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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES The Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted on December 22, 2017, and includes significant changes to the U.S. corporate tax system. Effective January 1, 2018, the 2017 Tax Act reduced the U.S. federal corporate tax rate from 35% to 21%, and transitioned the U.S. federal tax system from a worldwide tax system to a territorial tax system, and eliminated or reduced certain domestic deductions among other changes. In converting to the new territorial tax system, a deemed repatriation tax on previously tax-deferred earnings of certain foreign subsidiaries was required to be recognized as of December 31, 2017, and is payable over eight years. On December 22, 2017, the SEC issued Staff Accounting Bulletin 118 (“SAB 118”) that provides additional guidance allowing companies to apply a measurement period of up to twelve months to account for the impacts of the 2017 Tax Act in their financial statements. In the period ending December 31, 2018, we recognized measurement period adjustments of $2.1 million related to the deemed repatriation tax and the remeasurement of our deferred tax assets and liabilities. The effect of the measurement period adjustment on the 2018 effective tax rate was an increase of 0.5%. The accounting for the transitional impacts of the 2017 Tax Act are now complete. We are no longer asserting indefinite reversal under ASC 740-30-25 for undistributed earnings of non-U.S. subsidiaries and have accrued for related tax liabilities as of December 31, 2018. The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the estimated future tax effects of temporary differences between book and tax treatment of assets and liabilities and carryforwards to the extent they are realizable. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. While we consider future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance, in the event we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, a reduction of the valuation allowance would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, a reduction to the deferred tax asset would be charged to income in the period such determination was made. We record a liability for uncertain tax positions that do not meet the more likely than not standard as prescribed by the authoritative guidance for income tax accounting. We record tax benefits for only those positions that we believe will more likely than not be sustained. Unrecognized tax benefits are the differences between tax positions taken, or expected to be taken, in tax returns, and the benefits recognized for accounting purposes. We classify uncertain tax positions as long-term liabilities. Significant judgment is required in determining our worldwide provision for income taxes and our income tax filings are regularly under audit by tax authorities. Any audit result differing from amounts recorded would increase or decrease income in the period that we determine such adjustment is likely. Interest expense and penalties associated with the underpayment of income taxes are included in income tax expense. Earnings before income taxes were as follows (in thousands):໿
﻿ |  | For the Years Ended December 31,
﻿ |  | 2018 |  | 2017 |  | 2016
﻿ |  |  |  |  |  |  |  |  |
Domestic |  | $ | 337,437 |  |  | $ | 268,714 |  |  | $ | 227,875 |
International |  | 120,305 |  |  | 112,343 |  |  | 93,971 |
﻿ |  | $ | 457,742 |  |  | $ | 381,057 |  |  | $ | 321,846 |
The provision (benefit) for income taxes comprised the following (in thousands):
﻿ |  | For the Years Ended December 31,
﻿ |  | 2018 |  | 2017 |  | 2016
Current |  |  |  |  |  |
Federal |  | $ | 47,130 |  |  | $ | 92,453 |  |  | $ | 53,285 |
State |  | 10,415 |  |  | 9,258 |  |  | 6,608 |
International |  | 22,015 |  |  | 23,993 |  |  | 19,291 |
﻿ |  | 79,560 |  |  | 125,704 |  |  | 79,184 |
Deferred |  |  |  |  |  |
Federal |  | 3,970 |  |  | (1,201 | ) |  | 20,305 |
State |  | (937 | ) |  | (4,102 | ) |  | 1,196 |
International |  | (1,898 | ) |  | (2,613 | ) |  | (893 | )
﻿ |  | 1,135 |  |  | (7,916 | ) |  | 20,608 |
﻿ |  | $ | 80,695 |  |  | $ | 117,788 |  |  | $ | 99,792 |
The provision for income taxes differs from the amounts computed by applying the statutory federal income tax rate as follows:໿
﻿ |  | For the Years Ended December 31,
﻿ |  | 2018 |  | 2017 |  | 2016
﻿ |  |  |  |  |  |  |  |  |
U.S. federal statutory rate |  | 21.0 | % |  | 35.0 | % |  | 35.0 | %
State income tax, net of federal tax benefit |  | 2.6 |  |  | 1.9 |  |  | 1.8 |
Taxation on international earnings |  | (0.8 | ) |  | (5.5 | ) |  | (4.8 | )
Foreign derived intangible income |  | (1.3 | ) |  | — |  |  | — |
Share-based compensation from settlements under ASU 2016-09 |  | (4.7 | ) |  | (7.3 | ) |  | — |
Domestic manufacturing exclusions |  | — |  |  | (1.1 | ) |  | (1.0 | )
Research and development credit |  | (0.9 | ) |  | (0.9 | ) |  | (0.8 | )
Impact of the Tax Cuts and Jobs Act |  | 0.5 |  |  | 9.4 |  |  | — |
State income tax carryforwards |  | (0.2 | ) |  | (1.4 | ) |  | — |
Other, net |  | 1.4 |  |  | 0.8 |  |  | 0.8 |
Effective tax rate |  | 17.6 | % |  | 30.9 | % |  | 31.0 | %
Our effective income tax rate was 17.6% for the year ended December 31, 2018, and 30.9% for the year ended December 31, 2017. Our effective income tax rate for the year ended December 31, 2018 was lower primarily related to the reduction in the 2018 U.S. statutory tax rate to 21% from 35%, as well as the comparison to a non-recurring charge resulting from the 2017 Tax Act for the year ended December 31, 2017. These favorable impacts were offset by lower tax benefits related to share-based compensation and the prior year utilization of foreign tax credits. Our effective income tax rate was 30.9% for the year ended December 31, 2017, and 31.0% for the year ended December 31, 2016. Our effective income tax rate for the year ended December 31, 2017, was lower as a result of the adoption of ASU 2016-09 related to share-based compensation, which decreased our effective tax rate by approximately 7% and the utilization of foreign tax credits, which reduced our effective tax rate by approximately 1%. These decreases were offset by the following non-recurring items: A deemed repatriation tax, net of the remeasurement of our deferred tax assets and liabilities resulting from the 2017 Tax Act and a tax benefit related to state tax credit carryforwards, which combined, increased our tax rate by approximately 8%. Income taxes paid for the periods ended December 31, 2018, 2017 and 2016 was $69.7 million, $81.2 million, and $74.7 million, respectively. We have business operations in Switzerland and the Netherlands and have been granted tax rulings by each jurisdiction. Our Netherlands ruling is set to expire on December 31, 2022, and our Switzerland ruling remains in effect as long as our business operations comply with the ruling requirements or as long as Switzerland statutorily allows such rulings. As a result of the tax rulings, our net income was higher by $9.2 million, $8.9 million, and $7.8 million for the years ended December 31, 2018, 2017, and 2016, respectively. The benefit from these tax rulings is reflected within the overall benefit received from international income taxes in the table above. The components of the net deferred tax assets (liabilities) included in the accompanying consolidated balance sheets are as follows (in thousands):
﻿ |  | December 31, 2018 |  | December 31, 2017
﻿ |  |  |  |  |  |
Assets |  |  |  |  |  |
Accrued expenses |  | $ | 21,065 |  |  | $ | 13,843 |
Accounts receivable reserves |  | 2,363 |  |  | 2,624 |
Deferred revenue |  | 7,637 |  |  | 10,618 |
Inventory basis differences |  | 2,787 |  |  | 3,039 |
Property-based differences |  | 1,652 |  |  | 1,324 |
Share-based compensation |  | 9,267 |  |  | 9,035 |
Other |  | 2,314 |  |  | 918 |
Net operating loss carryforwards |  | 3,208 |  |  | 3,350 |
Tax credit carryforwards |  | 10,226 |  |  | 8,096 |
Unrealized losses on foreign currency exchange contracts, interest rate swaps and investments |  | 404 |  |  | 2,355 |
Total assets |  | 60,923 |  |  | 55,202 |
Valuation allowance |  | (6,212 | ) |  | (6,211 | )
Total assets, net of valuation allowance |  | 54,711 |  |  | 48,991 |
﻿ |  |  |  |
Liabilities |  |  |  |
Deferred instrument costs |  | (27,210 | ) |  | (20,399 | )
Property-based differences |  | (32,494 | ) |  | (31,859 | )
Intangible asset basis differences |  | (13,454 | ) |  | (13,574 | )
Other |  | (432 | ) |  | (656 | )
Unrealized gains on foreign currency exchange contracts, interest rate swaps and investments |  | (1,907 | ) |  | (158 | )
Total liabilities |  | (75,497 | ) |  | (66,646 | )
Net deferred tax assets (liabilities) |  | $ | (20,786 | ) |  | $ | (17,655 | )
As of December 31, 2018, we have recorded a valuation allowance of $6.2 million against certain deferred tax assets related to temporary differences including net operating loss (“NOL”) and tax credit carryforwards, as it is more likely than not that they will not be realized or utilized within the carryforward period. As of December 31, 2018, we have NOL’s in certain state and international jurisdictions of approximately $15.1 million available to offset future taxable income. Most of these NOL’s will expire at various dates between 2021 and 2026 and the remainder have indefinite lives. The following table summarizes the changes in unrecognized tax benefits during the years ended December 31, 2018, 2017 and 2016 (in thousands):
﻿ |  | For the Years Ended December 31,
﻿ |  | 2018 |  | 2017 |  | 2016
﻿ |  |  |  |  |  |
Total amounts of unrecognized tax benefits, beginning of period |  | $ | 21,417 |  |  | $ | 18,463 |  |  | $ | 7,204 |
Gross increases in unrecognized tax benefits as a result of tax positions taken during a prior period |  | 2,991 |  |  | 74 |  |  | 75 |
Gross increases in unrecognized tax benefits as a result of tax positions taken in the current period |  | 461 |  |  | 4,681 |  |  | 12,657 |
Decreases in unrecognized tax benefits relating to settlements with taxing authorities |  | — |  |  | (713 | ) |  | (1,326 | )
Decreases in unrecognized tax benefits as a result of a lapse of the applicable statutes of limitations |  | (622 | ) |  | (1,088 | ) |  | (147 | )
Total amounts of unrecognized tax benefits, end of period |  | $ | 24,247 |  |  | $ | 21,417 |  |  | $ | 18,463 |
The total amount of unrecognized tax benefits at December 31, 2018 and December 31, 2017, was $24.2 million and $21.4 million, respectively. Of the total unrecognized tax benefits at December 31, 2018 and 2017, $18.3 million and $9.1 million, respectively, comprise unrecognized tax positions that would, if recognized, affect our effective tax rate. During the years ended December 31, 2018, 2017 and 2016, we recorded interest expense and penalties of $1.2 million, $0.9 million, and $0.3 million, respectively, as income tax expense in our consolidated statement of income. At December 31, 2018 and 2017, we had $2.1 million and $1.0 million, respectively, of estimated interest expense and penalties accrued in our consolidated balance sheets. In the ordinary course of our business, our income tax filings are regularly under audit by tax authorities. While we believe we have appropriately provided for all uncertain tax positions, amounts asserted by taxing authorities could be greater or less than our accrued position. Accordingly, additional provisions on income tax matters, or reductions of previously accrued provisions, could be recorded in the future as we revise our estimates due to changing facts and circumstances or the underlying matters are settled or otherwise resolved. We are currently under tax examinations in various jurisdictions. We anticipate that these examinations will be concluded within the next two years. With few exceptions, we are no longer subject to income tax examinations in any jurisdiction in which we conduct significant taxable activities for years before 2014.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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