Income Taxes (Notes)

12 Months Ended

Dec. 31, 2020

The components of (loss)/income before income taxes are as follows:


	2020		2019		2018
Domestic	$	(63,025)	$	119,166	$	121,674
Foreign	33,040		62,060		55,666
	$	(29,985)	$	181,226	$	177,340

The components of (benefit)/provision for income taxes were as follows:


	2020		2019		2018
Current:
Federal	$	(10,764)	$	18,655	$	32,880
State and local	(545)		3,765		5,012
Foreign	7,958		11,940		11,771
	(3,351)		34,360		49,663
Deferred:
Federal	(4,940)		2,309		(2,489)
State and local	(2,962)		1,343		(200)
Foreign	(451)		1,492		(133)
	(8,353)		5,144		(2,822)
	$	(11,704)	$	39,504	$	46,841

A reconciliation between income taxes computed at the federal statutory rate and the effective tax rate is as follows:


	December 31,
	2020		2019		2018
Income taxes at federal statutory rate	21.0	%	21.0	%	21.0	%
Effects of foreign operations	10.3		(0.1)		(0.7)
Stock-based compensation	11.8		(3.4)		(2.1)
State and local income taxes - net of federal income tax benefit	12.9		2.3		2.4
Nondeductible items	(0.4)		0.7		0.1
Impact of tax reform	14.0		—		2.0
Global intangible low-taxed income ("GILTI")	(18.2)		—		—
Valuation allowance	(9.3)		0.6		0.4
Prepaid tax adjustment related to prior years	—		—		3.8
Other	(3.1)		0.7		(0.5)
Effective tax rate	39.0	%	21.8	%	26.4	%

The primary changes between the Company’s effective tax rate for the year ended December 31, 2020 and 2019 are due to the year-over-year benefit resulting from the exercising and vesting of share-based awards, an increase in tax benefit related to a net operating loss carryback claim set forth by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), an

increase in the GILTI tax, a decrease in the state taxes incurred, and an increase in pre-tax losses in jurisdictions with higher tax rates.

The components of deferred tax assets and liabilities are as follows:


	December 31,
	2020		2019
Deferred tax assets
Receivable allowances	$	5,226	$	8,537
Inventory	4,681		3,247

Accrued expenses	1,109		1,453
Deferred compensation	7,418		8,643

Net operating loss carryforwards	9,987		7,531
Lease liability	31,975		41,382
Other	1,345		493
Gross deferred tax assets before valuation allowance	61,741		71,286

Less: valuation allowance	(4,968)		(2,230)
Gross deferred tax assets after valuation allowance	56,773		69,056

Deferred tax liabilities
Depreciation and amortization	(13,744)		(17,532)
Unremitted earnings of foreign subsidiaries	(2,964)		(3,025)
Right-of-use asset	(24,211)		(37,248)
Amortization of goodwill	(7,665)		(7,682)
Indefinite-lived intangibles	(5,336)		(9,446)
Gross deferred tax liabilities	(53,920)		(74,933)

Net deferred tax assets/(liabilities)	$	2,853	$	(5,877)

The Company applies the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax‑planning strategies in making this assessment.

The Company’s increase in valuation allowance of $2,738 is due to a deferred tax asset on an outside basis difference which the Company does not expect to realize, and net operating loss deferred tax assets in various foreign subsidiaries, which resulted in an aggregate valuation allowance of $4,968 for the year ended December 31, 2020.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


	December 31,
	2020		2019		2018
Beginning Balance	$	1,150	$	1,511	$	361
Additions for tax positions of prior years	1,145		—		—
Additions related to current period tax positions	—		—		1,150
Reductions for tax positions of prior years	—		(361)		—

Ending Balance	$	2,295	$	1,150	$	1,511

For the years ended December 31, 2020, 2019 and 2018 the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is approximately $2,295, $1,150 and $1,511, in the aggregate, respectively. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. Accrued interest and penalties on unrecognized tax benefits and interest and penalty expense was immaterial to the consolidated financial statements for all periods presented. The unrecognized tax benefits are not expected to materially change in the next twelve months.

The Company files income tax returns in the U.S., for federal, state, and local purposes, and in certain other foreign jurisdictions. The Company's tax years 2017 through 2020 remain open to examination by most taxing authorities. During 2017, the U.S. Internal Revenue Service completed its audit of the Company's 2014 U.S. income tax return.

The Company’s consolidated financial statements provide for any related tax liability on amounts that may be repatriated from foreign operations, aside from undistributed earnings of certain of the Company’s foreign subsidiaries that are intended to be indefinitely reinvested in operations outside the U.S. The deferred tax liability of $2,964 at December 31, 2020 reflects the withholding tax on amounts that may be repatriated from foreign operations.

In response to the COVID-19 pandemic, the CARES Act was signed into law on March 27, 2020, which includes significant corporate income tax and payroll tax provisions aimed at providing economic relief. The Company received or expects to continue to receive a corporate income tax benefit on the net operating loss carryback provision set forth by the CARES act, as well as favorable cash flow benefits related to the employee retention credit, employer payroll tax deferral, and accelerated depreciation related to qualified improvement property. The Company will continue to assess the impact of the CARES Act and other COVID-19 related incentives.