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Note 17 - Income Taxes | 12 Months Ended
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Dec. 31, 2020
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
| 17. | Income Taxes
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the "Tax Act") was signed into law. The Tax Act made broad and complex changes to the U.S. tax code which included a lowering of the U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018, accelerated expensing of qualified capital investments for a specific period, limitations of the deductibility of interest expense and executive compensation, and a transition from a worldwide to a territorial tax system, which required companies to pay a one-time transition tax on certain unrepatriated earnings from foreign subsidiaries. The accounting for the remeasurement of the deferred taxes and transition tax was finalized in the third quarter of 2018. Adjustments to the provisional amounts were not material to the consolidated financial statements. The accounting for the income tax effects of the Tax Act was complete as of December 31, 2018. Profit (loss) before income taxes for the three years ended December 31 was as follows:
|  | 2020 |  |  | 2019 |  |  | 2018 |
U.S. operations |  | $ | 46.6 |  |  | $ | 50.1 |  |  | $ | 23.9 |
Foreign operations |  |  | (5.5 | ) |  |  | 3.9 |  |  |  | 11.9 |
Total |  | $ | 41.1 |  |  | $ | 54.0 |  |  | $ | 35.8 |
Income tax expense (benefit) for the three years ended December 31 was as follows:
|  | 2020 |  |  | 2019 |  |  | 2018 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 4.2 |  |  | $ | 9.6 |  |  | $ | 3.7 |
Foreign |  |  | 3.8 |  |  |  | 5.6 |  |  |  | 7.0 |
State |  |  | 1.8 |  |  |  | 2.1 |  |  |  | 1.0 |
|  | $ | 9.8 |  |  | $ | 17.3 |  |  | $ | 11.7 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 4.4 |  |  | $ | (2.4 | ) |  | $ | (3.1 | )
Foreign |  |  | (6.9 | ) |  |  | (6.7 | ) |  |  | (6.0 | )
State |  |  | 0.1 |  |  |  | (0.1 | ) |  |  | (0.3 | )
|  | $ | (2.4 | ) |  | $ | (9.2 | ) |  | $ | (9.4 | )
Total: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 8.6 |  |  | $ | 7.2 |  |  | $ | 0.6 |
Foreign |  |  | (3.1 | ) |  |  | (1.1 | ) |  |  | 1.0 |
State |  |  | 1.9 |  |  |  | 2.0 |  |  |  | 0.7 |
Total Income Tax Expense |  | $ | 7.4 |  |  | $ | 8.1 |  |  | $ | 2.3 |
In general, it is our practice and intention to permanently reinvest the earnings of our foreign subsidiaries and repatriate earnings only when the tax impact is zero or immaterial. Accordingly, no deferred taxes have been provided for withholding taxes or other taxes that would result upon repatriation of our approximately $68.8 million of undistributed earnings from foreign subsidiaries to the United States as those earnings continue to be permanently reinvested. Our effective income tax rate varied from the U.S. federal statutory tax rate for the three years ended December 31 as follows:
|  | 2020 |  |  | 2019 |  |  | 2018 |
Tax at statutory rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
(Decreases) increases in the tax rate from: |  |  |  |  |  |  |  |  |  |  |  |
State and local taxes, net of federal benefit |  |  | 3.5 |  |  |  | 1.9 |  |  |  | 1.4 |
Effect of foreign operations |  |  | (3.7 | ) |  |  | 3.5 |  |  |  | (4.3 | )
Transaction costs |  |  | — |  |  |  | 0.1 |  |  |  | (4.2 | )
Effect of 2017 deferred rate change |  |  | — |  |  |  | — |  |  |  | (1.0 | )
Transition Tax |  |  | — |  |  |  | — |  |  |  | (1.0 | )
Effect of changes in valuation allowances |  |  | 0.5 |  |  |  | (9.7 | ) |  |  | 6.6 |
Domestic production activities deduction |  |  | — |  |  |  | (0.3 | ) |  |  | 0.4 |
Executive compensation over $1 million |  |  | 2.1 |  |  |  | 2.5 |  |  |  | 1.0 |
Share-based payments |  |  | (0.9 | ) |  |  | (2.0 | ) |  |  | (5.7 | )
Research & Development credit |  |  | (3.3 | ) |  |  | (1.9 | ) |  |  | (3.6 | )
Other, net |  |  | (1.3 | ) |  |  | — |  |  |  | (4.2 | )
Effective income tax rate |  |  | 17.9 | % |  |  | 15.1 | % |  |  | 6.4 | %
Deferred tax assets and liabilities were comprised of the following as of December 31:
|  | 2020 |  |  | 2019 |
Deferred Tax Assets: |  |  |  |  |  |  |  |
Inventory costing and valuation methods |  | $ | 4.5 |  |  | $ | 4.6 |
Employee wages and benefits, principally due to accruals for financial reporting purposes |  |  | 14.0 |  |  |  | 13.7 |
Warranty reserves accrued for financial reporting purposes |  |  | 2.3 |  |  |  | 2.5 |
Receivables, principally due to allowance for doubtful accounts and tax accounting method for equipment rentals |  |  | 2.3 |  |  |  | 1.9 |
Operating lease liability |  |  | 11.2 |  |  |  | 11.4 |
Tax loss carryforwards |  |  | 9.6 |  |  |  | 6.6 |
Tax credit carryforwards |  |  | 3.6 |  |  |  | 3.2 |
Other |  |  | 2.5 |  |  |  | 3.2 |
Gross Deferred Tax Assets |  | $ | 50.0 |  |  | $ | 47.1 |
Less: valuation allowance |  |  | (7.5 | ) |  |  | (6.2 | )
Total Net Deferred Tax Assets |  | $ | 42.5 |  |  | $ | 40.9 |
Deferred Tax Liabilities: |  |  |  |  |  |  |  |
Lease right of use assets |  | $ | 11.2 |  |  | $ | 11.4 |
Property, Plant and Equipment, principally due to differences in depreciation and related gains |  |  | 14.0 |  |  |  | 10.2 |
Goodwill and Intangible Assets |  |  | 41.5 |  |  |  | 43.4 |
Total Deferred Tax Liabilities |  | $ | 66.7 |  |  | $ | 65.0 |
Net Deferred Tax Liabilities |  | $ | (24.2 | ) |  | $ | (24.1 | )
Tax credit carryforwards consist of $2.2 million U.S. federal and state tax credits and $1.4 million of Netherlands tax credits. We have non-U.S. cumulative tax losses of $40.9 million in various countries. Cumulative losses can be used to offset the income tax liabilities on future income in these countries. $18.9 million of these losses have unlimited carryforward periods. $22.0 million of these losses have a limited carryforward period which must be utilized during 2021 to 2028. The valuation allowance as of December 31, 2020 principally applies to Dutch net operating loss and tax credit carryforwards, and state tax credit carryforwards that, in the opinion of management, are more likely than not to expire unutilized. However, to the extent that tax benefits related to these carryforwards are realized in the future, the reduction in the valuation allowance will reduce income tax expense. A valuation allowance for the remaining tax loss carryforwards is not required since it is more likely than not that they will be realized through carryback to taxable income in prior years, future reversals of existing taxable temporary differences and future taxable income. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|  | 2020 |  |  | 2019 |
Balance at January 1 |  | $ | 7.5 |  |  | $ | 5.6 |
Increases as a result of tax positions taken during a prior period |  |  | 0.3 |  |  |  | 0.1 |
Increases as a result of tax positions taken during the current year |  |  | 0.4 |  |  |  | 0.5 |
Increase related to prior period tax positions of acquired entities |  |  | — |  |  |  | 2.5 |
Decreases relating to settlement with tax authorities |  |  | (0.8 | ) |  |  | (0.1 | )
Reductions as a result of a lapse of the applicable statute of limitations |  |  | (1.4 | ) |  |  | (1.0 | )
Increases as a result of foreign currency fluctuations |  |  | 0.4 |  |  |  | (0.1 | )
Balance at December 31 |  | $ | 6.4 |  |  | $ | 7.5 |
Included in the balance of unrecognized tax benefits as of December 31, 2020 and 2019 are potential benefits of $6.3 million and $7.4 million, respectively, that if recognized, would affect the effective tax rate. We recognize potential accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. In addition to the liability of $6.4 million and $7.5 million for unrecognized tax benefits as of December 31, 2020 and 2019, there was approximately $0.7 million and $0.6 million, respectively, for accrued interest and penalties. To the extent interest and penalties are not assessed with respect to uncertain tax positions, the amounts accrued will be revised and reflected as an adjustment to income tax expense. We and our subsidiaries are subject to U.S. federal income tax as well as income tax of numerous state and foreign jurisdictions. We are generally no longer subject to U.S. federal tax examinations for taxable years before 2018 and, with limited exceptions, state and foreign income tax examinations for taxable years before 2015. The Internal Revenue Service completed its examination of the U.S. income tax returns for tax years 2016 and 2017 during the third quarter. The IRS’s adjustments to certain tax positions were not material and were fully reserved. We are currently undergoing income tax examinations in various foreign jurisdictions. Although the final outcome of these examinations cannot be currently determined, we believe that we have adequate reserves with respect to these examinations.

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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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