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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | 9. Income Taxes The provisions for taxes on income and the related income before taxes for the years ended December 31, 2020, 2019 and 2018, were as follows:
(In thousands) |  | 2020 |  |  | 2019 |  |  | 2018 |
Taxes on Income |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 21,889 |  |  | $ | 9,998 |  |  | $ | (296 | )
Deferred |  |  | (3,453 | ) |  |  | (2,879 | ) |  |  | 8,876 |
State |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 4,305 |  |  |  | 2,248 |  |  |  | 2,095 |
Deferred |  |  | (562 | ) |  |  | (1,783 | ) |  |  | 1,821 |
Foreign |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 21,723 |  |  |  | 15,568 |  |  |  | 14,510 |
Deferred |  |  | (491 | ) |  |  | (354 | ) |  |  | (342 | )
Total |  | $ | 43,411 |  |  | $ | 22,798 |  |  | $ | 26,664 |
Income before Taxes |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  | $ | 81,906 |  |  | $ | 63,399 |  |  | $ | 86,368 |
Foreign |  |  | 89,161 |  |  |  | 62,500 |  |  |  | 51,401 |
Total |  | $ | 171,067 |  |  | $ | 125,899 |  |  | $ | 137,769 |
The variations between the effective and statutory U.S. federal income tax rates are summarized as follows:
(In thousands) |  | 2020 Amount |  |  | % |  |  | 2019 Amount |  |  | % |  |  | 2018 Amount |  |  | % |
Federal income tax provision at statutory tax rate |  | $ | 35,924 |  |  |  | 21.0 |  |  | $ | 26,439 |  |  |  | 21.0 |  |  | $ | 28,931 |  |  |  | 21.0 |
State income tax provision, less applicable federal tax benefit (1) |  |  | 2,956 |  |  |  | 1.7 |  |  |  | 367 |  |  |  | 0.3 |  |  |  | 3,094 |  |  |  | 2.2 |
Foreign income taxed at different rates |  |  | 1,964 |  |  |  | 1.1 |  |  |  | 623 |  |  |  | 0.5 |  |  |  | 864 |  |  |  | 0.6 |
U.S. taxation of foreign earnings (2) |  |  | 4,134 |  |  |  | 2.4 |  |  |  | 2,349 |  |  |  | 1.9 |  |  |  | 2,348 |  |  |  | 1.7 |
Unrecognized tax benefits |  |  | 1,454 |  |  |  | 0.8 |  |  |  | 2,954 |  |  |  | 2.3 |  |  |  | (460 | ) |  |  | (0.3 | )
Nontaxable foreign interest income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,179 | ) |  |  | (0.9 | )
U.S. tax reform, net impact (3) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (375 | ) |  |  | (0.3 | )
Change in accounting methods (4) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (3,383 | ) |  |  | (2.5 | )
Prior years return to provision true-up |  |  | (588 | ) |  |  | (0.3 | ) |  |  | (1,740 | ) |  |  | (1.4 | ) |  |  | (508 | ) |  |  | (0.4 | )
Stock based compensation, excess tax benefits |  |  | (1,816 | ) |  |  | (1.1 | ) |  |  | (1,633 | ) |  |  | (1.3 | ) |  |  | (1,648 | ) |  |  | (1.2 | )
U.S. tax credits (5) |  |  | (1,831 | ) |  |  | (1.1 | ) |  |  | (6,412 | ) |  |  | (5.1 | ) |  |  | (1,324 | ) |  |  | (1.0 | )
Non-deductible expenses and other items, net |  |  | 1,214 |  |  |  | 0.9 |  |  |  | (149 | ) |  |  | (0.1 | ) |  |  | 304 |  |  |  | 0.5 |
Total income tax provision |  | $ | 43,411 |  |  |  | 25.4 |  |  | $ | 22,798 |  |  |  | 18.1 |  |  | $ | 26,664 |  |  |  | 19.4 |
(1) | For 2019, amount includes incremental state research credits for the tax years 2015 - 2019 that were identified as part of a research and development tax credit study.
(2) | Includes cost of global intangible low-taxed income (GILTI) in 2020, 2019 and 2018 plus other taxes paid or withheld on cash repatriated from foreign countries in 2020, 2019 and 2018.
(3) | Does not include state tax impacts, which are included in state income tax provision, less applicable federal tax benefit.
(4) | For 2018, amount represents the federal tax rate change due to certain accounting methods that were adopted on the 2017 federal income tax return.
(5) | For 2019, amount 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, 2020 and 2019, the tax effects of significant temporary differences representing deferred tax assets and liabilities were as follows:
(In thousands) |  | 2020 |  |  | 2019 |
Deferred Tax Liabilities: |  |  |  |  |  |  |  |
Depreciation |  | $ | (62,986 | ) |  | $ | (59,574 | )
Unrealized foreign exchange loss |  |  | (2,444 | ) |  |  | (1,479 | )
Amortization of intangibles |  |  | (842 | ) |  |  | (835 | )
Inventories |  |  | (2,504 | ) |  |  | (5,855 | )
Other |  |  | (386 | ) |  |  | (307 | )
|  | $ | (69,162 | ) |  | $ | (68,050 | )
Deferred Tax Assets: |  |  |  |  |  |  |  |
Pensions |  | $ | 4,935 |  |  | $ | 5,855 |
Deferred revenue |  |  | 3,073 |  |  |  | 161 |
Other accruals and reserves |  |  | 14,960 |  |  |  | 12,171 |
Legal and environmental accruals |  |  | 7,055 |  |  |  | 7,758 |
Deferred compensation |  |  | 16,222 |  |  |  | 15,816 |
Bad debt and rebate reserves |  |  | 2,821 |  |  |  | 2,604 |
Non-U.S. subsidiaries net operating loss carryforwards |  |  | 2,495 |  |  |  | 3,966 |
Tax credit carryforwards |  |  | 4,713 |  |  |  | 5,200 |
|  | $ | 56,274 |  |  | $ | 53,531 |
Valuation Allowance |  | $ | (896 | ) |  | $ | (2,994 | )
Net Deferred Tax Liabilities |  | $ | (13,784 | ) |  | $ | (17,513 | )
Reconciliation to Consolidated Balance Sheet: |  |  |  |  |  |  |  |
Non-current deferred tax assets (in other non-current assets) |  |  | 6,961 |  |  |  | 5,878 |
Non-current deferred tax liabilities |  |  | (20,745 | ) |  |  | (23,391 | )
Net Deferred Tax (Liabilities) Assets |  | $ | (13,784 | ) |  | $ | (17,513 | )
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 anticipation of the INVISTA acquisition, the Company’s Philippines entities declared a cash dividend of approximately $20,700,000 to the U.S. parent in December 2020. The Company recorded $2,384,000 of additional income tax expense in 2020 as a result of the expected repatriation. The Company expects that the U.S. parent will receive the cash in 2021. The effect of the adjustment on the 2020 effective tax rate was an increase of approximately 1.4 percent. The Company evaluated its indefinite reinvestment assertion with regards to certain accumulated foreign earnings as of December 31, 2020. The Company does not consider 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 does not consider the undistributed earnings of one of its Dutch subsidiaries, 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, 2020. 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 $6,551,000 (pretax) as of December 31, 2020, and $12,031,000 as of December 31, 2019, that are available for use by the Company between 2021 and 2038. The Company has tax credit carryforwards of $4,713,000 as of December 31, 2020, and $5,200,000 as of December 31, 2019 that are available for use by the Company between 2021 and 2034. The Company has non-U.S. capital loss carryforwards of $633,000 as of December 31, 2020, and $621,000 as of December 31, 2019. The Company’s capital loss carryforwards do not expire. As of December 31, 2020, and 2019, the Company had valuation allowances of $896,000 and $2,994,000, respectively, which were attributable to deferred tax assets in Canada, China, India, and the Philippines. 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, 2020, 2019 and 2018, unrecognized tax benefits totaled $4,735,000, $3,273,000 and $168,000, 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 $4,545,000, $3,105,000 and $162,000 at December 31, 2020, 2019 and 2018, 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 2020, the Company recognized net interest and penalty expense of $31,000 compared to $19,000 of net interest and penalty expense in 2019 and $26,000 of net interest and penalty income in 2018. At December 31, 2020 the liability for interest and penalties was $80,000 compared to $49,000 at December 31, 2019. 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 2020, 2019 and 2018:
(In thousands) |  | 2020 |  |  | 2019 |  |  | 2018 |
Unrecognized tax benefits, opening balance |  | $ | 3,273 |  |  | $ | 168 |  |  | $ | 1,927 |
Gross increases – tax positions in prior period |  |  | 190 |  |  |  | 2,760 |  |  |  | 29 |
Gross increases – current period tax positions |  |  | 1,288 |  |  |  | 355 |  |  |  | 26 |
Foreign currency translation |  |  | 15 |  |  |  | 7 |  |  |  | 1 |
Settlement |  |  | — |  |  |  | — |  |  |  | (1,526 | )
Lapse of statute of limitations |  |  | (31 | ) |  |  | (17 | ) |  |  | (289 | )
Unrecognized tax benefits, ending balance |  | $ | 4,735 |  |  | $ | 3,273 |  |  | $ | 168 |

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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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