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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | 7. Income Taxes The following tables present components of income tax expense/(benefit) and income before income taxes on continuing operations:
(in thousands) |  | 2020 |  | 2019 |  | 2018
Income tax based on income from continuing operations, at estimated tax rates of 28%, 28%, and 31%, respectively |  | $ | 39,544 |  |  | $ | 49,977 |  |  | $ | 36,044 |
Income tax before discrete items |  | 39,544 |  |  | 49,977 |  |  | 36,044 |
Discrete tax expense/(benefit): |  |  |  |  |  |
Net impact of mandatory deemed repatriation |  | — |  |  | — |  |  | (1,003) |
Provision for/resolution of tax audits and contingencies, net |  | 752 |  |  | (2,874) |  |  | 1,286 |
Adjustments to prior period tax liabilities |  | (2,420) |  |  | (1,637) |  |  | (1,284) |
Provision for/adjustment to beginning of year valuation allowances |  | 168 |  |  | (525) |  |  | (4,882) |
Enacted tax legislation |  | — |  |  | (112) |  |  | 2,067 |
Tax effect of non-deductible foreign exchange loss on intercompany loan |  | 3,801 |  |  | — |  |  | — |
Other |  | (14) |  |  | — |  |  | — |
Total income tax expense |  | $ | 41,831 |  |  | $ | 44,829 |  |  | $ | 32,228 |
(in thousands) |  | 2020 |  | 2019 |  | 2018
Income/(loss) before income taxes: |  |  |  |  |  |
U.S. |  | $ | 63,375 |  |  | $ | 76,024 |  |  | $ | 41,875 |
Non-U.S. |  | 75,699 |  |  | 102,188 |  |  | 73,372 |
|  | $ | 139,074 |  |  | $ | 178,212 |  |  | $ | 115,247 |
Income tax provision |  |  |  |  |  |
Current: |  |  |  |  |  |
Federal |  | $ | 1,415 |  |  | $ | 780 |  |  | $ | 304 |
State |  | 2,028 |  |  | 6,357 |  |  | 4,996 |
Non-U.S. |  | 26,916 |  |  | 25,255 |  |  | 21,557 |
|  | $ | 30,359 |  |  | $ | 32,392 |  |  | $ | 26,857 |
Deferred: |  |  |  |  |  |
Federal |  | $ | 11,211 |  |  | $ | 10,583 |  |  | $ | 10,700 |
State |  | 192 |  |  | 253 |  |  | (338) |
Non-U.S. |  | 69 |  |  | 1,601 |  |  | (4,991) |
|  | $ | 11,472 |  |  | $ | 12,437 |  |  | $ | 5,371 |
Total income tax expense |  | $ | 41,831 |  |  | $ | 44,829 |  |  | $ | 32,228 |
The significant components of deferred income tax expense/(benefit) are as follows:
(in thousands) |  | 2020 |  | 2019 |  | 2018
Net effect of temporary differences |  | $ | 5,262 |  |  | $ | (18) |  |  | $ | (4,657) |
Foreign tax credits |  | 7,173 |  |  | 12,530 |  |  | 9,437 |
Retirement benefits |  | 401 |  |  | (752) |  |  | 2,360 |
Net impact to operating loss carryforwards |  | (1,532) |  |  | 1,314 |  |  | 1,046 |
Enacted changes in tax laws and rates |  |  |  | (112) |  |  | 2,067 |
Adjustment to beginning-of-the-year valuation allowance balance for changes in circumstances |  | 168 |  |  | (525) |  |  | (4,882) |
Total |  | $ | 11,472 |  |  | $ | 12,437 |  |  | $ | 5,371 |
A reconciliation of the U.S. federal statutory tax rate to the Company’s effective income tax rate is as follows:
| 2020 |  | 2019 |  | 2018 |
U.S. federal statutory tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | % |
State taxes, net of federal benefit | 1.8 |  |  | 3.0 |  |  | 2.9 |  |
Non-U.S. local income taxes | 3.2 |  |  | 4.4 |  |  | 3.3 |  |
U.S. permanent adjustments | 0.1 |  |  | — |  |  | (0.3) |  |
Foreign permanent adjustments | 0.2 |  |  | 0.4 |  |  | (0.4) |  |
Foreign rate differential | 0.6 |  |  | 0.5 |  |  | 0.2 |  |
Net U.S. tax on non-U.S. earnings and foreign withholdings | 1.2 |  |  | 0.3 |  |  | 5.7 |  |
Provision for/resolution of tax audits and contingencies, net | 0.5 |  |  | (1.6) |  |  | 1.1 |  |
Research and development and other tax credits | (0.4) |  |  | (0.3) |  |  | (0.1) |  |
Provision for/adjustment to beginning of year valuation allowances | 0.2 |  |  | (0.3) |  |  | (4.2) |  |
Enacted tax legislation and rate change | — |  |  | (0.1) |  |  | 1.8 |  |
Tax effect of non-deductible foreign exchange loss on intercompany loan | 2.7 |  |  | — |  |  | — |  |
Return to provision and other adjustments | (1.0) |  |  | (2.1) |  |  | (3.0) |  |
Effective income tax rate | 30.1 | % |  | 25.2 | % |  | 28.0 | % |
The Company's subsidiary in Mexico has an intercompany loan payable in U.S. dollars. As a result of the weaker Mexican peso, the Company recorded a revaluation loss in 2020 which is not deductible under Mexican tax law, leading to a $3.8 million discrete tax charge. The Company has operations which constitute a taxable presence in 18 countries outside of the United States. The majority of these countries had income tax rates that are above the United States federal tax rate of 21% during 2020. The jurisdictional location of earnings is a significant component of the Company’s effective tax rate each year. The rate impact of this component is influenced by the specific location of non-U.S. earnings and the level of the Company’s total earnings. From period to period, the jurisdictional mix of earnings can vary as a result of operating fluctuations in the normal course of business, as well as the extent and location of other income and expense items, such as pension settlement and restructuring charges. The foreign income tax rate differential that is included above in the reconciliation of the effective tax rate includes the difference between tax expense calculated at the U.S. federal statutory tax rate of 21% and the expense accrued based on the different statutory tax rates that apply in the jurisdictions where the income or loss is earned. During the periods reported, income outside of the U.S. was heavily concentrated within Brazil (blended 34% tax rate), China (25% tax rate), and Mexico (30% tax rate). The foreign rate differential of these jurisdictions was partially offset by Switzerland (7.8% tax rate). As a result, the foreign income tax rate differential was primarily attributable to these tax rate differences. On July 20, 2020, The Treasury Department and the IRS released final regulations and proposed regulations under Section 951A and Section 954, relating to the treatment of income that is subject to a high rate of foreign tax under the global intangible low-taxed income (GILTI) and subpart F income regimes. The final regulations adopted a high-tax exclusion for GILTI purposes, which can be elected on an annual basis. These final regulations may be applied retroactively to tax years beginning after December 31, 2017. The Company expects to elect the GILTI high-tax exclusion for the 2020 tax year. By making the election, the Company will reduce its taxable income by approximately $15 million. After taking the GILTI foreign tax credits into consideration, the net impact of making the election is a tax reduction of $0.7 million, or 0.5%. The Company will also use $0.7 million less carryover foreign tax credits, which can be utilized in a future year. The Company will review the impact of making the high-tax election retroactively for the 2018 and 2019 tax years to determine the potential benefits of making the election. The primary benefit of making the election retroactively would be the preservation of foreign tax credits that could then be utilized in future years. Making the election retroactively isn't expected to have a significant impact on the Company's financial reporting. The Proposed Regulations generally conform the high-tax exception under the subpart F regime with the high-tax exclusion under the GILTI regime, and adopt a single election under Section 954(b)(4) applicable for purposes of both subpart F income and tested income. The proposed regulations adopt a unified election for subpart F and tested income that applies the rules of the GILTI high-tax exclusion for both tested income and subpart F income. The proposed regulations generally apply to tax years beginning after the date of publication of the Treasury decision adopting such rules as final regulations in the Federal Register. Once the final regulations are published, the Company will determine annually whether making the election is beneficial. This election isn't expected to have a material impact on the Company's financial reporting. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of certain assets and liabilities for financial reporting purposes and income tax return purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:
|  | U.S. |  | Non-U.S.
(in thousands) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Noncurrent deferred tax assets: |  |  |  |  |  |  |  |
Accounts receivable, net |  | $ | 672 |  |  | $ | 823 |  |  | $ | 1,453 |  |  | $ | 1,050 |
Inventories |  | 762 |  |  | 636 |  |  | 1,995 |  |  | 1,231 |
Accrued liabilities, deferred compensation |  | 4,490 |  |  | 4,730 |  |  | 1,064 |  |  | 1,386 |
Property, plant, equipment and intangibles, net |  | — |  |  | — |  |  | 2,382 |  |  | 4,892 |
Other noncurrent liabilities |  | 12,498 |  |  | 14,885 |  |  | 82 |  |  | 1,048 |
Tax loss carryforwards |  | 517 |  |  | 2,266 |  |  | 24,509 |  |  | 21,467 |
Tax credit carryforwards |  | 9,236 |  |  | 15,931 |  |  | 954 |  |  | 936 |
Derivatives |  | 3,283 |  |  | 1,411 |  |  | — |  |  | — |
Other noncurrent liabilities, reserves |  | 2,704 |  |  | 2,953 |  |  | — |  |  | — |
Deferred revenue |  | 1,471 |  |  | 2,417 |  |  | — |  |  | — |
Other |  |  |  | — |  |  | 638 |  |  | — |
Noncurrent deferred tax assets before valuation allowance |  | 35,633 |  |  | 46,052 |  |  | 33,077 |  |  | 32,010 |
Less: valuation allowance |  | (9) |  |  | — |  |  | (10,261) |  |  | (9,102) |
Total noncurrent deferred tax assets |  | 35,624 |  |  | 46,052 |  |  | 22,816 |  |  | 22,908 |
Total deferred tax assets |  | $ | 35,624 |  |  | $ | 46,052 |  |  | $ | 22,816 |  |  | $ | 22,908 |
Noncurrent deferred tax liabilities: |  |  |  |  |  |  |  |
Unrepatriated foreign earnings |  | $ | 3,779 |  |  | $ | 2,202 |  |  | $ | — |  |  | $ | — |
Property, plant, equipment and intangibles, net |  | 3,122 |  |  | 4,404 |  |  | — |  |  | — |
Deferred gain |  | 2,911 |  |  | 3,391 |  |  | — |  |  | — |
Flow-through deferred tax liabilities |  | 6,881 |  |  | 6,205 |  |  | — |  |  | — |
Deferred revenue |  | — |  |  | — |  |  | 11,989 |  |  | 8,492 |
Other |  | 519 |  |  | 510 |  |  | — |  |  | 3,137 |
Total noncurrent deferred tax liabilities |  | $ | 17,212 |  |  | $ | 16,712 |  |  | $ | 11,989 |  |  | $ | 11,629 |
Net deferred tax liabilities |  | $ | 17,212 |  |  | $ | 16,712 |  |  | $ | 11,989 |  |  | $ | 11,629 |
Net deferred tax asset |  | $ | 18,412 |  |  | $ | 29,340 |  |  | $ | 10,827 |  |  | $ | 11,279 |
Deferred income tax assets, net of valuation allowances, are expected to be realized through the reversal of existing taxable temporary differences and future taxable income. In 2020, the Company recorded the following movements in its valuation allowance: $0.1 million increase due to the net recording of valuation allowances, $0.3 million increase in a valuation allowance due to a net increase in the related deferred tax assets, and $0.7 million increase due to the effect of the changes in currency translation rates. At December 31, 2020, the Company had available approximately $90.6 million of net operating loss carryforwards, for which the Company has a deferred tax asset of $24.6 million, with expiration dates ranging from one year to indefinite that may be applied against future taxable income. The Company believes that it is more likely than not that certain benefits from these net operating loss carryforwards will not be realized and, accordingly, the Company has recorded a valuation allowance of $10.3 million as of December 31, 2020. Additionally, management has evaluated its ability to utilize its other non-U.S. tax attributes during the various carryforward periods and has concluded that the Company will more likely than not be able to utilize the remaining non-U.S. tax attributes. Included in the net operating loss carryforward is approximately $8.5 million of state net operating loss carryforwards that are subject to various business apportionment factors and multiple jurisdictional requirements when utilized. In addition, the Company had available a foreign tax credit carryforward of $0.2 million that will begin to expire in 2025, U.S. and non-U.S. research and development credit carryforwards of $9.0 million and $0.9 million, respectively, that will begin to expire in 2025. The Company reported a U.S. net deferred tax asset of $18.4 million at December 31, 2020, which contained $9.8 million of tax attributes with limited lives. Although the Company is in a cumulative book income position for the three-year period ending December 31, 2020, management has evaluated its ability to utilize these tax attributes during the carryforward period. The Company’s future profits from operations, available tax elections and tax planning opportunities more likely than not will generate income of sufficient character to utilize the remaining tax attributes except for a small amount of state net operating losses for which we recorded a valuation allowance of less than $0.1 million. The Company records the residual U.S. and foreign taxes on certain amounts of foreign earnings that have been targeted for repatriation to the U.S. These amounts are not considered to be indefinitely reinvested, and the Company accrued for the tax cost on these earnings to the extent they cannot be repatriated in a tax-free manner. The Company has targeted for repatriation $131.7 million of current year and prior year earnings of the Company’s foreign operations. If these earnings were distributed, the Company would be subject to foreign withholding taxes of $1.3 million and U.S. income taxes of $2.0 million which have already been recorded. The accumulated undistributed earnings of the Company’s foreign operations not targeted for repatriation to the U.S. were approximately $132.3 million, and are intended to remain indefinitely invested in foreign operations. No additional income taxes have been provided on the indefinitely invested foreign earnings at December 31, 2020. If these earnings were distributed, the Company could be subject to income taxes and additional foreign withholding taxes. Determining the amount of unrecognized deferred tax liability related to any additional outside basis difference in these entities is not practical. The following table provides a reconciliation of the beginning and ending amount of unrecognized tax benefits, $1.3 million of which, if recognized, would impact the effective tax rate:
(in thousands) |  | 2020 |  | 2019 |  | 2018
Unrecognized tax benefits balance at January 1st |  | $ | 5,834 |  |  | $ | 3,790 |  |  | $ | 4,509 |
Increase in gross amounts of tax positions related to prior years |  | 540 |  |  | 4,874 |  |  | 2,008 |
Decrease in gross amounts of tax positions related to prior years |  | (637) |  |  | (2,239) |  |  | (358) |
Increase in gross amounts of tax positions related to current years |  | — |  |  | — |  |  | — |
Decrease due to settlements with tax authorities |  | — |  |  | — |  |  | (1,626) |
Decrease due to lapse in statute of limitations |  | (300) |  |  | (626) |  |  | (479) |
Currency translation |  | 54 |  |  | 35 |  |  | (264) |
Unrecognized tax benefits balance at December 31, |  | $ | 5,491 |  |  | $ | 5,834 |  |  | $ | 3,790 |
The Company recognizes interest and penalties related to unrecognized tax benefits within its global operations as a component of income tax expense. The Company recognized interest and penalties related to the unrecognized tax benefits noted above of $0.2 million or less in each of 2020, 2019 and 2018. As of December 31, 2020, 2019 and 2018, the Company had approximately $0.1 million, $0.1 million, and $0.4 million respectively, of accrued interest and penalties related to unrecognized tax benefits. The Company conducts business globally and, as a result, files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including major jurisdictions such as the United States, Brazil, Canada, France, Germany, Italy, Mexico and Switzerland. The open tax years in these jurisdictions range from 2008 to 2020. The Company is currently under audit in non-U.S. tax jurisdictions, including but not limited to Canada, Italy and Switzerland. In the first quarter of 2020, the Company recorded a $1.8 million out-of-period immaterial charge related to developments in an ongoing U.S. state tax audit, which resulted in a corresponding decrease in deferred tax assets. In the second quarter of 2020, the U.S. state tax audit was settled. As a result of the audit settlement, the Company recorded a net tax benefit of $1.5 million. As of December 31, 2020, and 2019, current income taxes prepaid and receivable consisted of the following:
(in thousands) |  | 2020 |  | 2019
Prepaid taxes |  | $ | 5,234 |  |  | $ | 4,399 |
Taxes receivable |  | 706 |  |  | 1,763 |
Total current income taxes prepaid and receivable |  | $ | 5,940 |  |  | $ | 6,162 |
As of December 31, 2020, and 2019, non-current deferred taxes and other liabilities consisted of the following:
(in thousands) |  | 2020 |  | 2019
Deferred income taxes |  | $ | 9,518 |  |  | $ | 11,002 |
Other liabilities |  | 1,266 |  |  | 1,224 |
Total noncurrent deferred taxes and other liabilities |  | $ | 10,784 |  |  | $ | 12,226 |
Taxes paid, net of refunds, amounted to $25.1 million in 2020, $25.9 million in 2019 and $28.1 million in 2018.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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