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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes |
NOTE 10 — INCOME TAXES
INCOME TAX PROVISION Consolidated income from continuing operations before income taxes consisted of the following:
|  | Year Ended December 31,
(in thousands) |  | 2021 |  | 2020 |  | 2019
United States operations |  | $ | 318,306 |  |  | $ | 29,154 |  |  | $ | 247,642 |
Foreign operations |  | 133,205 |  |  | 110,369 |  |  | 157,787 |
Income before income tax |  | $ | 451,511 |  |  | $ | 139,523 |  |  | $ | 405,429 |
The components of the provision for income taxes consisted of the following:
|  | Year Ended December 31,
(in thousands) |  | 2021 |  | 2020 |  | 2019
Current: |  |  |  |  |  |
Federal |  | $ | 51,790 |  |  | $ | 18,435 |  |  | $ | 41,148 |
State and local |  | 14,429 |  |  | 4,929 |  |  | 7,458 |
Non-United States |  | 33,825 |  |  | 26,897 |  |  | 30,930 |
|  | 100,044 |  |  | 50,261 |  |  | 79,536 |
Deferred: |  |  |  |  |  |
Federal |  | (3,042) |  |  | (14,728) |  |  | (7,887) |
State and local |  | (266) |  |  | (5,097) |  |  | (999) |
Non-United States |  | 667 |  |  | 1,074 |  |  | 4,290 |
|  | (2,641) |  |  | (18,751) |  |  | (4,596) |
Income tax expense |  | $ | 97,403 |  |  | $ | 31,510 |  |  | $ | 74,940 |
The following is a reconciliation of the statutory federal income tax rate to the effective rate reported in the financial statements:
|  | Year Ended December 31,
(percent of income before tax) |  | 2021 |  | 2020 |  | 2019
Provision for federal income taxes at the statutory rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State and local income taxes, net of federal benefit |  | 2.5 |  |  | 1.5 |  |  | 1.7 |
Non-United States income taxed at different rates |  | 2.7 |  |  | 2.1 |  |  | (0.1) |
Foreign tax credits |  | (2.4) |  |  | (0.9) |  |  | (0.1) |
Adjustment to deferred taxes |  | — |  |  | (1.2) |  |  | (2.1) |
Global Intangible Low-Taxed Income |  | 0.1 |  |  | 0.1 |  |  | — |
Research credits |  | (0.4) |  |  | (1.4) |  |  | (0.5) |
Withholding taxes |  | (1.4) |  |  | 0.5 |  |  | 0.3 |
Excess tax benefits from stock plans |  | (0.9) |  |  | (0.8) |  |  | (1.6) |
Other |  | 0.4 |  |  | 1.7 |  |  | (0.1) |
Actual provision for income taxes |  | 21.6 | % |  | 22.6 | % |  | 18.5 | %
DEFERRED INCOME TAX BALANCES Significant components of the Company's deferred taxes consisted of the following:
|  | December 31,
(in thousands) |  | 2021 |  | 2020
Deferred tax assets: |  |  |  |
Accruals and allowances |  | $ | 40,518 |  |  | $ | 29,950 |
Lease liability |  | 81,012 |  |  | 84,346 |
Capitalized inventory costs |  | 23,950 |  |  | 24,222 |
Sales reserves |  | 13,881 |  |  | 14,610 |
Stock compensation |  | 6,329 |  |  | 6,078 |
Net operating loss carryforwards |  | 22,767 |  |  | 24,253 |
Depreciation and amortization |  | 22,076 |  |  | 29,358 |
Tax credits |  | 387 |  |  | 844 |
Foreign currency |  | — |  |  | 2,418 |
Other |  | 2,164 |  |  | 2,304 |
Gross deferred tax assets |  | 213,084 |  |  | 218,383 |
Valuation allowance |  | (22,502) |  |  | (23,534) |
Net deferred tax assets |  | 190,582 |  |  | 194,849 |
Deferred tax liabilities: |  |  |  |
Depreciation and amortization |  | (10,414) |  |  | (16,206) |
Prepaid expenses |  | (3,447) |  |  | (2,085) |
ROU lease asset |  | (68,148) |  |  | (66,629) |
Deferred tax liability associated with future repatriations |  | (13,069) |  |  | (19,008) |
Foreign currency |  | (3,383) |  |  | — |
Gross deferred tax liabilities |  | (98,461) |  |  | (103,928) |
Total net deferred taxes |  | $ | 92,121 |  |  | $ | 90,921 |
Subsequent to the issuance of the Company’s December 31, 2020 consolidated financial statements, the Company identified that the Lease liability and corresponding ROU lease asset shown in the table above had been presented net with accruals and allowances, rather than gross. As a result, 2020 amounts in the table above have been revised from balances previously reported. The Company has assessed the qualitative and quantitative impact of the misstatement and determined it is not material to the 2020 financial statements. Further, the Company had previously recorded Sales reserves within Capitalized inventory costs, rather than presenting them separately and has reclassified such amounts to conform to the current year presentation. The Company has foreign net operating loss carryforwards of $87.5 million as of December 31, 2021, of which $68.4 million have an unlimited carryforward period and $19.1 million expire between 2025 and 2040. The net operating losses result in deferred tax assets of $22.8 million and $24.3 million and were subject to a valuation allowance of $20.2 million and $21.2 million at December 31, 2021 and 2020, respectively. At December 31, 2021, the Company had accumulated undistributed earnings generated by the Company's foreign subsidiaries of $333.9 million. As a result of the Tax Cuts and Jobs Act, these earnings have been subject to U.S. tax, so any further taxes associated with such earnings would generally be limited to foreign withholding and state taxes. The Company has recorded a deferred tax liability for these, except in the jurisdictions where we intend to indefinitely reinvest the earnings. UNRECOGNIZED TAX BENEFITS The Company conducts business globally, and, as a result, the Company or one or more of its subsidiaries file income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions. The Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Canada, China, France, Japan, South Korea, Switzerland, and the United States. The Company has effectively settled Canadian tax examinations of all years through 2012, United States tax examinations of all years through 2016, Japanese tax examinations of all years through 2019, France tax examinations of all years through 2016, Swiss tax examinations of all years through 2016, Italy tax examinations of all years through 2016, and China tax examinations of all years through 2018. The Korean National Tax Service concluded an audit of the Company's 2009 through 2013 corporate income tax returns in 2014, and an audit of the Company's 2014 corporate income tax return in 2016. Due to the nature of the findings in both of these audits, the Company has invoked the Mutual Agreement Procedures outlined in the United States-Korean income tax treaty. The Company does not anticipate that adjustments relative to these findings, or any other ongoing tax audits, will result in material changes to its financial condition, results of operations or cash flows. As of December 31, 2021, the Company was under audit in the United States for tax years 2017 and 2018, Canada for tax years 2017 and 2018, and Korea for tax years 2016 through 2020. Other than the findings and audits previously noted, the Company is not currently under examination in any other major jurisdiction. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
|  | Year Ended December 31,
(in thousands) |  | 2021 |  | 2020 |  | 2019
Balance at beginning of year |  | $ | 14,493 |  |  | $ | 12,478 |  |  | $ | 11,064 |
Increases related to prior year tax positions |  | 355 |  |  | 1,903 |  |  | 4,374 |
Decreases related to prior year tax positions |  | (1,447) |  |  | (162) |  |  | (5,423) |
Increases related to current year tax positions |  | 883 |  |  | 906 |  |  | 4,991 |
Settlements |  | — |  |  | — |  |  | (1,464) |
Expiration of statute of limitations |  | (429) |  |  | (632) |  |  | (1,064) |
Balance at end of year |  | $ | 13,855 |  |  | $ | 14,493 |  |  | $ | 12,478 |
Due to the potential for resolution of income tax audits currently in progress, and the expiration of various statutes of limitation, it is reasonably possible that the unrecognized tax benefits balance may change within the twelve months following December 31, 2021 by a range of zero to $6.5 million. Open tax years, including those previously mentioned, contain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, timing, or inclusion of revenue and expenses or the sustainability of income tax credits for a given examination cycle. Unrecognized tax benefits of $12.9 million, $13.6 million and $11.5 million would affect the effective tax rate if recognized at December 31, 2021, 2020 and 2019, respectively. The Company recognizes interest expense and penalties related to income tax matters in Income tax expense. The Company recognized a net increase of accrued interest and penalties of $0.3 million in 2021, and a net increase of accrued interest and penalties of $0.8 million in 2020 and a net reversal of accrued interest and penalties of $0.5 million in 2019, all of which related to uncertain tax positions. The Company had $2.6 million and $2.3 million of accrued interest and penalties related to uncertain tax positions at December 31, 2021 and 2020, respectively.

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