XML 62 R19.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Income Taxes
12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes

(11)

Income Taxes

The following table presents the U.S. and foreign components of earnings before income taxes and the related income tax expense (in thousands):

 

 

 

Years Ended December 31,

 

 

 

2019

 

 

2018

 

 

2017

 

Earnings before income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

142,410

 

 

$

145,907

 

 

$

119,330

 

Foreign

 

 

69,306

 

 

 

65,995

 

 

 

39,768

 

 

 

$

211,716

 

 

$

211,902

 

 

$

159,098

 

Income tax expense:

 

 

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Federal

 

$

20,254

 

 

$

18,334

 

 

$

31,067

 

U.S. State and local

 

 

5,457

 

 

 

3,218

 

 

 

3,636

 

Foreign

 

 

19,180

 

 

 

17,547

 

 

 

14,573

 

 

 

 

44,891

 

 

 

39,099

 

 

 

49,276

 

Deferred:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Federal

 

 

9,180

 

 

 

8,123

 

 

 

20,327

 

U.S. State and local

 

 

1,210

 

 

 

1,142

 

 

 

(427

)

Foreign

 

 

(2,972

)

 

 

(139

)

 

 

(761

)

 

 

 

7,418

 

 

 

9,126

 

 

 

19,139

 

 

 

$

52,309

 

 

$

48,225

 

 

$

68,415

 

 

The following schedule reconciles the differences between the U.S. federal income taxes at the U.S. statutory rate and our income tax expense (dollars in thousands):

 

 

 

2019

 

 

2018

 

 

2017

 

Statutory federal income tax rate

 

$

44,460

 

 

 

21.0

%

 

$

44,499

 

 

 

21.0

%

 

$

55,684

 

 

 

35.0

%

State income tax expense, net of

   federal income tax benefit

 

 

7,239

 

 

 

3.4

 

 

 

6,767

 

 

 

3.2

 

 

 

2,808

 

 

 

1.8

 

Audits and adjustments, net

 

 

2,556

 

 

 

1.2

 

 

 

2,659

 

 

 

1.3

 

 

 

(313

)

 

 

(0.2

)

Change in valuation allowances

 

 

(2,739

)

 

 

(1.3

)

 

 

60

 

 

 

 

 

 

2,472

 

 

 

1.5

 

Foreign income taxed at different rates

 

 

4,024

 

 

 

1.9

 

 

 

2,639

 

 

 

1.2

 

 

 

(6,057

)

 

 

(3.8

)

U.S. mandatory deemed repatriation

 

 

 

 

 

 

 

 

(1,396

)

 

 

(0.7

)

 

 

5,625

 

 

 

3.5

 

Adjustment of net deferred tax assets

   for enacted U.S. federal tax reform

 

 

 

 

 

 

 

 

(4,198

)

 

 

(2.0

)

 

 

7,738

 

 

 

4.9

 

Research and development credits

 

 

(5,438

)

 

 

(2.6

)

 

 

(4,132

)

 

 

(1.9

)

 

 

 

 

 

 

Other, net

 

 

2,207

 

 

 

1.1

 

 

 

1,327

 

 

 

0.7

 

 

 

458

 

 

 

0.3

 

Effective tax rate

 

$

52,309

 

 

 

24.7

%

 

$

48,225

 

 

 

22.8

%

 

$

68,415

 

 

 

43.0

%

 

In December 2017, U.S. federal tax reform was enacted as part of the U.S. Tax Cuts and Jobs Act.  As part of the change in tax law, beginning in 2018, the U.S. statutory federal income tax rate was reduced from 35% to 21%.  This reduction required a remeasurement of our deferred tax balances that resulted in an increase in our 2017 income tax expense.  In addition, the change in tax law included provisions requiring mandatory deemed repatriation of undistributed foreign earnings.  In 2017 and the first nine months of 2018, we recorded provisional amounts for certain tax enactment-date effects of the new law by applying the guidance of SEC Staff Accounting Bulletin 118 because we had not yet completed our enactment-date accounting for these effects.  In 2017 and 2018, the company recorded tax expense and benefit, respectively, related to the new tax law that included remeasurement of U.S. deferred income taxes, the mandatory deemed repatriation provision and the state tax effects of these items.  The changes to 2017 provisional amounts resulted in a benefit of $5,600,000, which reduced our annual effective tax rate by 2.7% in 2018.  The accounting for the enactment-date income tax effects for the new tax law was completed in 2018.

At December 31, 2017, all undistributed foreign earnings were taxed as part of the deemed repatriation of previously untaxed foreign earnings required by the U.S. Tax Cuts and Jobs Act of 2017.   For foreign entities not treated as branches for U.S. tax purposes, we continue to assert

indefinite reinvestment of foreign earnings, and accordingly have not accrued any additional income or withholding taxes on the potential repatriation of these earnings.  At the present time, given the various complexities involved in repatriating earnings, it is not practicable to estimate the amount of tax that may be payable if these earnings were not reinvested indefinitely.

The significant components of deferred tax assets and liabilities are as follows (in thousands):

 

 

 

December 31,

 

 

 

2019

 

 

2018

 

Deferred tax assets:

 

 

 

 

 

 

 

 

Net operating losses

 

$

27,328

 

 

$

23,926

 

Foreign tax credits

 

 

16,091

 

 

 

16,800

 

Other

 

 

20,153

 

 

 

16,335

 

Gross deferred tax assets

 

 

63,572

 

 

 

57,061

 

Valuation allowances

 

 

(38,247

)

 

 

(40,630

)

Total deferred tax assets

 

 

25,325

 

 

 

16,431

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

Goodwill and other intangibles

 

 

(48,279

)

 

 

(1,202

)

Property and equipment

 

 

(12,702

)

 

 

(998

)

Other

 

 

(5,406

)

 

 

(6,947

)

Total deferred tax liabilities

 

 

(66,387

)

 

 

(9,147

)

Net deferred tax (liabilities) assets

 

$

(41,062

)

 

$

7,284

 

 

The net non-current deferred tax assets and liabilities are as follows (in thousands):

 

 

 

December 31,

 

 

 

2019

 

 

2018

 

Net non-current deferred tax assets, which are included in

   "Other assets"

 

$

3,571

 

 

$

7,967

 

Net non-current deferred tax liabilities, which are included in

   "Other liabilities"

 

 

(44,633

)

 

 

(683

)

Net deferred tax (liabilities) assets

 

$

(41,062

)

 

$

7,284

 

 

As of December 31, 2019, we have a federal net operating loss carryforward (“NOL”) and U.S. state NOLs that will expire between 2020 and 2038.  We also have NOLs from various non-U.S. jurisdictions of $93,090,000.  While the majority of the non-U.S. NOLs have no expiration date, certain of them will expire between 2020 and 2026.  Certain federal and state NOLs relate to pre-acquisition losses from acquired subsidiaries, and accordingly, are subject to annual limitations as to their use under the provisions of Internal Revenue Code Section 382 – Limitation on net operating loss carry forwards and certain built-in losses following ownership change.  

On the basis of currently available information, we have provided valuation allowances for certain of our deferred tax assets where we believe it is more likely than not that the related tax benefits will not be realized.  At December 31, 2019 and 2018, our valuation allowances totaled $38,247,000 and $40,630,000, respectively, representing non-U.S. NOLs, foreign depreciation allowances and foreign tax credits.

We believe it is more likely than not that forecasted income, including income that may be generated as a result of prudent and feasible tax planning strategies, together with the tax effects of deferred tax liabilities, will be sufficient to fully recover our remaining deferred tax assets.  In the future, if we determine that realization of the remaining deferred tax assets and the availability of certain previously paid taxes to be refunded are not more likely than not, we will need to increase our valuation allowances and record additional income tax expense.  Changes to our valuation allowance for the years ended December 31, 2019 and 2018 were primarily driven by U.S. federal tax reform, specifically related to U.S. mandatory deemed repatriation, foreign currency translation and other adjustments. Various taxing jurisdictions are examining our tax returns for certain tax years.  Although the outcome of tax audits cannot be predicted with certainty, management believes the ultimate resolution of these examinations will not result in a material adverse effect to our financial position, results of operations or cash flows.

As of December 31, 2019 and 2018, we had approximately $9,736,000 and $6,849,000, respectively, of unrecognized tax benefits.  Of these amounts, approximately $442,000 and $313,000,

respectively, related to accrued interest.  The immaterial changes in the unrecognized tax benefits balance during the year reflect additions for tax positions in prior and current periods, subtractions due to foreign currency translation and subtractions due to audit settlements and statute expirations.  

 

In the future, if recognized, the liability associated with uncertain tax positions would affect our effective tax rate.  We do not believe there will be any changes over the next 12 months that would have a material effect on our effective tax rate.  

Several of our subsidiaries are currently under audit for tax years 2012 through 2018.  Although the timing of the resolutions and/or closures of audits is highly uncertain, it is reasonably possible that the examination phase of these audits may be concluded within the next 12 months which could significantly increase or decrease the balance of our gross unrecognized tax benefits.  However, based on the status of the various examinations in multiple jurisdictions, an estimate of the range of reasonably possible outcomes cannot be made at this time, but the estimated effect on our income tax expense and net earnings is not expected to be significant.

We, including our subsidiaries, file income tax returns in the U.S. federal jurisdiction and many state and local and non-U.S. jurisdictions.  In the U.S., federal income tax returns for 2016, 2017 and 2018 remain open to examination.  For U.S. state and local taxes as well as in non-U.S. jurisdictions, the statute of limitations generally varies between three and ten years.  However, to the extent allowable by law, the tax authorities may have a right to examine and make adjustment to prior periods when amended returns have been filed, or when net operating losses or tax credits were generated and carried forward for subsequent utilization.