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Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Earnings before taxes is summarized as follows:
| 2016 |  | 2015 |  | 2014
| (dollars in thousands)
Domestic | $ | 336,625 |  |  | $ | 266,831 |  |  | $ | 240,936 |
Foreign | 84,680 |  |  | 14,336 |  |  | 39,854 |
Total | $ | 421,305 |  |  | $ | 281,167 |  |  | $ | 280,790 |
The provision for income taxes is summarized as follows:
| 2016 |  | 2015 |  | 2014
| (dollars in thousands)
Federal | $ | 94,621 |  |  | $ | 78,617 |  |  | $ | 69,536 |
State and local | 13,107 |  |  | 9,515 |  |  | 9,316 |
Foreign | 29,361 |  |  | 1,425 |  |  | 8,626 |
Total | $ | 137,089 |  |  | $ | 89,557 |  |  | $ | 87,478 |
Current | $ | 115,726 |  |  | $ | 87,638 |  |  | $ | 72,137 |
Deferred | 21,363 |  |  | 1,919 |  |  | 15,341 |
Total | $ | 137,089 |  |  | $ | 89,557 |  |  | $ | 87,478 |
Reconciliation of the differences between income taxes computed at the federal statutory rate to the effective rate are as follows:
| 2016 |  | 2015 |  | 2014
U.S. federal statutory tax rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State taxes, net of federal benefit | 2.3 |  |  | 2.1 |  |  | 2.2 |
U.S. domestic manufacturers deduction | (2.4 | ) |  | (2.6 | ) |  | (2.3 | )
Permanent book vs. tax differences | (1.6 | ) |  | (1.1 | ) |  | (2.0 | )
Foreign tax rate differentials | (1.1 | ) |  | (2.1 | ) |  | (1.9 | )
Reserve adjustments and other | 0.3 |  |  | 0.6 |  |  | 0.2 |
Consolidated effective tax | 32.5 | % |  | 31.9 | % |  | 31.2 | %
At December 31, 2016 and January 2, 2016, the company had recorded the following deferred tax assets and liabilities:
| 2016 |  | 2015
| (dollars in thousands)
Deferred tax assets: |  |  |  |  |
Federal net operating loss carryforwards | $ | 16,951 |  |  | $ | 13,416 |
Compensation related | 25,650 |  |  | 19,160 |
Accrued retirement benefits | 60,986 |  |  | 43,930 |
Inventory reserves | 9,275 |  |  | 8,183 |
Product liability and workers compensation reserves | 4,550 |  |  | 5,811 |
Warranty reserves | 10,141 |  |  | 9,252 |
Receivable related reserves | 3,376 |  |  | 3,069 |
UNICAP | 5,104 |  |  | 3,520 |
State net operating loss carryforwards | 1,923 |  |  | 1,483 |
Foreign net operating loss carryforwards | 16,717 |  |  | 17,549 |
Other | 37,822 |  |  | 32,347 |
Gross deferred tax assets | 192,495 |  |  | 157,720 |
Valuation allowance | (29,893 | ) |  | (20,395 | )
Deferred tax assets | $ | 162,602 |  |  | $ | 137,325 |
Deferred tax liabilities: |  |  |  |  |
Intangible assets | $ | (173,673 | ) |  | $ | (182,471 | )
Foreign tax earnings repatriation | (1,178 | ) |  | (1,363 | )
Depreciation | (2,957 | ) |  | (551 | )
Interest rate swap | (3,655 | ) |  | (6 | )
Other | (7,200 | ) |  | (2,783 | )
Deferred tax liabilities | $ | (188,663 | ) |  | $ | (187,174 | )
Net deferred tax assets (liabilities) | $ | (26,061 | ) |  | $ | (49,849 | )
Current deferred asset | $ | — |  |  | $ | 51,723 |
Long-term deferred asset | 51,699 |  |  | 11,438 |
Long-term deferred liability | (77,760 | ) |  | (113,010 | )
Net deferred tax assets (liabilities) | $ | (26,061 | ) |  | $ | (49,849 | )
The company does not provide for deferred taxes and foreign withholding taxes on the remaining undistributed earnings of certain international subsidiaries of approximately $157.4 million and $104.5 million as of December 31, 2016 and January 2, 2016, respectively, as these earnings are considered permanently invested. Upon repatriation of these earnings to the U.S. in the form of dividends or otherwise, the company may be subject to U.S. income taxes and foreign withholding taxes. The actual U.S. tax cost would depend on income tax laws and circumstances at the time of distribution. Determination of the related tax liability is not practicable because of the complexities associated with the hypothetical calculation. As of December 31, 2016, the company has U.S. federal and foreign income tax net operating loss carryforwards of approximately $48.4 million and $63.3 million, respectively. If not utilized, the federal net operating loss carryforwards will expire at various dates beginning 2024 through 2036. The foreign net operating losses have no expiration period. Certain of these carryforwards are subject to limitations on use due to tax rules affecting acquired tax attributes, loss sharing between group members, and business profitability, and therefore the company has established tax-effected valuation allowances against these tax benefits. The valuation allowances that the company has provided against the deferred tax assets amount to $29.9 million and primarily relate to the acquisition of AGA in 2015. The company will continue to maintain a valuation allowance on certain deferred tax assets until such time as in management’s judgment, considering all available positive and negative evidence, the company determines that these deferred tax assets are more likely than not realizable. As of December 31, 2016, the total amount of liability for unrecognized tax benefits related to federal, state and foreign taxes was approximately 20.3 million (of which $20.0 million would impact the effective tax rate if recognized) plus approximately $2.7 million of accrued interest and $4.9 million of penalties. The company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. Interest recognized in fiscal years 2016, 2015 and 2014 was $0.3 million, $0.3 million and $(0.3) million, respectively. Penalties recognized in fiscal years 2016, 2015 and 2014 was $1.0 million, $0.8 million and $1.1 million, respectively. Although the company believes its tax returns are correct, the final determination of tax examinations may be different than what was reported on the tax returns. In the opinion of management, adequate tax provisions have been made for the years subject to examination. The following table summarizes the activity related to the unrecognized tax benefits for the fiscal years ended January 3, 2015, January 2, 2016 and December 31, 2016 (dollars in thousands):
Balance at January 3, 2015 | $ | 12,474 |
Increases to current year tax positions | 3,089 |
Increase to prior year tax positions | 116 |
Decrease to prior year tax positions | (755 | )
Settlements | — |
Lapse of statute of limitations | (505 | )
Balance at January 2, 2016 | $ | 14,419 |
Increases to current year tax positions | 6,367 |
Increase to prior year tax positions | 601 |
Decrease to prior year tax positions | (233 | )
Settlements | — |
Lapse of statute of limitations | (865 | )
Balance at December 31, 2016 | $ | 20,289 |
The company operates in multiple taxing jurisdictions; both within the United States and outside of the United States, and faces audits from various tax authorities. The company remains subject to examination until the statute of limitations expires for the respective tax jurisdiction. Within specific countries, the company and its operating subsidiaries may be subject to audit by various tax authorities and may be subject to different statute of limitations expiration dates. It is reasonably possible that the amounts of unrecognized tax benefits associated with state, federal and foreign tax positions may decrease over the next twelve months due to expiration of a statute or completion of an audit. The company believes that it is reasonably possible that $2.0 million of its remaining unrecognized tax benefits may be recognized by the end of 2017 as a result of settlements with taxing authorities or lapses of statutes of limitations. A summary of the tax years that remain subject to examination in the company’s major tax jurisdictions are:
United States – federal | 2012 – 2016
United States – states | 2007 – 2016
Australia | 2012 – 2016
Brazil | 2012 – 2016
Canada | 2007 – 2016
China | 2007 – 2016
Czech Republic | 2014 – 2016
Denmark | 2013 – 2016
France | 2014 – 2016
Germany | 2014 – 2016
India | 2013 – 2016
Ireland | 2010 – 2016
Italy | 2012 – 2016
Luxembourg | 2012 – 2016
Mexico | 2011 – 2016
Netherlands | 2005 – 2016
Philippines | 2013 – 2016
Poland | 2011 – 2016
Romania | 2007 – 2016
South Korea | 2011
Spain | 2012 – 2016
Sweden | 2010 – 2016
Switzerland | 2008 – 2016
Taiwan | 2011 – 2012
United Kingdom | 2015 – 2016

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 + Details
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