STONERIDGE INCSRI

STONERIDGE INC Income Taxes Disclosure

10-KFiled Mar 16, 20267 min read
Income Taxes
The income tax expense included in the accompanying consolidated statement of operations represents federal, state and foreign income taxes. The components of (loss) income before income taxes and the provision (benefit) for income taxes consist of the following:
Year ended December 31,202520242023
(Loss) income before income taxes:
Domestic$(89,933)$(45,419)$(29,658)
Foreign34,481 31,822 27,736 
Total loss before income taxes$(55,452)$(13,597)$(1,922)
Provision (benefit) for income taxes:
Current:
Federal$— $(653)$219 
State and local55 (49)(101)
Foreign10,249 9,371 7,181 
Total current provision$10,304 $8,669 $7,299 
Deferred:
Federal$33,577 $(3,536)$(2,265)
State and local1,749 (445)2 
Foreign1,753 (1,761)(1,775)
Total deferred provision (benefit)37,079 (5,742)(4,038)
Total income tax provision$47,383 $2,927 $3,261 
Effective January 1, 2025, the Company adopted ASU 2023‑09, Improvements to Income Tax Disclosures, on a prospective basis. In accordance with the categories required under the new standard, the following table presents the reconciliation of the provision for income taxes computed at the U.S. federal statutory income tax rate of 21% to the Company’s consolidated provision for income taxes:
Year ended December 31,2025
Benefit for income taxes at U.S. federal statutory income tax rate$(11,645)21.0 %
Domestic federal tax effects
Effect of cross-border tax laws
Global intangible low-taxed income, net of foreign tax credit7,202 (13.0)
Foreign deemed income inclusions (Subpart F)999 (1.8)
Other(439)0.8 
Tax credits
Other(343)0.6 
Nontaxable and nondeductible items
Compensation and benefits750 (1.4)
Other276 (0.4)
Changes in valuation allowance44,091 (79.5)
Domestic state and local income taxes, net of federal effect (1)
1,754 (3.2)
Other reconciling items(3)— 
Foreign tax effects
Brazil
Foreign tax rate differential853 (1.5)
Research credits(1,244)2.3 
Valuation allowance(2,439)4.4 
Other(410)0.7 
China
Withholding taxes2,305 (4.2)
Other(147)0.3 
Estonia
Foreign tax rate differential(1,326)2.4 
Unremitted earnings of foreign subsidiaries4,956 (9.0)
Mauritius
Unremitted earnings of foreign subsidiaries900 (1.6)
Other7 — 
Other jurisdictions1,432 (2.6)
Global changes in unrecognized tax benefits(146)0.3 
Consolidated provision for income taxes$47,383 (85.4)%
(1) Michigan contributes to the majority of this tax effect.
A summary of the differences between the statutory federal income tax rate of 21.0% and the consolidated provision for income taxes for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09 is shown below.
Year ended December 31,20242023
Statutory U.S. federal income tax benefit$(2,855)$(403)
State income taxes, net of federal tax benefit(542)(136)
Tax credits and incentives(2,585)(4,886)
Foreign tax rate differential245 706 
Impact of change in enacted tax law3 5 
Change in valuation allowance(1,663)1,817 
U.S. tax on foreign earnings5,922 4,815 
Tax reserves and audit adjustments4,054 — 
Unremitted earnings on foreign subsidiaries(22)— 
Non-deductible expenses607 1,338 
Compensation and benefits478 306 
Other(715)(301)
Provision for income taxes$2,927 $3,261 
Significant components of the Company’s deferred tax assets and liabilities were as follows:
As of December 31,20252024
Deferred tax assets:
Inventories$1,368 $1,478 
Employee compensation and benefits2,363 1,870 
Accrued liabilities and reserves8,570 6,981 
Property, plant and equipment9,090 3,657 
Tax loss carryforwards17,667 13,071 
Tax credit carryforwards25,673 23,921 
Capitalized research and development4,579 4,665 
Disallowed interest deduction2,545 3,575 
Lease liability4,671 2,339 
Other270 1,659 
Gross deferred tax assets76,796 63,216 
Less: Valuation allowance(59,954)(17,632)
Deferred tax assets less valuation allowance16,842 45,584 
Deferred tax liabilities:
Property, plant and equipment(984)(767)
Intangible assets(6,031)(6,577)
Right-of-use-assets(1,985)(2,148)
Unremitted earnings on foreign subsidiaries(5,869)— 
Other(7,477)(3,943)
Gross deferred tax liabilities(22,346)(13,435)
Net deferred tax (liabilities) assets$(5,504)$32,149 
The balance sheet classification of our net deferred tax asset is shown below:
Year ended December 31,20252024
Long-term deferred tax assets$4,468 $37,470 
Long-term deferred tax liabilities(9,972)(5,321)
Net deferred tax (liabilities) assets$(5,504)$32,149 
The Company has recognized deferred taxes related to the expected foreign currency impact upon repatriation from foreign subsidiaries not considered indefinitely reinvested. Taxes of $5,869 related to China and Estonia have been accrued on undistributed earnings that are not indefinitely reinvested.
The Company has net operating loss carry forwards of $73,874 and $73,584 for state and foreign tax jurisdictions, respectively. The state net operating losses expire from 2026-2045 or have indefinite lives and the foreign net operating losses expire from 2026-2030 or have indefinite lives. The Company has general business and foreign tax credit carry forwards of $23,824, $1,003 and $846 for U.S. federal, state and foreign jurisdictions, respectively. The U.S. federal general business credits, if unused, begin to expire in 2026, and the state and foreign tax credits expire at various times.
As of December 31, 2025, the Company has consolidated deferred tax assets of $76,796 offset by a valuation allowance of $59,954. The deferred tax assets principally related to tax credit carryforwards, tax loss carryforwards and other deferred tax assets in Sweden, Brazil, and the US. In evaluating the realizability of its deferred tax assets, the Company considered historical pre‑tax income or loss along with the four sources of taxable income outlined in ASC 740. These include taxable income available in carryback periods where permitted, the anticipated future reversal of existing temporary differences, reasonable and prudent tax‑planning strategies available to generate taxable income, and forecasts of future taxable income exclusive of the effects of reversing temporary differences and carryforwards. Based on this analysis, the Company concluded that, in instances where a valuation allowance has been recorded, the weight of the available evidence does not support a determination that the deferred tax assets are more likely than not to be realizable. Current and future provision for income taxes is significantly impacted by the initial recognition of and changes in valuation allowances. As a result, both the current and future income tax provisions are significantly affected by the initial recognition of valuation allowances and any subsequent changes to them.
During the year ended December 31, 2025, the Company reassessed the realizability of its U.S. federal and state deferred tax assets, including tax credit carryforwards, and deductible temporary differences. After evaluating both positive and negative evidence under ASC 740, including cumulative U.S. pretax losses in recent years, limited objectively verifiable sources of future taxable income, and projected near‑term operating losses, management concluded that U.S. deferred tax assets are not more likely than not to be realized. Accordingly, the Company recorded a valuation allowance of $46,976 against its U.S. federal and state deferred tax assets as of December 31, 2025. The allowance primarily relates to tax credit carryforwards and other deferred tax assets.
The following is a reconciliation of the Company’s total gross unrecognized tax benefits:
202520242023
Balance as of January 1$4,746 $2,545 $2,545 
Tax positions related to the current year:
Additions— 2,298 — 
Tax positions related to the prior years:
Reductions— — — 
Expirations of statutes of limitation(77)— — 
Cumulative translation adjustment444 (97)— 
Balance as of December 31$5,113 $4,746 $2,545 
The Company has classified its uncertain tax positions as a reduction to non-current deferred income tax assets. If the Company’s tax positions are sustained by the taxing authorities in favor of the Company, the amount that would affect the Company’s effective tax rate is approximately $5,113 and $4,746 at December 31, 2025 and 2024, respectively.
The Company classifies interest expense and, if applicable, penalties which could be assessed related to unrecognized tax benefits as a component of provision for income taxes. The Company recognized interest and penalties of $(34), $34 and $0 for the years ended December 31, 2025, 2024 and 2023, respectively.
The Company conducts business globally and, as a result, files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The following table summarizes the open tax years for each jurisdiction:
JurisdictionOpen Tax Years
U.S. Federal
2022-2025
Argentina
2020-2025
Brazil
2020-2025
China
2020-2025
France
2022-2025
Germany
2020-2025
Italy
2020-2025
Mauritius
2022-2025
Mexico
2020-2025
Netherlands
2021-2025
Sweden
2020-2025
United Kingdom
2024-2025
A summary of income taxes paid, net of refunds, is shown below:
Year ended December 31,2025
Federal$(346)
State and local(41)
Foreign
Netherlands2,137 
China4,565 
Mexico1,879 
UK850 
Brazil1,393 
All other foreign(100)
Income taxes paid, net of refunds$10,337 
In July 2025, the 2025 Budget Reconciliation Act, or H.R. 1 (the “Act”), was enacted. The Act contains a wide range of tax reform measures, including extensions and modifications to several provisions of the Tax Cuts and Jobs Act, as well as expansions of certain incentives under the Inflation Reduction Act while accelerating the phase‑out of others. The legislation includes multiple effective dates, with certain provisions taking effect in 2025 and others beginning in 2026 and beyond. The Act did not have a material impact on the Company’s 2025 consolidated financial statements and, based on guidance issued to date, is also not expected to have a significant impact on the Company’s 2026 consolidated financial statements.

Historical Timeline

Fiscal YearFiled
2025Mar 16, 2026Showing above
2024Mar 3, 2025
2023Mar 1, 2024
2022Mar 2, 2023
2021Feb 28, 2022
2020Feb 24, 2021
2019Feb 27, 2020
2018Feb 28, 2019
2017Mar 7, 2018
2016Mar 2, 2017
2015Mar 14, 2016

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.

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