Company: OFIX
Filing Date: 2025-02-25
Form Type: 10-K
Source: 0000950170-25-026066
Chunk: 74

Company: Orthofix Medical Inc.
Filing Date: 2025-02-25
Form: 10-K
Item: Item 16
Chunk 74
---
wards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the years in which those items are expected to be realized. Tax law and rate changes are recorded in the period such changes are enacted. The Company establishes a valuation allowance when it is more likely than not that certain deferred tax assets will not be realized in the foreseeable future. We recognize the tax impact of including certain foreign earnings in US taxable income as a period cost.The valuation allowance is primarily attributable to net operating loss carryforwards and temporary differences in domestic and certain foreign jurisdictions. The net increase in the valuation allowance of $28.5 million during the year principally relates to recognizing a full valuation allowance against the net deferred tax asset within the Company’s U.S. and Italy operations. The Company considered many factors when assessing the likelihood of future realization of these deferred tax assets, including recent cumulative losses experienced by the subsidiary, expectations of future taxable income or loss, the carryforward periods available to the Company for tax reporting purposes, and other relevant factors. That increase was partially offset by a decrease of valuation allowances on net operating loss carryforwards in other foreign jurisdictions due to expiration, statutory rate changes, and changes regarding the realizability of net deferred tax assets. It is reasonably possible that the valuation allowance will increase in 2025 due to further losses in certain jurisdictions, offset by decreases related to the expiration of foreign net operating losses. The Company has federal net operating loss carryforwards of $351.4 million and federal research and development credits of $5.9 million. These federal carryforwards are subject to limitation under the provisions of Internal Revenue Code Section 382 and will 

F-40

begin to expire in 2025. The Company has state net operating loss carryforwards of approximately $252.1 million, principally related to California, Colorado, Michigan, and New York. These carryforwards are subject to limitation under various provisions implemented by each specific state jurisdiction. Additionally, the Company has net operating loss carryforwards in various foreign jurisdictions of approximately $137.8 million, which mainly relate to the Company’s Netherlands, Brazil, Italy, and Canada operations. The majority of the foreign net operating losses do not expire. The Company also has research and development credits in Canada of $1.3 million which begin to expire in 2041.Unremitted foreign earnings were $15.7 million as of December 31, 2024. The Company’s investment in foreign subsidiaries continues to be indefinite in nature; however, the Company may periodically rep