INCOME TAXES

12 Months Ended

Dec. 31, 2021

INCOME TAXES

INCOME TAXES

NOTE 14 – INCOME TAXES

The components of income before income taxes were as follows:

	Year Ended December 31,
	2021		2020		2019
U.S.	$	143,290	$	179,650	$	237,296
Non-U.S.		181,708		84,390		131,197
Total	$	324,998	$	264,040	$	368,493

The components of income tax expense (benefit) were as follows:

	Year Ended December 31,
	2021		2020		2019
Current:
Federal	$	23,415	$	30,091	$	25,063
Non-U.S.		44,828		18,020		26,540
State and local		10,298		8,770		9,064
		78,541		56,881		60,667
Deferred:
Federal		(21,538)		(1,898)		6,971
Non-U.S.		(4,488)		3,196		6,513
State and local		(4,097)		(283)		1,259
		(30,123)		1,015		14,743
Total	$	48,418	$	57,896	$	75,410

The differences between total income tax expense and the amount computed by applying the statutory federal income tax rate to income before income taxes for the three years ended December 31, 2021 were as follows:

	Year Ended December 31,
	2021			2020			2019
Statutory rate applied to pre-tax income	$	68,250		$	55,448		$	77,384
State and local income taxes, net of federal tax benefit		4,005			6,148			8,831
Excess tax benefits resulting from exercises of stock-based compensation		(4,681)			(2,471)			(3,451)
Resolution and settlements to uncertain tax positions		577			(4,146)			(9,432)
Foreign Derived Intangible Income Deduction		(2,197)			(1,267)			(4,315)
Foreign rate variance		2,131			85			7,023
Valuation allowances		(4,209)			4,753			3,198
Research and development credit		(5,300)			(4,400)			(4,786)
Pension plan termination adjustment		(14,711)			—			—
U.S. tax cost (benefit) of foreign source income		3,488			269			1,783
Other		1,065			3,477			(825)
Total	$	48,418		$	57,896		$	75,410
Effective tax rate		14.9	%		21.9	%		20.5	%

The 2021 effective tax rate was lower than 2020 primarily due to the impact of a plan termination and utilization of certain loss carryforwards previously subject to valuation allowances in the current year offset by the impact of lower income tax benefits for the settlement of tax items recorded in the prior year.

Total income tax payments, net of refunds, were $87,288 in 2021, $59,360 in 2020 and $42,880 in 2019.

Deferred Taxes

Significant components of deferred tax assets and liabilities at December 31, 2021 and 2020, were as follows:

	December 31,
	2021		2020
Deferred tax assets:
Tax loss and credit carry-forwards	$	46,889	$	56,076
Inventory		1,929		2,525
Other accruals		13,395		14,084
Employee benefits		28,163		27,673
Pension obligations		9,760		13,021
Other		5,073		4,306
Deferred tax assets, gross		105,209		117,685
Valuation allowance		(55,619)		(65,413)
Deferred tax assets, net		49,590		52,272
Deferred tax liabilities:
Property, plant and equipment		40,422		36,795
Intangible assets		18,253		13,595
Inventory		3,716		5,586
Pension obligations		16,397		16,070
Other		9,202		10,009
Deferred tax liabilities		87,990		82,055
Total deferred taxes	$	(38,400)	$	(29,783)

At December 31, 2021, certain subsidiaries had net operating loss carry-forwards of approximately $7,245 that expire in various years from 2022 through 2035, plus $168,519 for which there is no expiration date.

In assessing the realizability of deferred tax assets, the Company assesses whether it is more-likely-than-not that a portion or all of the deferred tax assets will not be realized. The Company considers the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. At December 31, 2021, a valuation allowance of $55,619 was recorded against certain deferred tax assets based on this assessment. The Company believes it is more-likely-than-not that the tax benefit of the remaining net deferred tax assets will be realized. The amount of net deferred tax assets considered realizable could be increased or reduced in the future if the Company’s assessment of future taxable income or tax planning strategies changes.

The Company determined it will repatriate earnings for certain non-U.S. subsidiaries, which are subject to foreign withholding taxes. The Company has estimated the associated tax to be $233. The Company considers remaining earnings and outside basis in all other non-U.S. subsidiaries to be indefinitely reinvested and has not recorded any deferred taxes as such estimate is not practicable.

Unrecognized Tax Benefits

Liabilities for unrecognized tax benefits related to uncertain tax positions are classified as Other liabilities unless expected to be paid in one year. Additionally, to the extent a position would not result in a cash tax liability, those amounts are generally recorded to Deferred income taxes to offset tax attributes. The Company recognizes interest and penalties related to unrecognized tax benefits in Income taxes. Current income tax expense included benefits of $485 for the year ended December 31, 2021 and benefits of $244 for the year ended December 31, 2020 for interest and penalties. For those same years, the Company’s accrual for interest and penalties related to unrecognized tax benefits totaled $3,209 and $4,120, respectively.

The following table summarizes the activity related to unrecognized tax benefits:

	2021		2020
Balance at beginning of year	$	17,596	$	20,585
Increase related to current year tax provisions		2,693		1,661
Increase/(decrease) related to prior years' tax positions		(17)		683
Decrease related to settlements with taxing authorities		—		(1,476)
Resolution of and other decreases in prior years' tax liabilities		(1,585)		(4,537)
Other		(476)		680
Balance at end of year	$	18,211	$	17,596

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $14,918 at December 31, 2021 and $14,202 at December 31, 2020.

The Company files income tax returns in the U.S. and various state, local and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2017. The Company is currently subject to various state audits and non-U.S. income tax audits. The Company is generally not able to precisely estimate the ultimate settlement amounts or timing until after the close of an audit. The Company evaluates its tax positions and establishes liabilities for unrecognized tax benefits related to uncertain tax positions that may be challenged by local authorities and may not be fully sustained.

Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including management’s judgment in the interpretation of applicable tax law, regulation or tax ruling, the progress of tax audits and closing of statutes of limitations. Based on information currently available, management believes that additional audit activity could be completed and/or statutes of limitations may close relating to existing unrecognized tax benefits. It is reasonably possible there could be a further reduction of $3,921 in prior years’ unrecognized tax benefits in 2022.