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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 following table summarizes the components of the provision for income taxes from continuing operations:
| 2018 |  | 2017 |  | 2016
| (Dollars in thousands)
Current: |  |  |  |  |
Federal | $ | (1,525 | ) |  | $ | 133,621 |  |  | $ | 2,344 |
State | 1,432 |  |  | 5,213 |  |  | 5,230 |
Foreign | 29,353 |  |  | 35,444 |  |  | 28,842 |
Deferred: |  |  |  |  |
Federal | (5,124 | ) |  | (258,247 | ) |  | (25,141 | )
State | (5,114 | ) |  | 1,459 |  |  | (1,837 | )
Foreign | 4,174 |  |  | 212,158 |  |  | (1,364 | )
| $ | 23,196 |  |  | $ | 129,648 |  |  | $ | 8,074 |
U.S. tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “TCJA”) was enacted on December 22, 2017. The legislation significantly changed U.S. tax law by, among other things, permanently reducing corporate income tax rates from a maximum of 35% to 21%, effective January 1, 2018; implementing a territorial tax system, by generally providing for, among other things, a dividends received deduction on the foreign source portion of dividends received from a foreign corporation if specified conditions are met; and imposing a one-time repatriation tax on undistributed post-1986 foreign subsidiary earnings and profits, which are deemed repatriated for purposes of the tax. On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations where a company does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the TCJA. SAB 118 states that in these circumstances, if the company can determine a reasonable estimate for the income tax effects, the SEC staff would not object if the company includes in its financial statements the reasonable estimate it has determined (and the SEC staff also expressed its belief that it would not be appropriate for a company to exclude a reasonable estimate from its financial statements to the extent a reasonable estimate has been determined). As a result of the TCJA, the Company reassessed and revalued its ending net deferred tax liabilities at December 31, 2017 and recognized a $46.1 million provisional tax benefit in the Company’s consolidated statement of income for the year ended December 31, 2017. The Company also recognized a $154.0 million provisional tax expense in the Company’s consolidated statement of income for the year ended December 31, 2017, related to the deemed repatriated earnings. The Company expects to pay this tax over an eight-year period. In accordance with SAB118, during the year ended December 31, 2018, the Company adjusted the provisional amounts for taxes on deemed repatriated earnings and the revaluation of deferred tax assets and liabilities as a result of additional analysis, changes in interpretations and in the Company's assumptions, and the issuance of additional regulatory guidance. As prescribed under SAB 118, these adjustments were identified and recorded as discrete adjustments in the period in which such changes were made. During 2018, the Company recognized a net $2.3 million discrete tax benefit for adjustments to the provisional tax impacts of the TCJA included in the consolidated financial statements for the year ended December 31, 2017. These adjustments included a $0.2 million reduction in the provisional tax on deemed repatriated earnings and a $2.1 million tax benefit from changes in the revaluation of deferred tax assets and liabilities. The Company completed the accounting for these impacts in the fourth quarter 2018. While the TCJA provides for a territorial tax system, beginning in 2018, it includes two new U.S. tax base erosion provisions, the global intangible low-taxed income (“GILTI”) provisions and the base-erosion and anti-abuse tax (“BEAT”) provisions. The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company was subject to incremental U.S. tax of $10.7 million on GILTI income beginning in 2018. The Company elected to account for the GILTI tax in the period in which it is incurred. The BEAT provisions in the TCJA eliminate the deduction of certain base-erosion payments made to related foreign corporations and impose a minimum tax if greater than regular tax. For the year ended December 31, 2018, the Company was not impacted by the BEAT provisions. The Company may be subject to the BEAT tax in future years. At December 31, 2018, the cumulative unremitted earnings of subsidiaries outside the United States that are considered non-permanently reinvested and for which taxes have been provided approximated $2.1 billion. At December 31, 2018, the cumulative unremitted earnings of subsidiaries outside the United States that are considered permanently reinvested approximated $0.2 billion. Earnings considered permanently reinvested are expected to be reinvested indefinitely and, as a result, no additional deferred tax liability has been recognized with regard to these earnings. It is not practical to determine the deferred income tax liability on these earnings if, in the future, they are remitted to the United States because the income tax liability to be incurred, if any, is dependent on circumstances existing when remittance occurs. The following table summarizes the United States and non-United States components of income from continuing operations before taxes:
| 2018 |  | 2017 |  | 2016
| (Dollars in thousands)
United States | $ | 37,201 |  |  | $ | 37,528 |  |  | $ | (29,988 | )
Other | 182,427 |  |  | 247,383 |  |  | 275,713 |
| $ | 219,628 |  |  | $ | 284,911 |  |  | $ | 245,725 |
Reconciliations between the statutory federal income tax rate and the effective income tax rate are as follows:
| 2018 |  | 2017 |  | 2016
Federal statutory rate | 21.0 | % |  | 35.0 | % |  | 35.0 | %
Tax effect of international items | (3.3 | ) |  | (25.7 | ) |  | (27.5 | )
Impacts of the TCJA | (1.0 | ) |  | 37.9 |  |  | — |
Excess tax benefits related to share-based compensation | (7.2 | ) |  | (2.3 | ) |  | — |
State taxes, net of federal benefit | (0.1 | ) |  | 0.1 |  |  | 0.9 |
Uncertain tax contingencies | (0.4 | ) |  | (1.8 | ) |  | (3.6 | )
Contingent consideration | 5.3 |  |  | 0.4 |  |  | (1.2 | )
Intellectual property impairment charge | (2.0 | ) |  | — |  |  | — |
Research and development tax credit | (1.6 | ) |  | (0.8 | ) |  | (0.6 | )
Other, net | (0.1 | ) |  | 2.7 |  |  | 0.3 |
| 10.6 | % |  | 45.5 | % |  | 3.3 | %
The effective income tax rate for 2018 was 10.6% compared to 45.5% for 2017. The effective income tax rate for 2018 was impacted by the reduction of the United States corporate income tax rate from a maximum of 35% to 21% as a result of the TCJA. Additionally, the effective tax rate for 2018 was affected by a net excess tax benefit related to share-based compensation and a tax cost associated with a non-deductible contingent consideration expense recognized in connection with an increase in the fair value of the NeoTract contingent consideration liability. The effective income tax rate for 2017 reflects a net tax expense of $107.9 million resulting from the enactment of the TCJA. The $107.9 million net tax expense reflects a tax expense of $154.0 million for the deemed repatriation of undistributed foreign earnings partially offset by a $46.1 million tax benefit resulting from the reassessment and revaluation of the net deferred tax liabilities. Additionally, the effective tax rate for 2017 was affected by a net excess tax benefit related to share-based compensation and a benefit resulting from the expiration of various statutes of limitation. The Company and its subsidiaries are routinely subject to examinations by various taxing authorities. In conjunction with these examinations and as a regular practice, the Company establishes and adjusts reserves with respect to its uncertain tax positions to address developments related to those positions. The Company realized a net benefit of approximately $0.8 million and $5.2 million in 2018 and 2017, respectively, as a result of reducing its reserves with respect to uncertain tax positions, principally due to the expiration of a number of applicable statutes of limitations. The Company realized a net benefit of approximately $8.8 million in 2016, as a result of reducing its reserves with respect to uncertain tax positions, principally due to the conclusion of a tax audit in Germany and the expiration of various statutes of limitations. The following table summarizes significant components of the Company’s deferred tax assets and liabilities at December 31, 2018 and 2017:
| 2018 |  | 2017
| (Dollars in thousands)
Deferred tax assets: |  |  |
Tax loss and credit carryforwards | $ | 234,940 |  |  | $ | 210,055 |
Pension | 19,972 |  |  | 28,147 |
Reserves and accruals | 68,767 |  |  | 62,378 |
Other | 3,267 |  |  | 3,619 |
Less: valuation allowances | (143,971 | ) |  | (104,799 | )
Total deferred tax assets | 182,975 |  |  | 199,400 |
Deferred tax liabilities: |  |  |
Property, plant and equipment | 24,315 |  |  | 22,299 |
Intangibles — stock acquisitions | 541,445 |  |  | 553,245 |
Unremitted foreign earnings | 218,769 |  |  | 223,494 |
Other | 4,221 |  |  | 228 |
Total deferred tax liabilities | 788,750 |  |  | 799,266 |
Net deferred tax liability | $ | (605,775 | ) |  | $ | (599,866 | )
As a result of enactment of the TCJA, the Company reassessed and revalued its deferred tax positions, resulting in a $46.1 million decrease in the net deferred tax liability at December 31, 2017. Subsequently, in accordance with SAB 118, adjustments were made to the provisional amounts for the revaluation of deferred tax assets and liabilities due to additional analysis. During 2018, the Company recognized a net $2.1 million tax benefit as a result of changes in its revaluation of deferred tax assets and liabilities related to the TCJA. The accounting for these changes was completed in the fourth quarter of 2018. Under the tax laws of various jurisdictions in which the Company operates, deductions or credits that cannot be fully utilized for tax purposes during the current year may be carried forward, subject to statutory limitations, to reduce taxable income or taxes payable in a future tax year. At December 31, 2018, the tax effect of such carryforwards approximated $234.9 million. Of this amount, $11.0 million has no expiration date, $3.7 million expires after 2018 but before the end of 2023 and $220.2 million expires after 2023. A portion of these carryforwards consists of tax losses and credits obtained by the Company as a result of acquisitions; the utilization of these carryforwards are subject to an annual limitation imposed by Section 382 of the Internal Revenue Code, which limits a company’s ability to deduct prior net operating losses following a more than 50 percent change in ownership. It is not expected that the Section 382 limitation will prevent the Company ultimately from utilizing the applicable loss carryforwards. The determination of state net operating loss carryforwards is dependent upon the United States subsidiaries’ taxable income or loss, the state’s proportion of each subsidiary's taxable net income and the application of state laws, which can change from year to year and impact the amount of such carryforward. The valuation allowance for deferred tax assets of $144.0 million and $104.8 million at December 31, 2018 and 2017, respectively, relates principally to the uncertainty of the Company’s ability to utilize certain deferred tax assets, primarily tax loss and credit carryforwards in various jurisdictions. The valuation allowance was calculated in accordance with applicable accounting standards, which require that a valuation allowance be established and maintained when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. Uncertain Tax Positions: The following table is a reconciliation of the beginning and ending balances for liabilities associated with unrecognized tax benefits for the years ended December 31, 2018, 2017 and 2016:
| 2018 |  | 2017 |  | 2016
| (Dollars in thousands)
Balance at January 1 | $ | 9,336 |  |  | $ | 15,054 |  |  | $ | 34,381 |
Increase in unrecognized tax benefits related to prior years | — |  |  | — |  |  | — |
Decrease in unrecognized tax benefits related to prior years | — |  |  | — |  |  | (13,083 | )
Unrecognized tax benefits related to the current year | 899 |  |  | 895 |  |  | 705 |
Reductions in unrecognized tax benefits due to settlements | — |  |  | — |  |  | (2,121 | )
Reductions in unrecognized tax benefits due to lapse of applicable statute of limitations | (1,955 | ) |  | (6,813 | ) |  | (4,840 | )
Increase (decrease) in unrecognized tax benefits due to foreign currency translation | (174 | ) |  | 200 |  |  | 12 |
Balance at December 31 | $ | 8,106 |  |  | $ | 9,336 |  |  | $ | 15,054 |
The total liabilities associated with the unrecognized tax benefits that, if recognized, would impact the effective tax rate for continuing operations, were $4.5 million at December 31, 2018. The Company accrues interest and penalties associated with unrecognized tax benefits in income tax expense in the consolidated statements of income, and the corresponding liability is included in the consolidated balance sheets. The net interest expense (benefit) and penalties reflected in income from continuing operations for the year ended December 31, 2018 was $0.2 million and $(0.3) million, respectively; for the year ended December 31, 2017 was $0.2 million and $(0.2) million, respectively; and for the year ended December 31, 2016 was $0.2 million and $(0.5) million, respectively. The liabilities in the consolidated balance sheets for interest and penalties at December 31, 2018 were $0.6 million and $2.2 million, respectively, and at December 31, 2017 were $0.6 million and $2.6 million, respectively. The taxable years for which the applicable statute of limitations remains open by major tax jurisdictions are as follows:
| Beginning |  | Ending
United States | 2015 |  | 2018
Canada | 2014 |  | 2018
China | 2013 |  | 2018
Czech Republic | 2015 |  | 2018
France | 2016 |  | 2018
Germany | 2011 |  | 2018
India | 2002 |  | 2018
Ireland | 2014 |  | 2018
Italy | 2014 |  | 2018
Malaysia | 2014 |  | 2018
Singapore | 2014 |  | 2018
The Company and its subsidiaries are routinely subject to income tax examinations by various taxing authorities. As of December 31, 2018, the most significant tax examination in process is in Germany. The date at which this examination may be concluded and the ultimate outcome of the examination are uncertain. As a result of the uncertain outcome of this ongoing examination, future examinations or the expiration of statutes of limitation, it is reasonably possible that the related unrecognized tax benefits for tax positions taken could materially change from those recorded as liabilities at December 31, 2018. Due to the potential for resolution of certain examinations, and the expiration of various statutes of limitation, it is reasonably possible that the Company’s unrecognized tax benefits may change within the next year by a range of zero to $1.6 million.

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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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