Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The Company recognizes deferred tax assets or liabilities for the differences between the financial statement carrying amount and tax basis of assets and liabilities using enacted tax rates in effect for the years in which the asset is expected to be recovered or the liability is expected to be settled.
The components of deferred tax assets and liabilities are as follows (in thousands):
December 31,
  2023 2022
Deferred tax assets:
Foreign tax credits $ 19,456  $ 30,142 
Net operating losses 153,068  155,532 
Pension liability (269) 5,383 
Interest expense limitation 49,431  42,995 
Accrued expenses not currently deductible 18,367  14,439 
Lease liabilities 34,553  36,101 
Other 6,544  10,771 
Gross deferred tax assets 281,150  295,363 
Valuation allowance (155,411) (159,648)
Total deferred tax assets $ 125,739  $ 135,715 
Deferred tax liabilities:
Property and equipment $ (99,684) $ (96,121)
Inventories (1,366) (2,152)
Investment in foreign subsidiaries and unconsolidated affiliates (6,365) (14,059)
Right-of-use lease asset (34,496) (35,135)
Intangibles (13,245) (14,440)
Other (2,578) (3,308)
Total deferred tax liabilities $ (157,734) $ (165,215)
Net deferred tax liabilities $ (31,995) $ (29,500)
As of December 31, 2023, the Company had deferred tax assets of $10.7 million recorded in other assets on the consolidated balance sheets.
For U.S. income taxes, companies may use foreign tax credits to offset the income taxes due on income earned from foreign sources. The foreign tax credits claimed for a particular taxable year may be limited. Foreign tax credits may be carried back one year and forward ten years. As of December 31, 2023, the Company had $19.5 million of excess foreign tax credits, of which, $13.2 million will expire in 2024 and $6.3 million will expire after 2025.
As of December 31, 2023, the Company had a $38.0 million net operating loss carryforward in the U.S. In addition, the Company has net operating losses in certain states totaling $563.4 million, which began to expire during the twelve months ended December 31, 2023. The following table shows the expiration of such loss carryforwards (in thousands, except dates):
  December 31, 2023 Expiration
Foreign tax credit carryforwards $19,456 2024-2032
Foreign net operating loss carryforwards $395,232 Indefinite
State net operating loss carryforwards $428,846 Indefinite
State net operating loss carryforwards $134,533 2024-2041
Section 163j interest expense $235,384 Indefinite
The Company estimates the likelihood of the recoverability of its deferred tax assets. Any valuation allowance recorded is based on estimates and assumptions of taxable income in future periods and a determination is made of the magnitude of
deferred tax assets which are more likely than not to be realized. If these estimates and related assumptions change in the future, the Company may be required to record additional valuation allowance against its deferred tax assets and its effective tax rate may increase which could result in a material adverse impact on the Company’s financial position, results of operations and cash flows. The valuation allowance continues to be applied against certain deferred income tax assets where the Company has assessed that the realization of such assets does not meet the “more likely than not” criteria. Valuation allowances against net deferred tax assets aggregated to $155.4 million and $159.6 million as of December 31, 2023 and 2022, respectively. As of December 31, 2023, valuation allowances were $79.1 million for foreign operating loss carryforwards, $32.4 million for state operating loss carryforwards, $27.7 million for interest expense limitation carryforwards, $15.3 million for foreign tax credits and $0.9 million for capital loss carryforwards. As of December 31, 2022, valuation allowances were $79.9 million for foreign operating loss carryforwards, $31.6 million for state operating loss carryforwards, $17.7 million for interest expense limitation carryforwards and $29.4 million for foreign tax credits and $1.0 million for capital loss carryforwards.
The Company recorded $2.5 million of deferred taxes related to the change in estimated UK pension liabilities. This amount is reflected in other comprehensive income. During the twelve months ended December 31, 2023, the Company utilized $27.0 million of net operating losses in various foreign jurisdictions and released through continuing operations an offsetting valuation allowance previously recorded against the net operating losses.
The components of income (loss) before income taxes for the periods reflected in the table below were as follows (in thousands):
  Twelve Months Ended December 31, 2023 Nine Months Ended December 31, 2022 Twelve Months Ended March 31, 2022
Domestic $ (39,130) $ (7,692) $ (23,346)
Foreign 57,142  28,771  18,927 
Income (loss) before income taxes $ 18,012  $ 21,079  $ (4,419)
The components of income tax expense (benefit) for the periods reflected in the table below were as follows (in thousands):
  Twelve Months Ended December 31, 2023 Nine Months Ended December 31, 2022 Twelve Months Ended March 31, 2022
Current:
Domestic $ 10,347  $ 3,995  $ 5,971 
Foreign 13,916  8,821  7,068 
$ 24,263  $ 12,816  $ 13,039 
Deferred:
Domestic $ (2,568) $ (3,419) $ (5,945)
Foreign 3,237  (1,903) 4,200 
$ 669  $ (5,322) $ (1,745)
Income tax expense $ 24,932  $ 7,494  $ 11,294 
The reconciliation of the U.S. Federal statutory tax rate to the effective income tax rate for the periods reflected in the table below is as follows:
  Twelve Months Ended December 31, 2023 Nine Months Ended December 31, 2022 Twelve Months Ended March 31, 2022
Statutory rate 21.0  % 21.0  % 21.0  %
Net foreign tax on non-U.S. earnings 15.5  % 49.0  % (348.2) %
Foreign earnings double tax relief (9.5) % (5.0) % 25.2  %
Foreign earnings indefinitely reinvested abroad (3.4) % (28.7) % 44.8  %
Change in valuation allowance (23.6) % (12.9) % 16.7  %
Foreign earnings that are currently taxed in the U.S. 7.4  % 5.9  % (40.5) %
Changes in prior year estimates —  % 0.9  % (3.8) %
Impact of U.S. withholding tax 2.2  % 3.6  % (10.1) %
Impact of tax rate changes 2.6  % —  % —  %
Foreign tax credits 76.5  % —  % —  %
Deferred gains 7.9  % —  % —  %
GILTI income 19.8  % —  % —  %
Other, net 22.0  % 1.8  % (45.2) %
Sale of subsidiaries —  % —  % 22.0  %
Impairment of foreign investments —  % —  % 62.4  %
Effective tax rate 138.4  % 35.6  % (255.7) %
The Company’s effective income tax rate for the twelve months ended December 31, 2023 is primarily impacted by income tax from non-US earnings in certain profitable jurisdictions, adjustments to valuation allowances against future realization of deductible business interest expense and adjustments to valuation allowances against net operating losses.
The Company files income tax returns in the U.S. federal jurisdiction, various states and foreign jurisdictions. The Company is currently undergoing multiple tax examinations in various jurisdictions in which it operates. The ultimate settlement and timing of these additional potential tax assessments is uncertain, but the Company will continue to vigorously defend its return filing positions and does not view additional assessments as probable at this time.
The following table summarizes the years open by jurisdiction as of December 31, 2023:
  Years Open
U.S. 2020 to present
UK 2022 to present
Nigeria 2013 to present
Trinidad 2010 to present
Australia 2019 to present
Norway 2019 to present
Brazil 2019 to present
During the twelve months ended December 31, 2023, adjustments were made to estimates for uncertain tax positions in certain tax jurisdictions based upon changes in facts and circumstances, resulting in an increase to income tax expense. As of December 31, 2023 and 2022, the Company had $4.2 million and $4.1 million, of unrecognized tax benefits respectively, all of which would have an impact on its effective tax rate, if recognized.
The activity associated with unrecognized tax benefit for the periods reflected in the table below was follows (in thousands):
  Twelve Months Ended December 31, 2023 Nine Months Ended December 31, 2022 Twelve Months Ended March 31, 2022
Unrecognized tax benefits – beginning of period $ 4,067  $ 3,942  $ 4,258 
Increases for tax positions taken in prior periods 106  200  147 
Decreases for tax positions taken in prior periods —  (75) (420)
Decrease related to statute of limitation expirations —  —  (43)
Unrecognized tax benefits – end of period $ 4,173  $ 4,067  $ 3,942 
As of December 31, 2023, the Company had aggregated approximately $211.3 million in unremitted earnings generated by foreign subsidiaries. The Company expects to indefinitely reinvest these earnings. The Company has not provided deferred taxes on these unremitted earnings. If the Company’s expectations were to change, withholding and other applicable taxes incurred upon repatriation, if any, are not expected to have a material impact on its results of operations.