instrument adjustments, and related tax effects, are an element of “other comprehensive income” and are not included in net income other than the revaluation of the associated deferred tax asset due to the Tax Act.

As of December 31, 2023, we have estimated $246.8 million of undistributed foreign earnings and profits. Such earnings were previously subject to U.S. tax as a result of the Tax Act and much of any future remittances would generally be subject to no U.S. tax as a result of dividends received deductions and/or foreign tax credit relief. We intend to invest substantially all of our foreign subsidiary earnings, as well as our capital in our foreign subsidiaries, indefinitely outside of the U.S. in those jurisdictions in which we incur significant additional costs upon repatriation of such amounts.

We are subject to taxation in the U.S. and various states and foreign jurisdictions. Our U.S. federal income tax returns for tax years 2020 and forward are subject to examination by the Internal Revenue Service. Our principal state income tax returns for tax years 2012 and forward are subject to examination by the state tax authorities. The total gross amount of unrecognized tax benefits as of December 31, 2023 was $78.6 million which, if recognized, would impact the effective tax rate. We believe that adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax examinations cannot be predicted with certainty. As of December 31, 2023, it is reasonably possible that the expiration of the U.S. federal statute of limitations will cause the gross amount of unrecognized tax benefits to decrease by $6.7 million within the next twelve months. It is not possible to estimate any other amount of change, if any, in the unrecognized tax benefits that is reasonably possible within the next twelve months. We recognize accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. We recognized $1.4 million of interest expense and $0.2 million of penalties in income tax benefit during 2023 and released $0.7 million of interest expense and $0.6 million of penalties in 2023. In total, we have accrued for interest and penalties of $2.9 million and $2.0 million, respectively as of December 31, 2023, and $2.2 million and $2.3 million, respectively, as of December 31, 2022.

The following table summarizes our cumulative gross unrecognized tax benefits (in thousands): 

	Year Ended December 31,
	2023		2022		2021
Beginning balance	$	54,053	$	21,537	$	18,443
Increases to prior year tax positions	2,347		148		231
Increases due to acquisitions	—		29,606		—
Increases to current year tax positions	34,607		4,706		3,242
Decreases to prior year tax positions	(2,455)		(222)		—
Decrease related to lapse of statute of limitations	(9,591)		(1,722)		(31)
Decrease related to settlements with tax authorities	(403)		—		(348)
Ending balance	$	78,558	$	54,053	$	21,537

In December 2022, the European Union agreed to implement Pillar Two, the OECD’s global minimum tax rate of 15% for multinationals that meet a global revenue threshold. A number of countries have enacted or have announced plans to enact legislation to adopt Pillar Two. The Pillar Two legislation is effective for our fiscal year beginning January 1, 2024 and for fiscal year 2024 we do not anticipate that it will have a material impact to our tax provision or effective tax rate. However, the Pillar Two rules continue to evolve and their application may alter our tax obligations in certain countries in which we operate for fiscal periods beyond 2024 as we continue to assess the impact of tax legislation in these jurisdictions.