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Taxes on Income | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Taxes on Income | Taxes on Income On December 22, 2017, the U.S. government enacted comprehensive tax legislation which we refer to as U.S. Tax Reform. U.S. Tax Reform implemented a new system of taxation for non-U.S. earnings which eliminated U.S. federal income taxes on dividends from certain foreign subsidiaries and imposed a one-time transition tax on the deemed repatriation of undistributed earnings of certain foreign subsidiaries that is payable over eight years. Accordingly, the Company had initially recorded a $15.5 million transition tax liability for U.S. income taxes on undistributed earnings of non-U.S. subsidiaries. As of December 31, 2023, $8.5 million in installments have been paid with the remaining $7.0 million to be paid through installments in future years. The Company may also be subject to other taxes, such as withholding taxes and dividend distribution taxes, if these undistributed earnings are ultimately remitted to the U.S. Taxes on income before equity in net income of associated companies for the years ended December 31, 2023, 2022 and 2021 are as follows:
| 2023 |  | 2022 |  | 2021
Current: |  |  |  |  |
Federal | $ | 12,159 |  |  | $ | (708) |  |  | $ | 955 |
State | 2,938 |  |  | 1,450 |  |  | 2,115 |
Foreign | 51,930 |  |  | 34,735 |  |  | 44,375 |
Total | 67,027 |  |  | 35,477 |  |  | 47,445 |
Deferred: |  |  |  |  |
Federal | 518 |  |  | (2,798) |  |  | (3,863) |
State | (163) |  |  | (713) |  |  | (3,117) |
Foreign | (11,797) |  |  | (7,041) |  |  | (5,526) |
Total | $ | (11,442) |  |  | $ | (10,552) |  |  | $ | (12,506) |
Taxes on income before equity in net income of associated companies | $ | 55,585 |  |  | $ | 24,925 |  |  | $ | 34,939 |
The components of income before taxes and equity of associated companies for the years ended December 31, 2023, 2022 and 2021 are as follows:
| 2023 |  | 2022 |  | 2021
U.S. | $ | 14,520 |  |  | $ | (4,933) |  |  | $ | 7,263 |
Foreign | 138,604 |  |  | 12,051 |  |  | 139,728 |
Total | $ | 153,124 |  |  | $ | 7,118 |  |  | $ | 146,991 |
Total deferred tax assets and liabilities are composed of the following as of December 31, 2023 and 2022:
| 2023 |  | 2022 |
Pension and other postretirement benefits | $ | 6,539 |  |  | $ | 5,777 |  |
Allowance for credit losses | 2,627 |  |  | 2,246 |  |
Insurance and litigation reserves | 534 |  |  | 716 |  |
Performance incentives | 5,839 |  |  | 3,327 |  |
Equity-based compensation | 2,980 |  |  | 2,723 |  |
Prepaid expense | 541 |  |  | 486 |  |
Operating loss carryforward | 22,693 |  |  | 20,519 |  |
Foreign tax credit and other credits | 13,360 |  |  | 5,506 |  |
Interest | 12,926 |  |  | 9,928 |  |
Restructuring reserves | 403 |  |  | 791 |  |
Right of use lease assets | 8,018 |  |  | 8,440 |  |
Inventory reserves | 4,810 |  |  | 3,712 |  |
Research and development | 11,125 |  |  | 11,936 |  |
Other | 5,712 |  |  | 3,562 |  |
Total deferred tax assets, gross | 98,107 |  |  | 79,669 |  |
Valuation allowance | (24,182) |  |  | (11,730) |  |
Total deferred tax assets, net | $ | 73,925 |  |  | $ | 67,939 |  |
Depreciation | 10,240 |  |  | 11,935 |  |
Intangibles | 177,320 |  |  | 182,838 |  |
Lease liabilities | 9,105 |  |  | 9,590 |  |
Outside basis in equity investment | 5,276 |  |  | 5,886 |  |
Unremitted earnings | 8,204 |  |  | 6,766 |  |
Total deferred tax liabilities | $ | 210,145 |  |  | $ | 217,015 |  |
Total net deferred tax liabilities | $ | (136,220) |  |  | $ | (149,076) |  |
The Company’s net deferred tax assets and liabilities are classified in the Consolidated Balance Sheets as of December 31, 2023 and 2022 as follows:
| 2023 |  | 2022
Non-current deferred tax assets | $ | 10,737 |  |  | $ | 11,218 |
Non-current deferred tax liabilities | 146,957 |  |  | 160,294 |
Total net deferred tax liabilities | $ | (136,220) |  |  | $ | (149,076) |
As of December 31, 2023, the Company has a deferred tax liability of $8.2 million on certain undistributed foreign earnings, which primarily represents the Company’s estimate of the non-U.S. income taxes the Company will incur to ultimately remit certain earnings to the U.S. Otherwise, it is the Company’s current intention to reinvest its additional undistributed earnings of certain non-U.S. subsidiaries to support working capital needs and certain other growth initiatives outside of the U.S. The amount of such undistributed earnings at December 31, 2023 was approximately $379.2 million. Any tax liability which might result from ultimate remittance of these earnings is expected to be substantially offset by foreign tax credits (subject to certain limitations). It is currently impractical to estimate any such incremental tax expense. The Company has $7.3 million of deferred tax assets related to state net operating losses. Management analyzed the expected impact of the reversal of existing taxable temporary differences, considered expiration dates, analyzed current state tax laws, and determined that $1.9 million of state net operating loss carryforwards is expected to be realized as a future benefit based on the reversal of deferred tax liabilities. Accordingly, a partial valuation allowance of $5.4 million has been established. These state net operating losses are subject to various carryforward periods of 5 years to 20 years or an indefinite carryforward period. An additional $0.9 million of valuation allowance was established for other net state deferred tax assets. The Company has $15.6 million of deferred tax assets related to foreign net operating loss carryforwards. A partial valuation allowance of $2.4 million has been established against this amount resulting in a net $13.2 million expected future benefit. These foreign net operating losses are subject to various carryforward periods with the majority having an indefinite carryforward period. An additional partial valuation allowance of $3.0 million has been established against certain other foreign deferred tax assets. Foreign tax credits may be carried forward for 10 years. Management analyzed the expected impact of the utilization of foreign tax credits based on certain assumptions such as projected U.S. taxable income, overall domestic loss recapture, and annual limitations due to the ownership change under the Internal Revenue Code. The Company had a foreign tax credit carry forward of $13.0 million and $5.2 million as of December 31, 2023 and 2022, respectively, with a $12.5 million and $1.3 million valuation allowance as of December 31, 2023 and 2022, respectively, reflecting the amount of credits that are not expected to be utilized before expiration. The following are the changes in the Company’s deferred tax asset valuation allowance for the years ended December 31, 2023, 2022 and 2021:
| 2023 |  | 2022 |  | 2021
Balance at January 1, | $ | 11,730 |  |  | $ | 17,400 |  |  | $ | 21,511 |
Net charges to income tax expense | $ | 14,393 |  |  | $ | 1,119 |  |  | $ | 359 |
Release of valuation allowance | $ | (1,941) |  |  | $ | (6,789) |  |  | $ | (4,470) |
Balance at December 31, | $ | 24,182 |  |  | $ | 11,730 |  |  | $ | 17,400 |
The following is a reconciliation of income taxes at the Federal statutory rate with income taxes recorded by the Company for the years ended December 31, 2023, 2022 and 2021:
| 2023 |  | 2022 |  | 2021
Income tax provision at the Federal statutory tax rate | $ | 32,156 |  |  | $ | 1,495 |  |  | $ | 30,868 |
Unremitted earnings | 1,211 |  |  | (1,839) |  |  | 1,841 |
Tax law changes / reform | 47 |  |  | 823 |  |  | 1,955 |
U.S. tax on foreign operations | 9,014 |  |  | 4,864 |  |  | 10,479 |
Pension settlement | — |  |  | — |  |  | — |
Foreign derived intangible income | (1,147) |  |  | (917) |  |  | (8,698) |
Non-deductible acquisition expenses | — |  |  | 45 |  |  | 129 |
Withholding taxes | 11,193 |  |  | 7,785 |  |  | 6,584 |
Foreign tax credits | (3,432) |  |  | (5,850) |  |  | (14,725) |
Share-based compensation | 973 |  |  | 1,234 |  |  | 600 |
Foreign tax rate differential | 4,731 |  |  | 4,782 |  |  | 1,712 |
Research and development credit | (2,000) |  |  | (1,757) |  |  | (1,685) |
Audit Settlements | 456 |  |  | 2,697 |  |  | 1,378 |
Uncertain tax positions | (598) |  |  | (6,375) |  |  | 519 |
State income tax provisions, net | 2,158 |  |  | 432 |  |  | (1,446) |
Non-deductible meals and entertainment | 416 |  |  | 146 |  |  | 426 |
Intercompany transfer of intangible assets | (584) |  |  | (1,932) |  |  | 4,347 |
Goodwill Impairment | — |  |  | 19,550 |  |  | — |
Miscellaneous items, net | 991 |  |  | (258) |  |  | 655 |
Taxes on income before equity in net income of associated companies | $ | 55,585 |  |  | $ | 24,925 |  |  | $ | 34,939 |
For the years ended December 31, 2023 and 2022, the Company’s cumulative liability for gross unrecognized tax benefits were $15.7 million and $16.3 million, respectively. For the years ended December 31, 2023 and 2022, the Company had accrued approximately $1.1 million and $1.3 million, respectively, for cumulative penalties and $2.9 million and $2.7 million, respectively, for cumulative interest. The Company continues to recognize interest and penalties associated with uncertain tax positions as a component of tax expense on income before equity in net income of associated companies in its Consolidated Statements of Operations. The Company recognized a benefit of $0.4 million for penalties and an expense of $0.1 million for interest (net of expirations and settlements) in its Consolidated Statement of Income for the year ended December 31, 2023, a benefit of $1.7 million for penalties and a benefit of $0.3 million for interest (net of expirations and settlements) in its Consolidated Statement of Income for the year ended December 31, 2022, and a benefit of $0.5 million for penalties and a benefit of $0.3 million for interest (net of expirations and settlements) in its Consolidated Statement of Income for the year ended December 31, 2021. The Company estimates that during the year ending December 31, 2023, it will reduce its cumulative liability for gross unrecognized tax benefits by approximately $2.7 million due to the expiration of the statute of limitations with regard to certain tax positions. This estimated reduction in the cumulative liability for unrecognized tax benefits does not consider any increase in liability for unrecognized tax benefits with regard to existing tax positions or any increase in cumulative liability for unrecognized tax benefits with regard to new tax positions for the year ending December 31, 2023. A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended December 31, 2023, 2022 and 2021, respectively, is as follows:
| 2023 |  | 2022 |  | 2021
Unrecognized tax benefits as of January 1 | $ | 16,340 |  |  | $ | 22,464 |  |  | $ | 22,152 |
(Decrease) increase in unrecognized tax benefits taken in prior periods | (147) |  |  | (1,174) |  |  | 1,002 |
Increase in unrecognized tax benefits taken in current period | 1,799 |  |  | 953 |  |  | 2,915 |
Decrease in unrecognized tax benefits due to lapse of statute of limitations | (2,736) |  |  | (2,378) |  |  | (1,527) |
Decrease in unrecognized tax benefits due to audit settlements | — |  |  | (2,509) |  |  | (1,104) |
(Decrease) increase due to foreign exchange rates | 403 |  |  | (1,016) |  |  | (974) |
Unrecognized tax benefits as of December 31 | $ | 15,659 |  |  | $ | 16,340 |  |  | $ | 22,464 |
The amount of net unrecognized tax benefits above that, if recognized, would impact the Company’s tax expense and effective tax rate is $10.1 million, $10.2 million and $15.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. The Company and its subsidiaries are subject to U.S. Federal income tax, as well as the income tax of various state and foreign tax jurisdictions. Tax years that remain subject to examination by major tax jurisdictions are shown in the table below:
Jurisdiction |  | Open Years
Brazil |  | 2018-2023
China |  | 2018-2023
Germany |  | 2018-2023
India |  | 2017-2023
Italy |  | 2007, 2019-2023
Mexico |  | 2018-2023
Netherlands |  | 2017-2023
Spain |  | 2018-2023
U.S. Federal and State |  | 2019-2023
United Kingdom |  | 2018-2023
Positions challenged by the taxing authorities may be settled or applied by the Company. As a result, income tax uncertainties are recognized in the Company’s financial statements in accordance with the accounting for income taxes, when applicable.

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