INCOME TAXES |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Income Tax Disclosure [Abstract] | |
| INCOME TAXES |
NOTE 9: INCOME TAXES
For the Successor period, the Company’s provision for income taxes consists of U.S., state and local, and foreign taxes. The Company has significant operations in various locations outside the U.S. The annual effective tax rate is a composite rate reflecting the earnings in the various locations at their applicable statutory tax rates.
For the Predecessor period, income taxes as presented herein attribute current and deferred income taxes of the Company’s financial statements in a manner that is systematic, rational, and consistent with the asset and liability method described by ASC Topic 740, “Income Taxes.” Accordingly, the Company’s income tax provision during the predecessor period was prepared following the separate return method. The separate return method applies ASC Topic 740 to the stand-alone financial statements of each member of the consolidated group as if the group member were a separate taxpayer and a stand-alone enterprise. Use of the separate return method may result in differences when the sum of the amounts allocated to stand-alone tax provisions are compared with amounts presented in consolidated financial statements. In that event, the related deferred tax assets and liabilities could be significantly different from those presented herein. The consolidated financial statements reflect the Company’s portion of income taxes payable as if the Company had been a separate taxpayer.
The Successor’s income tax benefit was $0.4 million for the three months ended September 30, 2021, which includes a discrete income tax benefit of $0.3 million related to the finalization of a Switzerland tax ruling (as further described below) and $0.2 million in connection with the filing of the Company’s 2020 U.S. federal and state tax returns during the quarter. The effective tax rate for the three months ended September 30, 2021 was an income tax benefit of 5.3% on pre-tax income of $8.4 million which differs from the statutory federal rate of 21% primarily due to non-deductible permanent differences, state and local income taxes, benefit from losses in certain jurisdictions, foreign income at different rates, and the discrete tax benefits described above.
The Successor’s income tax benefit was $8.3 million for the nine months ended September 30, 2021, which includes a discrete income tax benefit of $4.8 million. The Company recorded a discrete tax benefit of $4.0 million related to the receipt of a beneficial tax ruling in Switzerland which allows for future amortization deductions, $1.0 million related to the reversal of uncertain tax position liabilities as a result of the lapse of applicable statute of limitations, and $0.2 million related to finalization of the Company’s 2020 U.S. federal and state tax returns during the quarter ended September 30, 2021, offset with a deferred tax provision of $0.5 million related to a tax law change in the United Kingdom which was enacted in June 2021. The effective tax rate for the nine months ended September 30, 2021 was an income tax benefit of 106.1% on a pre-tax loss of $7.8 million. The effective tax rate differs from the federal rate of 21% primarily due to non-deductible permanent differences, state and local income taxes and the discrete tax benefits described above.
The Successor’s income tax provision was $1.7 million for the three months ended September 30, 2020, which includes a discrete tax provision of $0.4 million. The effective tax rate for the three months ended September 30, 2020 was an income tax provision of (146.3%) on a pre-tax loss of $1.2 million. The effective tax rate differs from the statutory federal rate of 21% primarily due to the U.S. tax effect of international operations including Global Intangible Low-Taxed Income (“GILTI”) recorded during the period.
The Successor’s income tax provision was $1.7 million for the period from June 26, 2020 through September 30, 2020. The effective tax rate for the period from June 26, 2020 through September 30, 2020 was computed by applying an estimate of the annual effective tax rate for the Successor period to “ordinary” income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. The effective tax provision was (102.9%) on a pre-tax loss of $1.6 million from June 26, 2020 through September 30, 2020 and differs from the statutory federal tax rate of 21% primarily due to GILTI recorded during the period. The Predecessor’s income tax benefit was $3.5 million for the period from January 1, 2020 through June 25, 2020. The effective tax rate for the period from January 1, 2020 through June 25, 2020 was computed using a discrete method. The Predecessor’s effective tax rate was 9.3% on pre-tax loss of $37.6 million which differs from the statutory rate of 21% primarily due to the impact of the impairment charges of non-deductible goodwill and the U.S. tax effect of international operations including GILTI recorded during the period.
As of September 30, 2021 and December 31, 2020, the Company had an uncertain tax position liability of $0.2 million and $1.2 million, respectively, including interest and penalties. The unrecognized tax benefits include amounts related primarily to various state and foreign tax issues.
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