v3.25.3
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes (As Restated)
Components of the Company's income (loss) before taxes are as follows:
Year ended December 31,
202420232022
(in thousands)
(As Restated)(As Restated)(As Restated)
Domestic (including U.S. exports)$(358,855)$(304,300)$(151,022)
Foreign subsidiaries49,645 37,847 37,086 
$(309,210)$(266,453)$(113,936)
Components of the Company’s income tax provision are as follows:
Year ended December 31,
202420232022
(in thousands)(As Restated)(As Restated)(As Restated)
Current taxes
Federal$15,141 $8,973 $12,871 
State3,215 2,911 2,125 
Foreign14,374 11,318 10,961 
Total current taxes32,730 23,202 25,957 
Deferred taxes:
Federal(13,647)(16,776)3,178 
State(538)1,622 2,010 
Foreign67 150 (1,652)
Total deferred taxes(14,118)(15,004)3,536 
Total tax provision$18,612 $8,198 $29,493 
The tax effects of temporary differences that have resulted in the creation of deferred tax assets and deferred tax liabilities at December 31, 2024, 2023 and 2022 are as follows:
December 31,
202420232022
(in thousands)
(As Restated)(As Restated)(As Restated)
Deferred tax assets:
Tax credits$3,411 $5,023 $6,179 
Accounts receivable and allowances1,063 1,093 1,577 
Net operating loss carryforwards37,725 20,041 28,090 
Accrued expenses20,374 17,007 13,164 
Interest expense limitation carryforwards55,778 29,445 10,488 
Lease liabilities50,123 46,231 38,614 
Inventory10,056 8,257 9,068 
Stock based compensation6,068 4,386 4,747 
Capitalized research & development expenses9,474 4,245 2,474 
Capital loss on sale of Crosman11,260 — — 
Lugano other expense (2)
78,076 43,104 21,640 
Other1,759 3,806 3,401 
Total deferred tax assets$285,167 $182,638 $139,442 
Valuation allowance (1)
(181,962)(84,334)(50,149)
Net deferred tax assets$103,205 $98,304 $89,293 
Deferred tax liabilities:
Intangible assets$(143,105)$(136,623)$(150,148)
Property and equipment(22,661)(23,832)(23,533)
Repatriation of foreign earnings(38)(38)(38)
Prepaid and other expenses(1,256)(842)(865)
Right of use assets(44,236)(40,233)(33,766)
Total deferred tax liabilities$(211,296)$(201,568)$(208,350)
Total net deferred tax liability$(108,091)$(103,264)$(119,057)

(1)Primarily relates to the Trust and 5.11, Arnold, Lugano and Velocity operating segments.
(2) Lugano other expense represents losses recognized at Lugano in the years ending December 31, 2024, 2023 and 2022 which do not meet the requirements for deduction under ASC 740 - Income taxes, until the year ended December 31, 2025.
As of December 31, 2024, 2023 and 2022, the Company had approximately $211.3 million, $201.6 million and $208.4 million, respectively in deferred tax liabilities. A significant portion of the balance in deferred tax liabilities reflects temporary differences in the basis of property and equipment and intangible assets related to the Company’s purchase accounting adjustments in connection with the acquisition of certain of its businesses. For financial accounting purposes the Company has recognized a significant increase in the fair values of the intangible assets and property and equipment in certain of the businesses it acquired. For income tax purposes the existing, pre-acquisition tax basis of the intangible assets and property and equipment is utilized. In order to reflect the increase in the financial accounting basis over the existing tax basis, a deferred tax liability was recorded. This liability will decrease in future periods as these temporary differences reverse but may be replaced by deferred tax liabilities generated as a result of future acquisitions.
At December 31, 2024, 2023 and 2022, the Company had U.S. Federal net operating loss carryforwards of approximately $121.6 million, $56.3 million and $106.4 million, respectively. Approximately $10.6 million of these carryforwards will expire, if not utilized, beginning in 2036. The remaining balance of the Company's U.S. Federal net operating loss carryforwards do not expire and are subject to utilization limitations based on a percentage of
taxable income in a given year. As of December 31, 2024, 2023 and 2022, the Company had net operating loss carryforwards for state income tax purposes of $149.5 million, $85.7 million and $110.2 million, respectively. The Company’s state net operating loss carryforwards will expire, if not utilized, beginning in 2026. As of December 31, 2024, 2023 and 2022, the Company had foreign net operating loss carryforwards of $11.0 million, $10.2 million and $6.8 million, respectively. The foreign net operating loss carryforwards will expire, if not utilized, beginning in 2024. As of December 31, 2024, the Company had Federal capital loss carryforwards of $47.5 million. The Federal capital loss carryforwards will expire in 2029 if not utilized. As of December 31, 2024, the Company had State capital loss carryforwards of $0.5 million. The State capital loss carryforwards will expire in 2044 if not utilized.
As of December 31, 2024, 2023 and 2022, the Company had federal research and development tax credit carryforwards of $0.2 million and $1.7 million and $1.5 million, respectively. The research and development tax credit carryforwards will expire beginning in 2044 if not utilized. As of December 31, 2024, 2023 and 2022, the Company had foreign tax credit carryforwards of $2.0 million, $2.8 million and $6.4 million, respectively. The foreign tax credit carryforwards will expire beginning in 2031 if not utilized. As of December 31, 2024, 2023 and 2022, the Company had state tax credit carryforwards, consisting mostly of California business tax credits of $0.8 million, $1.1 million and $3.4 million, respectively. The California business tax credit carryforwards will expire, if not utilized, beginning in 2025.
As of December 31, 2024, 2023 and 2022, the Company had a valuation allowance related to the realization of domestic and foreign net operating losses, domestic and foreign tax credits and the limitation on the deduction of interest expense of $182.0 million, $84.3 million and $50.1 million, respectively. A valuation allowance is provided whenever it is more likely than not that some or all of deferred assets recorded may not be realized.
The reconciliation between the Federal Statutory Rate and the effective income tax rate for 2024, 2023 and 2022 are as follows:
Year ended December 31,
202420232022
(As Restated)(As Restated)(As Restated)
United States Federal Statutory Rate21.0 %21.0 %21.0 %
State income taxes (net of Federal benefits)3.1 1.6 2.3 
Foreign income taxes (1.3)(1.5)(1.9)
Impact of subsidiary employee stock options(0.2)1.3 (0.1)
Non-deductible acquisition costs(0.2)— (0.4)
Impairment expense(0.5)(5.9)(4.8)
Non-recognition of various carryforwards at subsidiaries(28.6)(18.2)(37.3)
United States tax on foreign income0.4 (0.8)(0.6)
Dividend (net of dividend received deduction)0.3 (3.3)(2.8)
Utilization of tax credits1.6 2.4 6.4 
Tax effect – loss on sale of Crosman(1.7)— — 
Effect of classification of assets held for sale— — (7.5)
Other0.1 0.3 (0.2)
Effective income tax rate(6.0)%(3.1)%(25.9)%

A reconciliation of the amount of unrecognized tax benefits for 2024, 2023 and 2022 are as follows (in thousands):
Balance at January 1, 2022$1,254 
Additions for current years’ tax positions91 
Additions for prior years’ tax positions 15 
Reductions for prior years’ tax positions (71)
Reductions for expiration of statute of limitations$(73)
Balance at December 31, 2022$1,216 
Additions for current years’ tax positions28,325 
Additions for prior years’ tax positions 33 
Reductions for prior years' tax positions(184)
Reductions for expiration of statute of limitations(68)
Balance at December 31, 2023$29,322 
Additions for current years’ tax positions7,802 
Additions for prior years’ tax positions — 
Reductions for prior years' tax positions(25)
Reductions for expiration of statute of limitations(73)
Balance at December 31, 2024$37,026 
The unrecognized tax benefits are recorded in the consolidated balance sheet in other noncurrent liabilities. Included in the unrecognized tax benefits at December 31, 2024, 2023 and 2022, is $1.6 million, $1.3 million and $1.2 million, respectively, of tax benefits that, if recognized, would affect the Company’s effective tax rate. Also included in the unrecognized tax benefits at December 31, 2024 and 2023 are $7.4 million and $27.9 million, respectively, of unrecognized tax benefits that, if recognized, would not affect the Company's effective tax rate but would result in an adjustment to discontinued operations in future periods. The $7.4 million in unrecognized tax benefits is recorded as a reduction to the gain on sale related to the sale of our Ergobaby subsidiary in the year ended December 31, 2024. The $27.9 million in unrecognized tax benefits is recorded as a reduction to the gain on sale related to the sale of our ACI and Marucci subsidiaries in the year ended December 31, 2023. If recognized, the tax benefit would result in additional gain on sale of discontinued operations.
The Company accrues interest and penalties related to uncertain tax positions. The amounts accrued at December 31, 2024, 2023 and 2022 are not material to the Company. Such amounts are included in the provision (benefit) for income taxes in the accompanying consolidated statements of operations. It is expected that the amount of unrecognized tax benefits will change in the next twelve months. However, we do not expect the change to have a significant impact on the consolidated results of operations or financial position.
Each of the Company’s businesses file U.S. Federal, state and foreign income tax returns in multiple jurisdictions with varying statutes of limitations. The 2019 through 2024 tax years generally remain subject to examinations by the taxing authorities.