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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | 10. Income Taxes The provisions for taxes on income and the related income before taxes for the years ended December 31, 2019, 2018 and 2017, were as follows:
(In thousands) |  | 2019 |  |  | 2018 As Adjusted |  |  | 2017 As Adjusted |
Taxes on Income |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 9,998 |  |  | $ | (296 | ) |  | $ | 32,299 |
Deferred (1) |  |  | (2,879 | ) |  |  | 8,876 |  |  |  | (3,690 | )
State |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 2,248 |  |  |  | 2,095 |  |  |  | 1,764 |
Deferred (1) |  |  | (1,783 | ) |  |  | 1,821 |  |  |  | 587 |
Foreign |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 15,568 |  |  |  | 14,510 |  |  |  | 13,077 |
Deferred |  |  | (354 | ) |  |  | (342 | ) |  |  | 2,102 |
Total (1) |  | $ | 22,798 |  |  | $ | 26,664 |  |  | $ | 46,139 |
Income before Taxes |  |  |  |  |  |  |  |  |  |  |  |
Domestic (1) |  | $ | 63,399 |  |  | $ | 86,368 |  |  | $ | 80,307 |
Foreign |  |  | 62,500 |  |  |  | 51,401 |  |  |  | 66,575 |
Total (1) |  | $ | 125,899 |  |  | $ | 137,769 |  |  | $ | 146,882 |
| (1) | The 2018 and 2017 amounts for the noted line items have been retrospectively changed from the amounts originally reported as a result of the Company’s first quarter 2019 change in method of accounting for U.S. inventory valuation from LIFO to FIFO. |
The variations between the effective and statutory U.S. federal income tax rates are summarized as follows:
(In thousands) |  | 2019 Amount |  |  | % |  |  | 2018 Amount As Adjusted |  |  | % |  |  | 2017 Amount As Adjusted |  |  | % |
Federal income tax provision at statutory tax rate (1) |  | $ | 26,439 |  |  |  | 21.0 |  |  | $ | 28,931 |  |  |  | 21.0 |  |  | $ | 51,409 |  |  |  | 35.0 |
State income tax provision, less applicable federal tax benefit (1)(2) |  |  | 367 |  |  |  | 0.3 |  |  |  | 3,094 |  |  |  | 2.2 |  |  |  | 1,528 |  |  |  | 1.0 |
Foreign income taxed at different rates |  |  | 623 |  |  |  | 0.5 |  |  |  | 864 |  |  |  | 0.6 |  |  |  | (8,075 | ) |  |  | (5.5 | )
U.S. taxation of foreign earnings (3) |  |  | 2,349 |  |  |  | 1.9 |  |  |  | 2,348 |  |  |  | 1.7 |  |  |  | (1,054 | ) |  |  | (0.7 | )
Unrecognized tax benefits |  |  | 2,954 |  |  |  | 2.3 |  |  |  | (460 | ) |  |  | (0.3 | ) |  |  | (47 | ) |  |  | — |
Domestic production activities deduction |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,339 | ) |  |  | (0.9 | )
Nontaxable foreign interest income |  |  | — |  |  |  | — |  |  |  | (1,179 | ) |  |  | (0.9 | ) |  |  | (2,073 | ) |  |  | (1.4 | )
U.S. tax reform, net impact (4) |  |  | — |  |  |  | — |  |  |  | (375 | ) |  |  | (0.3 | ) |  |  | 10,323 |  |  |  | 7.0 |
Change in accounting methods (5) |  |  | — |  |  |  | — |  |  |  | (3,383 | ) |  |  | (2.5 | ) |  |  | (893 | ) |  |  | (0.6 | )
Prior years return to provision true-up (6) |  |  | (1,740 | ) |  |  | (1.4 | ) |  |  | (508 | ) |  |  | (0.4 | ) |  |  | (266 | ) |  |  | (0.2 | )
Stock based compensation, excess tax benefits |  |  | (1,633 | ) |  |  | (1.3 | ) |  |  | (1,648 | ) |  |  | (1.2 | ) |  |  | (2,254 | ) |  |  | (1.5 | )
U.S. tax credits (7) |  |  | (6,412 | ) |  |  | (5.1 | ) |  |  | (1,324 | ) |  |  | (1.0 | ) |  |  | (1,204 | ) |  |  | (0.8 | )
Non-deductible expenses and other items, net |  |  | (149 | ) |  |  | (0.1 | ) |  |  | 304 |  |  |  | 0.5 |  |  |  | 84 |  |  |  | 0.0 |
Total income tax provision (1) |  | $ | 22,798 |  |  |  | 18.1 |  |  | $ | 26,664 |  |  |  | 19.4 |  |  | $ | 46,139 |  |  |  | 31.4 |
(1) | The 2018 and 2017 amounts for the noted line items have been retrospectively changed from the amounts originally reported as a result of the Company’s first quarter 2019 change in method of accounting for U.S. inventory valuation from LIFO to FIFO.
(2) | Includes incremental state research credits for the tax years 2015 - 2019 that were identified as part of a research and development tax credit study.
(3) | Includes cost of global intangible low-taxed income (GILTI) in 2019 and 2018 plus other taxes paid or withheld on cash repatriated from foreign countries in 2019 and 2018.
(4) | Does not include state tax impacts, which are included in state income tax provision, less applicable federal tax benefit.
(5) | For 2018, amount represents the federal tax rate change due to certain accounting methods that were adopted on the 2017 federal income tax return. For 2017, amount represents an accounting method change for depreciation.
(6) | Certain 2018 and 2017 amounts have been reclassified to conform to the 2019 presentation.
(7) | Includes incremental federal research credits for 2015 - 2019 that were identified as part of a research and development tax credit study. Also includes a federal tax rate change due to the classification of certain 2016 and 2017 depreciable fixed assets as deductible research costs.
At December 31, 2019 and 2018, the tax effects of significant temporary differences representing deferred tax assets and liabilities were as follows:
(In thousands) |  | 2019 |  |  | 2018 As Adjusted |
Deferred Tax Liabilities: |  |  |  |  |  |  |  |
Depreciation |  | $ | (59,574 | ) |  | $ | (57,665 | )
Unrealized foreign exchange loss |  |  | (1,479 | ) |  |  | (980 | )
Amortization of intangibles |  |  | (835 | ) |  |  | (1,016 | )
Inventories (1) |  |  | (5,855 | ) |  |  | (8,429 | )
Other |  |  | (307 | ) |  |  | (301 | )
|  | $ | (68,050 | ) |  | $ | (68,391 | )
Deferred Tax Assets: |  |  |  |  |  |  |  |
Pensions |  | $ | 5,855 |  |  | $ | 7,971 |
Deferred revenue |  |  | 161 |  |  |  | 208 |
Other accruals and reserves |  |  | 12,171 |  |  |  | 13,123 |
Legal and environmental accruals |  |  | 7,758 |  |  |  | 7,143 |
Deferred compensation |  |  | 15,816 |  |  |  | 14,214 |
Bad debt and rebate reserves |  |  | 2,604 |  |  |  | 2,916 |
Non-U.S. subsidiaries net operating loss carryforwards |  |  | 3,966 |  |  |  | 3,869 |
Tax credit carryforwards |  |  | 5,200 |  |  |  | 2,141 |
|  | $ | 53,531 |  |  | $ | 51,585 |
Valuation Allowance |  | $ | (2,994 | ) |  | $ | (3,701 | )
Net Deferred Tax Liabilities |  | $ | (17,513 | ) |  | $ | (20,507 | )
Reconciliation to Consolidated Balance Sheet: |  |  |  |  |  |  |  |
Non-current deferred tax assets (in other non-current assets) (1) |  |  | 5,878 |  |  |  | 4,454 |
Non-current deferred tax liabilities |  |  | (23,391 | ) |  |  | (24,961 | )
Net Deferred Tax (Liabilities) Assets |  | $ | (17,513 | ) |  | $ | (20,507 | )
| (1) | The 2018 amounts for the noted line items have been retrospectively changed from the amounts originally reported as a result of the Company’s first quarter 2019 change in method of accounting for U.S. inventory valuation from LIFO to FIFO. |
Earnings generated by a foreign subsidiary are presumed to ultimately be transferred to the parent company. Therefore, the establishment of deferred taxes may be required with respect to the excess of the investment value for financial reporting over the tax basis of investments in those foreign subsidiaries (also referred to as book-over-tax outside basis differences). A company may overcome this presumption and forgo recording a deferred tax liability in its financial statements if it can assert that management has the intent and ability to indefinitely reinvest the earnings of its foreign subsidiaries. Pursuant to the 2017 U.S. Tax Cuts and Jobs Act (Tax Act), the Company’s foreign earnings have been subject to U.S. federal taxes. The Company now has the ability to repatriate to the U.S. parent the cash associated with these foreign earnings with little additional U.S. federal taxes. This cash may, however, be subject to foreign income and/or local country taxes if repatriated to the United States. In addition, repatriation of some foreign cash balances may be further restricted by local laws. As such, the Company intends to limit its distributions to earnings previously taxed in the U.S. or earnings that would qualify for the 100 percent dividends received deduction provided for in the Tax Act as long as such distributions would not result in any significant foreign taxes. In 2019, the Company repatriated approximately $57,000,000 to the U.S. parent, and recorded $500,000 of additional income tax expense in 2019 as a result of the repatriation. The effect of the adjustment on the 2019 effective tax rate was an increase of approximately 0.4 percent. During 2019, the Company reevaluated its indefinite reinvestment assertion with regards to certain accumulated foreign earnings. The Company no longer considers the undistributed earnings of its Canadian subsidiary to be indefinitely reinvested in foreign operations to the extent of the subsidiary’s paid-up capital (PUC) as determined under Canadian tax law which is used to determine tax-free distributions for Canadian tax purposes. The Company also no longer considers the undistributed earnings of its Dutch subsidiary, one of its Singapore subsidiaries, and one of its Chinese subsidiaries to be indefinitely reinvested in foreign operations. A distribution from any of these subsidiaries should not result in any significant foreign taxes to the extent of the distribution limitations discussed above and therefore, the Company has not recognized a deferred tax liability for these undistributed earnings as of December 31, 2019. The Company considers the undistributed earnings of its remaining foreign subsidiaries to be indefinitely reinvested in foreign operations. At this time, the determination of deferred tax liabilities on this amount is not practicable. The Company has non-U.S. tax loss carryforwards of $12,031,000 (pretax) as of December 31, 2019, and $14,901,000 as of December 31, 2018, that are available for use by the Company between 2020 and 2038. The Company has tax credit carryforwards of $5,200,000 as of December 31, 2019, and $2,141,000 as of December 31, 2018 that are available for use by the Company between 2020 and 2034. The Company has non-U.S. capital loss carryforwards of $621,000 as of December 31, 2019, and $0 as of December 31, 2018. The Company’s capital loss carryforwards do not expire. At December 31, 2019, the Company had valuation allowances of $2,994,000, which were attributable to deferred tax assets in Canada, China, India, the Philippines and Singapore. The realization of deferred tax assets is dependent on the generation of sufficient taxable income in the appropriate tax jurisdictions. The Company believes that it is more likely than not that the related deferred tax assets will not be realized. As of December 31, 2019, 2018 and 2017, unrecognized tax benefits totaled $3,273,000, $168,000 and $1,927,000, respectively. The amount of unrecognized tax benefits that, if recognized, would favorably affect the Company’s effective income tax rate in any future periods, net of the federal benefit on state issues, was approximately $3,105,000, $162,000 and $1,917,000 at December 31, 2019, 2018 and 2017, respectively. The Company does not believe that the amount of unrecognized tax benefits related to its current uncertain tax positions will change significantly over the next 12 months. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. In 2019, the Company recognized net interest and penalty expense of $19,000 compared to $26,000 of net interest and penalty income in 2018 and $3,000 of net interest and penalty expense in 2017. At December 31, 2019 the liability for interest and penalties was $49,000 compared to $30,000 at December 31, 2018. The Company files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is not subject to U.S. federal income tax examinations by tax authorities for years before 2015. Some foreign jurisdictions and various U.S. states jurisdictions may be subject to examination back to 2013. During 2016, the Internal Revenue Service started its audit of the 2011 and 2012 tax years. As of December 31, 2019, these audits were officially settled. During 2018, the Company effectively settled these audits and reversed an unrecognized tax benefit of $1,526,000 that was offset with a corresponding reversal of $1,326,000 related to an income tax refund receivable for which the Company is no longer entitled to receive. Below are reconciliations of the January 1 and December 31 balances of unrecognized tax benefits for 2019, 2018 and 2017:
(In thousands) |  | 2019 |  |  | 2018 |  |  | 2017 |
Unrecognized tax benefits, opening balance |  | $ | 168 |  |  | $ | 1,927 |  |  | $ | 1,931 |
Gross increases – tax positions in prior period |  |  | 2,760 |  |  |  | 29 |  |  |  | — |
Gross increases – current period tax positions |  |  | 355 |  |  |  | 26 |  |  |  | 20 |
Foreign currency translation |  |  | 7 |  |  |  | 1 |  |  |  | 69 |
Settlement |  |  | — |  |  |  | (1,526 | ) |  |  | — |
Lapse of statute of limitations |  |  | (17 | ) |  |  | (289 | ) |  |  | (93 | )
Unrecognized tax benefits, ending balance |  | $ | 3,273 |  |  | $ | 168 |  |  | $ | 1,927 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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