ARTIVION, INC.AORT
ARTIVION, INC. Income Taxes Disclosure
Income Taxes
Income Tax Expense
Income (loss) before income taxes consisted of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | 5,309 | $ | 4,559 | $ | (24,658) | |||||||||||
| Foreign | 9,471 | (12,073) | 3,072 | ||||||||||||||
| Income (loss) before income taxes | $ | 14,780 | $ | (7,514) | $ | (21,586) | |||||||||||
Income tax expense consists of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 1,001 | $ | 5,857 | $ | 5,573 | |||||||||||
| State | 156 | 834 | 1,004 | ||||||||||||||
| Foreign | 3,818 | 665 | 3,851 | ||||||||||||||
| $ | 4,975 | $ | 7,356 | $ | 10,428 | ||||||||||||
| Deferred: | |||||||||||||||||
| Federal | $ | 463 | $ | 538 | $ | 222 | |||||||||||
| State | (67) | 277 | 157 | ||||||||||||||
| Foreign | (359) | (2,326) | (1,703) | ||||||||||||||
| 37 | (1,511) | (1,324) | |||||||||||||||
| Income tax expense | $ | 5,012 | $ | 5,845 | $ | 9,104 | |||||||||||
Tax Payment Summary
Income taxes paid, net of refunds, consists of the following (in thousands):
Year ended December 31, | |||||
| 2025 | |||||
| Federal | $ | 2,000 | |||
| State | 1,040 | ||||
| Foreign | |||||
| Germany | (1,972) | ||||
| Italy | 282 | ||||
| Poland | 253 | ||||
| Spain | 174 | ||||
| France | 143 | ||||
| Other | 623 | ||||
| Total income taxes paid, net of refunds | $ | 2,543 | |||
Effective Tax Rate Reconciliation
Based on prospective adoption of ASU 2023-09, the following table represents a reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory US federal income tax rate to income before income taxes after the adoption of ASU 2023-09 for the year ended December 31, 2025.
($ in thousands)
Year Ended December 31, 2025 | ||||||||||||||
Amount | Percentage | |||||||||||||
| Income tax expense at statutory rate | $ | 3,104 | 21.0% | |||||||||||
| State and local income taxes, net of federal (national) benefit | 57 | 0.4% | ||||||||||||
| Foreign tax effects | ||||||||||||||
| Germany | ||||||||||||||
| German trade tax | 714 | 4.8% | ||||||||||||
| Effect of changes in tax laws or rates enacted in the current period | (998) | (6.8)% | ||||||||||||
| Other | 877 | 5.9% | ||||||||||||
| Other foreign jurisdictions | 876 | 5.9% | ||||||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | —% | ||||||||||||
| Effect of cross-border tax laws | (195) | (1.3) | % | |||||||||||
| Tax credits | ||||||||||||||
| Research and development credits | (855) | (5.8)% | ||||||||||||
| Changes in valuation allowances | (2,986) | (20.2)% | ||||||||||||
| Nontaxable or nondeductible items | ||||||||||||||
| Debt conversion cost | 559 | 3.8% | ||||||||||||
Nondeductible compensation1 | 1,740 | 11.8% | ||||||||||||
| Other | 230 | 1.6% | ||||||||||||
| Other | ||||||||||||||
| Tax accrual adjustments | 1,083 | 7.3% | ||||||||||||
| Intercompany elimination tax effects | 599 | 4.1% | ||||||||||||
| Other | 70 | 0.5% | ||||||||||||
| Changes in unrecognized tax benefits | 137 | 0.9% | ||||||||||||
| Total income tax expense | $ | 5,012 | 33.9% | |||||||||||
(1) Amount includes $(4.2) million of windfall tax deductions, $5.6 million of compensation limited by Section 162(m), and $0.4 million of shortfalls and other non-deductible compensation
The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include California, Georgia, Pennsylvania, Texas, and Wisconsin.
The following table presents a reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory US federal income tax rate to loss before income taxes in accordance with the requirements prior to ASU 2023-09 for the years ended December 31, 2024 and 2023 (in thousands):
| Year Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Income tax benefit at statutory rate | $ | (1,578) | $ | (4,533) | ||||||||||
| Increase (reduction) in income taxes resulting from: | ||||||||||||||
| Valuation allowance change | 4,091 | 9,964 | ||||||||||||
| Nondeductible executive compensation | 1,432 | 989 | ||||||||||||
| State income taxes, net of federal benefit | 936 | 281 | ||||||||||||
| Equity compensation | 577 | 872 | ||||||||||||
| Provision to return adjustments | 536 | (937) | ||||||||||||
| Research and development credit | (425) | (800) | ||||||||||||
| Foreign income taxes | (323) | 2,969 | ||||||||||||
| Nondeductible entertainment expenses | 201 | 262 | ||||||||||||
| Foreign derived intangible income deduction | (60) | (501) | ||||||||||||
| Net change in uncertain tax positions | (56) | 652 | ||||||||||||
| Other | 514 | (114) | ||||||||||||
| Income tax expense | $ | 5,845 | $ | 9,104 | ||||||||||
Deferred Taxes
The tax effects of temporary differences which give rise to deferred tax assets and liabilities are as follows (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Finance and operating leases | $ | 10,748 | $ | 11,774 | |||||||
| Excess interest carryforward | 9,911 | 9,203 | |||||||||
| Loan revaluation | 4,647 | 5,240 | |||||||||
| Property | 583 | 2,974 | |||||||||
| Loss carryforwards | 3,943 | 2,880 | |||||||||
| Stock compensation | 2,539 | 2,545 | |||||||||
| Inventory and deferred preservation costs write-downs | — | 2,441 | |||||||||
| Deferred compensation | 2,289 | 2,055 | |||||||||
| Unrealized gains and losses | 4,001 | 1,119 | |||||||||
| Debt costs | 287 | 475 | |||||||||
| Credit carryforwards | 636 | 323 | |||||||||
| Accrued expenses | 2,361 | 165 | |||||||||
| Other | 1,325 | 672 | |||||||||
| Total deferred tax assets | 43,270 | 41,866 | |||||||||
| Less: Valuation allowance | (36,590) | (32,607) | |||||||||
| Total deferred tax assets, net | $ | 6,680 | $ | 9,259 | |||||||
| Deferred tax liabilities: | |||||||||||
| Intangible assets | $ | (20,134) | $ | (14,746) | |||||||
| Finance and operating leases | (8,809) | (11,972) | |||||||||
| Prepaid items | (295) | (455) | |||||||||
| Other | (549) | (1,201) | |||||||||
| Total deferred tax liabilities | (29,787) | (28,374) | |||||||||
| Total deferred tax liabilities, net | $ | (23,107) | $ | (19,115) | |||||||
We regularly assess the realizability of deferred tax assets and establish valuation allowances if it is more likely than not that some or all deferred tax assets will not be realized. The following table reflects changes in the valuation allowance (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning balance | $ | 32,607 | $ | 32,860 | $ | 17,942 | |||||||||||
| (Reductions) additions in estimates recorded to deferred income tax expense, net | (2,660) | 4,091 | 9,964 | ||||||||||||||
| Additions (reductions) related to Other comprehensive income, net | 6,536 | (4,081) | 5,109 | ||||||||||||||
| Currency translation and other | 107 | (263) | (155) | ||||||||||||||
| Ending balance | $ | 36,590 | $ | 32,607 | $ | 32,860 | |||||||||||
As of December 31, 2025 and 2024 we maintained a net deferred tax liability of $23.1 million and $19.1 million, respectively. As of December 31, 2025 and 2024 we maintained valuation allowances against our deferred tax assets of $36.6 million and $32.6 million, respectively, primarily related to net operating loss carryforwards and disallowed excess interest carryforwards.
As of December 31, 2025 we had $4.6 million of federal net operating loss carryforwards related to prior acquisitions for which we have a full valuation allowance against and will fully expire at the end of 2032, $16.8 million of state net operating loss carryforwards, the majority of which will expire in 2026 and are offset by valuation allowance, $9.9 million of foreign net operating loss carryforwards, all of which is offset by a valuation allowance and have an indefinite carryforward period, and $0.6 million in research and development tax credit carryforwards, the majority of which will expire in 2032. We also generated a federal net operating loss of $3.8 million in the current year, which is fully offset by valuation allowance. The federal net operating loss carries forward indefinitely.
As of December 31, 2025 we had a deferred tax asset of $9.9 million of disallowed interest expense deduction carryforwards. This deferred tax asset can be carried forward indefinitely. This rule disallows interest expense to the extent it exceeds 30% of adjusted taxable income. For the years ended December 31, 2025 and 2024 our interest deduction was limited to $22.3 million and $18.5 million, respectively.
Reinvestment of Unremitted Earnings
We intend to reinvest substantially all of the unremitted earnings of our non-US subsidiaries to fund working capital, strategic investments, and debt repayment and postpone their remittance indefinitely. Accordingly, no material provision for US federal or foreign withholding taxes was recorded on these unremitted earnings in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss). The Company is permanently reinvested with respect to the outside basis differences in its significant non-US subsidiaries.
Uncertain Tax Positions
The following table reflects changes in our uncertain tax position liability, excluding interest and penalties (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning balance | $ | 4,460 | $ | 4,832 | $ | 4,508 | |||||||||||
| Decrease related to prior year tax positions | (269) | (467) | (508) | ||||||||||||||
| Increase related to current year tax positions | 448 | 338 | 2,728 | ||||||||||||||
| Increase (decrease) for foreign exchange differences | 561 | (267) | 116 | ||||||||||||||
| Increase related to prior year tax positions | 118 | 199 | 26 | ||||||||||||||
| Decrease due to the lapsing of statutes of limitations | (170) | (175) | (158) | ||||||||||||||
| Decrease due to settlements of prior year tax positions | — | — | (1,880) | ||||||||||||||
| Ending balance | $ | 5,148 | $ | 4,460 | $ | 4,832 | |||||||||||
We recorded non-current liabilities of $0.6 million related to interest and penalties on uncertain tax positions in our Consolidated Balance Sheets as of December 31, 2025 and 2024. We included expense of less than $0.1 million for December 31, 2025, 2024, and 2023, for interest and penalties related to unrecognized tax benefits in our Consolidated Statements of Operations and Comprehensive Income (Loss).
As of December 31, 2025 our uncertain tax liability of $5.8 million, including interest and penalties, was recorded as a reduction to deferred tax assets of $0.3 million, and a non-current liability of $5.5 million in our Consolidated Balance Sheets. The amount of uncertain tax liabilities that are expected to affect our tax rate if recognized were $4.9 million, $4.0 million, and $4.4 million for the years ended December 31, 2025, 2024, and 2023, respectively. As of December 31, 2024 our uncertain tax liability, including interest and penalties of $5.1 million, was recorded as a reduction to deferred tax assets of $0.5 million and a non-current liability of $4.6 million in our Consolidated Balance Sheets.
Other
Our tax years 2020 and forward generally remain open to examination by the major taxing jurisdictions to which we are subject. However, certain returns from years prior to 2020, in which net operating losses and tax credits have arisen, are still open for examination by the tax authorities.
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About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.