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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
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, 2024, $11.6 million in installments have been paid with the remaining $3.9 million to be paid in 2025. 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, 2024, 2023 and 2022 are as follows:
202420232022
Current:
Federal$15,276 $12,159 $(708)
State2,395 2,938 1,450 
Foreign41,662 51,930 34,735 
Total59,333 67,027 35,477 
Deferred:
Federal(4,385)518 (2,798)
State(24)(163)(713)
Foreign(5,624)(11,797)(7,041)
Total$(10,033)$(11,442)$(10,552)
Taxes on income before equity in net income of associated companies
$49,300 $55,585 $24,925 
The components of income before taxes and equity of associated companies for the years ended December 31, 2024, 2023 and 2022 are as follows:
202420232022
U.S.$17,167 $14,520 $(4,933)
Foreign137,891 138,604 12,051 
Total$155,058 $153,124 $7,118 
Total deferred tax assets and liabilities are composed of the following as of December 31, 2024 and 2023:
20242023
Pension and other postretirement benefits$5,472 $6,539 
Allowance for credit losses1,895 2,627 
Insurance and litigation reserves565 534 
Performance incentives5,582 5,839 
Equity-based compensation2,891 2,980 
Prepaid expense426 541 
Operating loss carryforward24,702 22,693 
Foreign tax credit and other credits19,516 13,360 
Interest16,423 12,926 
Restructuring reserves158 403 
Right-of-use lease assets7,629 8,018 
Inventory reserves2,423 4,810 
Research and development12,608 11,125 
Other1,261 5,712 
Total deferred tax assets, gross101,551 98,107 
Valuation allowance(27,993)(24,182)
Total deferred tax assets, net$73,558 $73,925 
Depreciation9,814 10,240 
Intangibles170,309 177,320 
Lease liabilities8,575 9,105 
Outside basis in equity investment6,080 5,276 
Unremitted earnings8,392 8,204 
Total deferred tax liabilities$203,170 $210,145 
Total net deferred tax liabilities$(129,612)$(136,220)
The Company’s net deferred tax assets and liabilities are classified in the Consolidated Balance Sheets as of December 31, 2024 and 2023 as follows:
20242023
Non-current deferred tax assets$9,216 $10,737 
Non-current deferred tax liabilities138,828 146,957 
Total net deferred tax liabilities$(129,612)$(136,220)
As of December 31, 2024, the Company has a deferred tax liability of $8.4 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, 2024 was approximately $359.8 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); however, certain withholding taxes could apply. It is currently impractical to estimate any such incremental tax expense.
The Company has $6.1 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 $1.4 million of state net operating loss carryforwards is expected to be realized as a future benefit. Accordingly, a partial valuation allowance of $4.7 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 $0.6 million of valuation allowance was established for other net state deferred tax assets.
The Company has $18.5 million of deferred tax assets related to foreign net operating loss carryforwards. A partial valuation allowance of $2.8 million has been established against this amount resulting in a net $15.7 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 $2.8 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 applicable limitations if any. The Company had a foreign tax credit carry forward of $19.2 million and $13.0 million as of December 31, 2024 and 2023, respectively, with a $17.2 million and $12.5 million valuation allowance as of December 31, 2024 and 2023, 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, 2024, 2023 and 2022:
202420232022
Balance at January 1,$24,182 $11,730 $17,400 
   Net charges to income tax expense$5,693 $14,393 $1,119 
   Release of valuation allowance$(1,882)$(1,941)$(6,789)
Balance at December 31,$27,993 $24,182 $11,730 
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, 2024, 2023 and 2022:
202420232022
Income tax provision at the Federal statutory tax rate$32,562 $32,156 $1,495 
Unremitted earnings(30)1,211 (1,839)
Tax law changes / reform(37)47 823 
U.S. tax on foreign operations9,625 9,014 4,864 
Foreign derived intangible income(1,336)(1,147)(917)
Withholding taxes8,418 11,193 7,785 
Foreign tax credits(6,898)(3,432)(5,850)
Share-based compensation2,345 1,814 1,372 
Foreign tax rate differential1,315 4,731 4,782 
Research and development credit(1,902)(2,000)(1,757)
Audit settlements— 456 2,697 
Uncertain tax positions(2,372)(598)(6,375)
State income tax provisions, net1,905 2,158 432 
Non-deductible expenses341 416 190 
Intercompany transfer of intangible assets2,295 (584)(1,932)
Goodwill impairment— — 19,550 
Provision to return and other adjustments2,655 (930)21 
Miscellaneous items, net414 1,080 (416)
Taxes on income before equity in net income of associated companies$49,300 $55,585 $24,925 
For the years ended December 31, 2024 and 2023, the Company’s cumulative liability for gross unrecognized tax benefits were $13.9 million and $15.7 million, respectively. For the years ended December 31, 2024 and 2023, the Company had accrued approximately $0.8 million and $1.1 million, respectively, for cumulative penalties and $2.6 million and $2.9 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 $0.2 million for penalties and a benefit of $0.2 million for interest (net of expirations and settlements) in its Consolidated Statements of Operations for the year ended December 31, 2024, 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 Operations for the year ended December 31, 2023, and 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 Operations for the year ended December 31, 2022.
The Company estimates that during the year ending December 31, 2024, it will reduce its cumulative liability for gross unrecognized tax benefits by approximately $3.6 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, 2024.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended December 31, 2024, 2023 and 2022, respectively, is as follows:
202420232022
Unrecognized tax benefits as of January 1$15,659 $16,340 $22,464 
Decrease in unrecognized tax benefits taken in prior periods(88)(147)(1,174)
Increase in unrecognized tax benefits taken in current period2,684 1,799 953 
Decrease in unrecognized tax benefits due to lapse of statute of limitations(3,559)(2,736)(2,378)
Decrease in unrecognized tax benefits due to audit settlements— — (2,509)
(Decrease) increase due to foreign exchange rates(747)403 (1,016)
Unrecognized tax benefits as of December 31$13,949 $15,659 $16,340 
The amount of net unrecognized tax benefits above that, if recognized, would impact the Company’s tax expense and effective tax rate is $8.3 million, $10.1 million and $10.2 million for the years ended December 31, 2024, 2023 and 2022, 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:
JurisdictionOpen Years
Brazil2019-2024
China2019-2024
Germany2018-2024
India2019-2024
Italy2019-2024
Mexico2019-2024
Netherlands2018-2024
Spain2018-2024
U.S. Federal and State2020-2024
United Kingdom2021-2024
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.