INCOME TAXES

12 Months Ended

Dec. 31, 2024

INCOME TAXES

INCOME TAXES

NOTE 4.           INCOME TAXES

The geographic distribution of pretax income from continuing operations was as follows:

	Years Ended December 31,
	2024		2023		2022
	(in thousands)
Domestic	$	(43,223)	$	(17,458)	$	5,969
Foreign		95,600		139,919		235,772
Income from continuing operations, before income taxes	$	52,377	$	122,461	$	241,741

The income tax provision (benefit) from continuing operations is summarized as follows:

	Years Ended December 31,
	2024			2023			2022
	(in thousands)
Current:
Federal	$	3,760		$	13,402		$	23,370
State		459			589			1,949
Foreign		12,357			11,661			20,267
Total current provision		16,576			25,652			45,586
Deferred:
Federal		(1,444)			(5,455)			(6,742)
State		(61)			(955)			(1,030)
Foreign		(19,000)			(27,530)			2,036
Total deferred benefit		(20,505)			(33,940)			(5,736)
Total income tax provision (benefit)	$	(3,929)		$	(8,288)		$	39,850
Effective tax rate		(7.5)	%		(6.8)	%		16.5	%

The principal causes of the difference between the federal statutory rate and the effective income tax rate for each of the years below are as follows:

	Years Ended December 31,
	2024		2023		2022
	(in thousands)
Income taxes per federal statutory rate	$	10,999	$	25,850	$	50,766
State income taxes, net of federal deduction		302		(490)		510
U.S. tax on foreign operations		18,944		20,451		28,726
Foreign derived intangible income deduction		(1,423)		(2,868)		(6,259)
Tax effect of foreign operations		(14,934)		(27,959)		(28,432)
Uncertain tax positions		(1,101)		1,291		1,080
Change in valuation allowance assessment		616		(25,636)		—
Tax credits		(7,805)		(7,289)		(5,857)
Change in valuation allowance		3,616		12,927		268
Executive compensation limitation		2,348		1,955		641
Impact of intellectual property transfer		(22,950)		—		—
Other permanent items, net		7,459		(6,520)		(1,593)
Total income tax provision (benefit)	$	(3,929)	$	(8,288)	$	39,850

Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to be reversed. Significant deferred tax assets and liabilities consist of the following:

	December 31,		December 31,
	2024		2023
	(in thousands)
Deferred tax assets:
Net operating loss and tax credit carryforwards	$	72,027	$	73,954
Pension obligation		9,206		9,960
Bond hedge original issue discount		20,168		24,755
Amortization		43,011		23,609
Operating lease liabilities		12,253		12,054
Other		56,424		43,782
Total deferred tax assets		213,089		188,114
Less: valuation allowance		(42,355)		(37,999)
Deferred tax assets, net of valuation allowance		170,734		150,115
Deferred tax liabilities:
Depreciation		2,545		3,826
Amortization		26,802		28,853
Unremitted earnings		2,821		3,277
Operating lease right-of-use assets		9,862		9,520
Operating lease liability		5,265		1,069
Other		2,650		3,038
Total deferred tax liabilities		49,945		49,583
Net deferred tax assets	$	120,789	$	100,532

Of the $120.8 million and $100.5 million net deferred tax assets as of December 31, 2024 and 2023, respectively, $121.4 million and $107.9 million, respectively, were included as a net non-current deferred tax asset within other assets on the Consolidated Balance Sheets. $0.6 million and $7.4 million, respectively, were included as a net non-current deferred tax liability within other long-term liabilities on the Consolidated Balance Sheets.

During the fourth quarter of 2024, we completed the transfer of certain intellectual property between certain of our legal entities in connection with simplifying our corporate legal entity structure. The tax impact of the transfer resulted in the recognition of deferred tax assets totaling approximately $23.0 million with a corresponding decrease to tax expense.

As of December 31, 2024, we have recorded a total valuation allowance on $2.9 million of our U.S. domestic deferred tax assets, largely attributable to state carryforward attributes that are expected to expire before sufficient income can be realized in those jurisdictions. The remaining valuation allowance on deferred tax assets approximates $39.4 million and is associated primarily with operations in Hong Kong, Germany, China, and Switzerland. As of December 31, 2024, there is not sufficient positive evidence to conclude that such deferred tax assets, presently reduced by a valuation allowance, will more likely than not be recognized. The December 31, 2024 valuation allowance balance reflects an increase of $4.4 million during the year.

As of December 31, 2024, we had U.S., foreign and state tax loss carryforwards of $31.3 million, $277.7 million, and $107.2 million, respectively. Additionally, we had $1.6 million and $30.5 million of capital loss and interest expense limitation carryforwards, respectively. Finally, we had U.S. and state tax credit carryforwards of $0.1 million and $2.3 million, respectively. The U.S. and state net operating losses, tax credits, and interest expense limitation are

subject to various utilization limitations under Section 382 of the Internal Revenue Code and applicable state laws. These Section 382 limited attributes have various expiration periods through 2036 or, in the case of the interest expense limitation amount, no expiration period. Much of the foreign loss carryforwards, and $9.7 million of the federal net operating loss carry forwards, have no expiration period.

We operate under a tax holiday in Singapore, China, and Malaysia. These tax holidays are in effect through June 30, 2027, December 31, 2025, and January 31, 2025, respectively. The tax holidays are conditional upon our meeting certain employment and investment thresholds. The expected benefit of these tax holidays may be limited by the impact of Pillar II global minimum tax or other actions taken by these countries. For the years ended December 31, 2024, 2023 and 2022, the impact of the tax holidays decreased foreign taxes by $12.4 million, $14.3 million, and $19.4 million, respectively, and the benefit on earnings per diluted share was $0.33, $0.38, and $0.52, respectively.

As of December 31, 2024, we have undistributed earnings in certain foreign subsidiaries of approximately $36.3 million that we have indefinitely invested, and on which we have not recognized deferred taxes. Estimating the amount of potential tax is not practicable because of the complexity and variety of assumptions necessary to compute the tax.

We account for uncertain tax positions by applying a minimum recognition threshold to tax positions before recognizing these positions in the consolidated financial statements. The following table provides a reconciliation of our total gross unrecognized tax benefits, which we include within other long-term liabilities on the Consolidated Balance Sheets:

	Years Ended December 31,
	2024		2023		2022
	(in thousands)
Balance at beginning of period	$	8,452	$	7,467	$	5,513
Additions based on tax positions taken during a prior period		—		199		245
Additions based on tax positions taken during a prior period - acquisitions		—		—		1,025
Additions based on tax positions taken during the current period		536		1,070		836
Reductions based on tax positions taken during a prior period		(2,102)		—		—
Reductions related to a lapse of applicable statute of limitations		(1,151)		(139)		(152)
Reductions related to a settlement with taxing authorities		—		(145)		—
Balance at end of period	$	5,735	$	8,452	$	7,467

The unrecognized tax benefits of $5.7 million, if recognized, will impact our effective tax rate. In accordance with our accounting policy, we recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. We had $0.8 million and $0.7 million of accrued interest and penalties on December 31, 2024 and 2023, respectively. With few exceptions, we are no longer subject to federal, state, or foreign income tax examinations by tax authorities for years before 2020.

As of January 1, 2024, the Pillar II minimum global effective tax rate of 15% enacted by the Organization for Economic Cooperation and Development (“OECD”) was effectuated. More than 140 countries agreed to enact the Pillar II global minimum tax. However, the timing of the implementation for each country varies. For the year ended December 31, 2024, we included an estimate of global minimum tax liability as a result of those countries where we conduct business that have adopted Pillar II. As countries continue to make revisions to their legislation and release additional guidance with respect to the global minimum tax, we continue to determine any potential impact in the countries in which we operate. The impact of these changes may have a material impact on our cash tax expense and tax rate.