XML 77 R20.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
The following table summarizes the components of Income tax expense:
For the Years Ended December 31,
(in millions of dollars)202320222021
Current tax expense:
Federal$33.7 $24.0 $14.7 
Foreign3.1 4.1 5.0 
State and local9.1 6.6 4.0 
Total current tax expense45.9 34.7 23.7 
Deferred tax (benefit) expense:
Federal— (3.5)0.4 
Foreign(0.5)(0.1)1.5 
State and local0.2 (0.6)(8.6)
Total deferred tax benefit(0.3)(4.2)(6.7)
Total income tax expense$45.6 $30.5 $17.0 
The following table summarizes the differences between the statutory federal income tax rate and the effective income tax rate:
For the Years Ended December 31,
202320222021
Statutory federal income tax rate21.0 %21.0 %21.0 %
State income taxes, net of federal tax benefit3.8 4.0 3.4 
Valuation allowance(0.1)(2.3)(2.9)
Remeasurement of deferred taxes(0.1)(0.6)(2.8)
Foreign-derived intangible income(1.7)(0.9)(0.6)
Executive compensation limitation1.5 0.7 0.9 
Foreign tax rate effects0.7 0.6 1.2 
Excess tax benefits from stock compensation activity(1.9)(1.6)(4.8)
Other, net(0.7)(0.7)(0.9)
Effective income tax rate22.5 %20.2 %14.5 %
The following table summarizes Income before income taxes:
For the Years Ended December 31,
(in millions of dollars)202320222021
U.S.$176.6 $132.1 $94.8 
Non-U.S.26.4 18.8 22.8 
Income before income taxes$203.0 $150.9 $117.6 
Summary
The Company recognized income tax expense of $45.6 million for the year ended December 31, 2023, compared to $30.5 million for the year ended December 31, 2022. The increase in income tax expense in the current year was primarily due to higher earnings and the non-recurrence of certain discrete tax benefits recognized in the prior year associated with the release of valuation allowances, partially offset by a $1.5 million increase in the amount of excess tax benefits from stock compensation activity compared to the prior year. In the year ended December 31, 2022, the Company recognized a $2.6 million tax benefit from the release of a valuation allowance that had previously been recorded against deferred tax assets associated with foreign tax credits in the U.S., primarily due to tax planning. The Company also recognized a $1.1 million tax benefit during the year ended December 31, 2022 associated with the release of a valuation allowance in the U.K., as the associated deferred tax assets
were considered more-likely-than-not to be realized primarily due to increased projections of future taxable income. Including these items, the Company’s effective tax rate for the year ended December 31, 2023 was 22.5%, compared to 20.2% in 2022.
The Company recognized income tax expense of $30.5 million for the year ended December 31, 2022, compared to $17.0 million for the year ended December 31, 2021. The increase in income tax expense in 2022 was primarily due to higher earnings, a $3.2 million reduction in the amount of excess tax benefits from stock compensation activity compared to 2021, and fewer discrete tax benefits than in 2021. In the year ended December 31, 2022, the Company recognized a $2.6 million tax benefit from the release of a valuation allowance that had previously been recorded against deferred tax assets associated with foreign tax credits in the U.S., and also recognized a $1.1 million tax benefit associated with the release of a valuation allowance in the U.K. In the year ended December 31, 2021, the Company recognized a $3.4 million tax benefit associated with the release of state valuation allowances and a $3.3 million tax benefit associated with the remeasurement of deferred taxes for changes in state tax apportionment, both of which primarily resulted from a change in tax status and other tax planning activities executed during the year. Including these items, the Company’s effective tax rate for the year ended December 31, 2022 was 20.2%, compared to 14.5% in 2021.
The Company paid income taxes of $46.2 million in 2023, $26.9 million in 2022 and $35.5 million in 2021.
Deferred Taxes
The following table summarizes the Company’s deferred tax assets and liabilities:
(in millions of dollars)20232022
Deferred tax assets:
Properties and equipment$3.5 $3.5 
Accrued expenses34.8 28.7 
Stock-based compensation3.3 3.2 
Net operating loss and tax credit carryforwards14.0 18.0 
Goodwill and intangibles4.8 0.9 
Pension benefits15.6 14.8 
Gross deferred tax assets76.0 69.1 
Valuation allowance(0.5)(0.7)
Total deferred tax assets75.5 68.4 
Deferred tax liabilities:
Properties and equipment(40.6)(35.4)
Pension benefits(11.9)(10.1)
Goodwill and intangibles(62.4)(63.1)
Other(1.8)(1.9)
Gross deferred tax liabilities(116.7)(110.5)
Net deferred tax liabilities$(41.2)$(42.1)
The deferred tax asset for net operating loss and tax credit carryforwards at December 31, 2023 includes state net operating loss carryforwards of $4.5 million, which will begin to expire in 2024, and foreign net operating loss carryforwards of $9.5 million, which have an indefinite carryforward period.
The deferred tax asset for tax loss and tax credit carryforwards at December 31, 2022, included state net operating loss carryforwards of $5.4 million, state income tax credits of $0.3 million, foreign net operating loss carryforwards of $9.7 million, and U.S. foreign tax credits of $2.6 million.
The $75.5 million of deferred tax assets at December 31, 2023, for which no valuation allowance is recorded, is anticipated to be realized through future taxable income or the future reversal of existing taxable temporary differences recorded as deferred tax liabilities at December 31, 2023. Should the Company determine that it is not more-likely-than-not to be able to realize its remaining deferred tax assets in the future, an adjustment to the valuation allowance would be recorded in the period such determination is made.
Generally, the Company has considered cash and cash equivalents held by subsidiaries outside the U.S. to be indefinitely reinvested in its foreign operations and the Company’s current plans do not demonstrate a need to repatriate such cash to fund U.S. operations. As of December 31, 2023, the Company continues to assert that its undistributed earnings of certain foreign subsidiaries are indefinitely reinvested. It is not practicable to determine the income tax liability that would be payable if such earnings were not permanently reinvested.
Valuation Allowances
ASC 740, Income Taxes, requires that the future realization of deferred tax assets depends on the existence of sufficient taxable income in future periods. Possible sources of taxable income include taxable income in carryback periods, the future reversal of existing taxable temporary differences recorded as a deferred tax liability, tax-planning strategies that generate future income or gains in excess of anticipated losses in the carryforward period and projected future taxable income. If, based upon all available evidence, both positive and negative, it is more likely than not such deferred tax assets will not be realized, a valuation allowance is recorded. Significant weight is given to positive and negative evidence that is objectively verifiable. A company’s three-year cumulative loss position is significant negative evidence in considering whether deferred tax assets are realizable and the accounting guidance restricts the amount of reliance the Company can place on projected taxable income to support the recovery of the deferred tax assets.
We continually evaluate the need to maintain a valuation allowance for deferred tax assets based on our assessment of whether it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income. Appropriate consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance.
As of December 31, 2023, the Company’s valuation allowance was $0.5 million, which represents the estimated amount of state net operating loss carryforwards that are not more-likely-than not to be realized prior to expiration. During the year ended December 31, 2023, the Company’s valuation allowance decreased by $0.2 million, primarily due to increased projections of future taxable income associated with these state net operating loss carryforwards.
Unrecognized Tax Benefits
The following table summarizes the activity related to the Company’s unrecognized tax benefits:
(in millions of dollars)202320222021
Balance at January 1$1.2 $1.2 $1.2 
Increases as a result of tax positions taken in the current period11.8 — 0.1 
Decreases from prior period positions(0.5)— — 
Decreases due to lapse of statute of limitations— — (0.1)
Balance at December 31$12.5 $1.2 $1.2 
During the year ended December 31, 2023, the Company filed amended U.S. federal income tax returns for the 2015 through 2018 tax years to claim a worthless stock deduction. As of December 31, 2023, the aggregate refund claim associated with the worthless stock deduction was $13.6 million, including interest of $1.8 million which is not included in the table above. As recovery of the refund claim was not considered more-likely-than-not as of December 31, 2023, the Company recognized an offsetting increase to its liability for unrecognized tax benefits. In accordance with ASC 740, the Company has recorded a receivable for the full amount of the refund claim, including interest, and an offsetting liability for unrecognized tax benefits for the same amount. The receivable and offsetting liability have been presented net on the Consolidated Balance Sheets and, as the refund claim is fully reserved, the recognition of the uncertain tax position had no impact on the Consolidated Statements of Operations during the year ended December 31, 2023. As of December 31, 2023, the amended tax returns were under examination by the applicable tax authorities. Subsequent to December 31, 2023, the tax authorities notified the Company that the amended tax returns had been approved, at which point receipt of the refund claim was considered more-likely-than-not. As a result, the Company expects to record a corresponding reduction in unrecognized tax benefits during the first quarter of 2024, which would impact the Company’s effective tax rate in 2024.
The Company’s accounting policy is to recognize interest and penalties related to income tax matters in income tax expense. At both December 31, 2023 and 2022, accruals for interest and penalties amounting to $0.4 million, were included in the Consolidated Balance Sheets but are not included in the table above. At December 31, 2023 and 2022, liabilities for unrecognized tax benefits, including interest and penalties of $1.1 million and $1.6 million, respectively, were included within Other long-term liabilities on the Consolidated Balance Sheets and would impact the Company’s effective rate, if recognized.
Other than the anticipated reduction in unrecognized tax benefits associated with the approval of the amended tax returns previously described, the Company does not expect significant changes to its unrecognized tax benefits as a result of potential expiration of statute of limitations or settlements with the tax authorities within the next twelve months.
Status of Tax Returns
We file U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2020 through 2022 tax years generally remain subject to examination by federal tax authorities, whereas the 2019 through 2022 tax years generally remain subject to examination by most state tax authorities. In significant foreign jurisdictions, the tax years from 2019 through 2022 generally remain subject to examination by their respective tax authorities.