Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

On March 27, 2020, the U.S. Federal government passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide economic relief from COVID-19. The CARES Act provides employer payroll tax credits for wages paid to employees who are unable to work during the COVID-19 outbreak and options to defer payroll tax payments. The Company has elected to defer remittances of payroll and other taxes into the future as provided for under the Act.

The following table summarizes the provision (benefit) for U.S. federal, state, and foreign taxes on income from continuing operations:

	Year Ended December 31,
In thousands	2021		2020		2019
Current:
Federal	$	20,197	$	(963)	$	4,859
State and local	7,271		1,731		2,179
Foreign	12,594		12,409		13,771
Total current	40,062		13,177		20,809
Deferred:
Federal	(36,196)		(2,852)		2,334
State and local	(12,186)		(3,340)		(1,846)
Foreign	(12,657)		(60,444)		(1,518)
Total deferred	(61,039)		(66,636)		(1,030)
Change in valuation allowance	(24,535)		53,697		838
Total provision (benefit) for income taxes	$	(45,512)	$	238	$	20,617

Subsequent to the issuance of our 2019 financial statements, we determined that a deferred tax liability related to the difference between the book and tax bases of a European subsidiary, initially recorded in 2018, should not have been recognized. Instead, we should have established a valuation allowance against the net operating loss deferred tax asset recognized for that subsidiary. As a result, the valuation allowance, the deferred tax liability, and the related disclosures of movements in those amounts, including foreign currency impacts, have been restated from the amounts previously reported in the 2019 tax disclosures. There is no impact on income tax benefit (provision), net income or the balance sheet presentation of this immaterial misstatement.

The change in the valuation allowance does not include the impacts of currency translation adjustments, acquisitions, or significant intercompany transactions.

Our tax provision (benefit) as a percentage of income before tax was 37%, less than 1%, and 28% for 2021, 2020, and 2019. The 2021 tax benefit reflects the impact of certain transfers of business activities and assets that result in a prospective shift of income from international operations to the U.S. A reconciliation of income taxes at the U.S. federal statutory rate of 21% to the consolidated actual tax rate is as follows:

	Year Ended December 31,
In thousands	2021		2020		2019
Income (loss) before income taxes
Domestic	$	(91,579)	$	24,010	$	57,261
Foreign	(32,231)		(80,649)		15,771
Total income (loss) before income taxes	$	(123,810)	$	(56,639)	$	73,032
Expected federal income tax provision (benefit)	$	(26,000)	$	(11,894)	$	15,337
Latin America Divestiture	—		10,936		—
Change in valuation allowance	(24,535)		53,697		838
Onshoring of international operations	(10,933)		—		—
Stock-based compensation	(2,465)		(163)		(2,130)
Foreign earnings	25,738		(58,649)		(15,610)
Tax credits	(8,988)		(9,101)		(8,794)
Uncertain tax positions, including interest and penalties	6,693		11,144		13,060
Change in tax rates	(1,919)		557		9,514
State income tax provision (benefit), net of federal effect	(5,722)		(1,997)		2,805
U.S. tax provision on foreign earnings	58		142		129
Local foreign taxes	667		1,298		1,471
Other, net	1,894		4,268		3,997
Total provision (benefit) from income taxes	$	(45,512)	$	238	$	20,617

Deferred tax assets and liabilities consist of the following:

	December 31,
In thousands	2021		2020
Deferred tax assets
Loss carryforwards(1)	$	412,023	$	423,013
Tax credits(2)	39,767		88,433
Accrued expenses	68,757		47,569
Pension plan benefits expense	17,140		21,735
Warranty reserves	9,302		11,083
Depreciation and amortization	94,917		6,363
Equity compensation	6,126		4,701
Inventory valuation	2,593		1,799
Deferred revenue	11,534		9,705
Interest	17,971		—
Leases	9,460		10,872
Other deferred tax assets, net	9,062		10,817
Total deferred tax assets	698,652		636,090
Valuation allowance	(443,593)		(503,859)
Total deferred tax assets, net of valuation allowance	255,059		132,231
Deferred tax liabilities
Depreciation and amortization	(56,897)		(39,995)
Leases	(8,489)		(10,046)
Other deferred tax liabilities, net	(10,201)		(7,969)
Total deferred tax liabilities	(75,587)		(58,010)
Net deferred tax assets	$	179,472	$	74,221

(1)For tax return purposes at December 31, 2021, we had U.S. federal loss carryforwards of $4.8 million, which begin to expire in the year 2022. At December 31, 2021, we have net operating loss carryforwards in Luxembourg of $1.3 billion, the majority of which can be carried forward indefinitely, offset by a full valuation allowance. The remaining portion of the loss carryforwards are composed primarily of losses in various other state and foreign jurisdictions. The majority of these losses can be carried forward indefinitely. At December 31, 2021, there was a valuation allowance of $443.6 million primarily associated with foreign loss carryforwards.

(2)For tax return purposes at December 31, 2021, we had: (1) U.S. general business credits of $53.3 million, which begin to expire in 2028; (2) U.S. foreign tax credits of $1.6 million, which begin to expire in 2025; and (3) state tax credits of $39.3 million, which begin to expire in 2022.

Changes in the valuation allowance for deferred tax assets are summarized as follows:

	Year Ended December 31,
In thousands	2021		2020		2019
Balance at beginning of period	$	503,859	$	427,030	$	437,149
Other adjustments	(35,731)		23,132		(10,957)
Additions charged to costs and expenses	(24,535)		53,697		838
Balance at end of period, noncurrent	$	443,593	$	503,859	$	427,030

We recognize valuation allowances to reduce deferred tax assets to the extent we believe it is more likely than not that a portion of such assets will not be realized. In making such determinations, we consider all available favorable and unfavorable evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and our ability to carry back losses to prior years. We are required to make assumptions and judgments about potential outcomes that lie outside management's control. Our most sensitive and critical factors are the projection, source, and character of future taxable income. Although realization is not assured, management believes it is more likely than not that deferred tax assets, net of valuation allowance, will be realized. The amount of deferred tax assets considered realizable, however, could be reduced in

the near term if estimates of future taxable income during the carryforward periods are reduced or current tax planning strategies are not implemented.

We do not provide U.S. deferred taxes on temporary differences related to our foreign investments that are considered permanent in duration. These temporary differences include undistributed foreign earnings of $25.7 million and $18.1 million at December 31, 2021 and 2020. Foreign taxes have been provided on these undistributed foreign earnings. As a result of recent changes in U.S. tax legislation, any repatriation of these earnings would not result in additional U.S. federal income tax.

We are subject to income tax in the United States and numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these reserves in light of changing facts and circumstances, such as the outcome of tax audits. The provision for income taxes includes the impact of reserve positions and changes to reserves that are considered appropriate.

A reconciliation of the beginning and ending amount of unrecognized tax benefits were as follows:

In thousands	Total
Unrecognized tax benefits at January 1, 2019	$	112,558
Gross increase to positions in prior years	1,067
Gross decrease to positions in prior years	(3,296)
Gross increases to current period tax positions	13,762
Audit settlements	—
Decrease related to lapsing of statute of limitations	(1,574)
Effect of change in exchange rates	(802)
Unrecognized tax benefits at December 31, 2019	$	121,715
Gross increase to positions in prior years	633
Gross decrease to positions in prior years	(2,140)
Gross increases to current period tax positions	14,821
Audit settlements	(795)
Decrease related to lapsing of statute of limitations	(2,381)
Effect of change in exchange rates	4,057
Unrecognized tax benefits at December 31, 2020	$	135,910
Gross increase to positions in prior years	570
Gross decrease to positions in prior years	(19,709)
Gross increases to current period tax positions	31,456
Audit settlements	—
Decrease related to lapsing of statute of limitations	(4,535)
Effect of change in exchange rates	(4,163)
Unrecognized tax benefits at December 31, 2021	$	139,529

	At December 31,
In thousands	2021		2020		2019
The amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate	$	139,503	$	134,473	$	120,410

If certain unrecognized tax benefits are recognized they would create additional deferred tax assets. These assets would require a full valuation allowance in certain locations based upon present circumstances.

We classify interest expense and penalties related to unrecognized tax benefits and interest income on tax overpayments as components of income tax expense. The net interest and penalties expense recognized were as follows:

	Year Ended December 31,
In thousands	2021		2020		2019
Net interest and penalties expense (benefit)	$	(1,097)	$	400	$	708

	At December 31,
In thousands	2021		2020
Accrued interest	$	2,964	$	3,432
Accrued penalties	747		1,645

At December 31, 2021, we are under examination by certain tax authorities. During 2021, we settled a French tax audit on years 2013-2018 with minimal impact to the financial statements or cash taxes. We believe we have appropriately accrued for the expected outcome of all tax matters and do not currently anticipate that the ultimate resolution of these examinations will have a material adverse effect on our financial condition, future results of operations, or cash flows.

Based upon the timing and outcome of examinations, litigation, the impact of legislative, regulatory, and judicial developments, and the impact of these items on the statute of limitations, it is reasonably possible that the related unrecognized tax benefits could change from those recognized within the next twelve months. However, at this time, an estimate of the range of reasonably possible adjustments to the balance of unrecognized tax benefits cannot be made.

We file income tax returns in various jurisdictions. We are subject to income tax examination by tax authorities in our major tax jurisdictions as follows:

Tax Jurisdiction	Years Subject to Audit
U.S. federal	Subsequent to 2002
France	Subsequent to 2018
Germany	Subsequent to 2013
United Kingdom	Subsequent to 2016
Indonesia	Subsequent to 2015
Italy	Subsequent to 2016