Income Taxes

9 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

For the three-month period ended September 30, 2020, the Company's effective tax rate was 16.6% compared to an effective tax rate of 35.1% for the three-month period ended September 30, 2019. For the three months ended September 30, 2020, the rate was negatively impacted by valuation allowance activity of $2.0 million, offset by a state tax benefit of $0.8 million. resulting in a lower effective tax rate when in a pre-tax loss position. For the three months ended September 30, 2019, the effective tax rate was negatively impacted by losses in jurisdictions in which no tax benefit can be recognized.

For the nine-month period ended September 30, 2020, the Company's effective tax rate was 6.3% compared to an effective tax rate of 97.0% for the nine-month period ended September 30, 2019. For the nine months ended September 30, 2020, the Company had a pre-tax loss primarily resulting from impairment charges of $61.1 million. The impairment charges significantly impacted the Company's effective tax rate because $48.7 million of the impairment charges related to non-deductible goodwill, resulting in a low effective tax rate for the nine months ended September 30, 2020 when in a pre-tax loss position. Additionally, the effective rate was negatively impacted by valuation allowance activity of $2.7 million. For the nine-month period ended September 30, 2019, the Company recorded a tax benefit of $5.5 million primarily driven by $10.5 million of tax benefit related to the pension plan settlement. Excluding the tax benefit of the pension plan settlement, the Company's effective tax rate for the nine months ended September 30, 2019 was 25.2%. This was negatively impacted by $1.8 million from losses in jurisdictions in which no tax benefit can be recognized, partially offset by the Company's geographical mix of earnings.

The Company and its subsidiaries file a consolidated federal income tax return, as well as returns required by various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities, including such major jurisdictions as the United States, Canada, China, France, Germany, Hong Kong, India, the Netherlands, and the United Kingdom. With few exceptions, the Company is no longer subject to U.S. federal examinations for years before 2016, state and local examinations for years before 2015, and non-U.S. income tax examinations for years before 2013.

The Company’s effective tax rates in future periods could be affected by an increase or decrease in earnings in countries where tax rates differ from the United States federal tax rate, the relative impact of permanent tax adjustments on earnings from domestic operations, changes in net deferred tax asset valuation allowances, including valuation allowances on loss

carryforwards in which no tax benefit can be recognized, stock vesting, pension plan terminations, the completion of acquisitions or divestitures, changes in tax rates or tax laws and the completion of ongoing tax planning strategies and audits.

On July 20, 2020, the U.S. Treasury Department and IRS released T.D. 9902 final regulations for publication in the Federal Register related to the global intangible low-taxed income (“GILTI”) high-tax exception. The final regulations largely adopt the framework of the 2019 proposed regulations, with certain key departures. The most significant departures are that an election to apply the GILTI high-tax exception may be made annually instead of once every five years, and that the calculation is made with respect to each “tested unit” of a controlled foreign corporation, rather than on a qualified business unit by qualified business unit basis. The company has evaluated the final regulations and included the impacts of these changes in the Company’s third quarter financial statements.