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Income Taxes | 12 Months Ended
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Dec. 31, 2021
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, 2021, 2020 and 2019, were as follows:
(In thousands) |  | 2021 |  |  | 2020 |  |  | 2019 |
Taxes on Income |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 35,057 |  |  | $ | 21,889 |  |  | $ | 9,998 |
Deferred |  |  | (25,653 | ) |  |  | (3,453 | ) |  |  | (2,879 | )
State |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 9,320 |  |  |  | 4,305 |  |  |  | 2,248 |
Deferred |  |  | (6,556 | ) |  |  | (562 | ) |  |  | (1,783 | )
Foreign |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 23,870 |  |  |  | 21,723 |  |  |  | 15,568 |
Deferred |  |  | (1,396 | ) |  |  | (491 | ) |  |  | (354 | )
Total |  | $ | 34,642 |  |  | $ | 43,411 |  |  | $ | 22,798 |
Income before Taxes |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  | $ | 77,696 |  |  | $ | 81,906 |  |  | $ | 63,399 |
Foreign |  |  | 94,841 |  |  |  | 89,161 |  |  |  | 62,500 |
Total |  | $ | 172,537 |  |  | $ | 171,067 |  |  | $ | 125,899 |
The variations between the effective and statutory U.S. federal income tax rates are summarized as follows:
(In thousands) |  | 2021 Amount |  |  | % |  |  | 2020 Amount |  |  | % |  |  | 2019 Amount |  |  | % |
Federal income tax provision at statutory tax rate |  | $ | 36,233 |  |  |  | 21.0 |  |  | $ | 35,924 |  |  |  | 21.0 |  |  | $ | 26,439 |  |  |  | 21.0 |
State income tax provision, less applicable federal tax benefit (1) |  |  | 2,184 |  |  |  | 1.3 |  |  |  | 2,956 |  |  |  | 1.7 |  |  |  | 367 |  |  |  | 0.3 |
Foreign income taxed at different rates |  |  | 2,356 |  |  |  | 1.4 |  |  |  | 1,964 |  |  |  | 1.1 |  |  |  | 623 |  |  |  | 0.5 |
U.S. taxation of foreign earnings (2) |  |  | (134 | ) |  |  | (0.1 | ) |  |  | 4,134 |  |  |  | 2.4 |  |  |  | 2,349 |  |  |  | 1.9 |
Unrecognized tax benefits |  |  | 1,775 |  |  |  | 1.0 |  |  |  | 1,454 |  |  |  | 0.8 |  |  |  | 2,954 |  |  |  | 2.3 |
Prior years return to provision true-up (3) |  |  | (3,314 | ) |  |  | (1.9 | ) |  |  | (588 | ) |  |  | (0.3 | ) |  |  | (1,740 | ) |  |  | (1.4 | )
Stock based compensation, excess tax benefits |  |  | (1,287 | ) |  |  | (0.7 | ) |  |  | (1,816 | ) |  |  | (1.1 | ) |  |  | (1,633 | ) |  |  | (1.3 | )
U.S. tax credits (4) |  |  | (2,692 | ) |  |  | (1.6 | ) |  |  | (1,831 | ) |  |  | (1.1 | ) |  |  | (6,412 | ) |  |  | (5.1 | )
Non-deductible expenses and other items, net |  |  | (479 | ) |  |  | (0.3 | ) |  |  | 1,214 |  |  |  | 0.9 |  |  |  | (149 | ) |  |  | (0.1 | )
Total income tax provision |  | $ | 34,642 |  |  |  | 20.1 |  |  | $ | 43,411 |  |  |  | 25.4 |  |  | $ | 22,798 |  |  |  | 18.1 |
(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 2021, 2020 and 2019 plus other taxes paid or withheld on cash repatriated from foreign countries in 2021, 2020 and 2019. For 2021, includes the benefit of separate limitation loss foreign tax credit attributes, related to prior years, that were utilized in 2021.
(3) | For 2021, amount resulted from a higher federal research credit, higher foreign-derived intangible income (FDII), and lower GILTI related to the 2020 tax year.
(4) | 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, 2021 and 2020, the tax effects of significant temporary differences representing deferred tax assets and liabilities were as follows:
(In thousands) |  | 2021 |  |  | 2020 |
Deferred Tax Assets: |  |  |  |  |  |  |  |
Pensions |  | $ | 537 |  |  | $ | 4,935 |
Deferred revenue |  |  | 3,444 |  |  |  | 3,073 |
Other accruals and reserves |  |  | 13,331 |  |  |  | 14,960 |
Legal and environmental accruals |  |  | 7,385 |  |  |  | 7,055 |
Deferred compensation |  |  | 16,210 |  |  |  | 16,222 |
Bad debt and rebate reserves |  |  | 2,706 |  |  |  | 2,821 |
Non-U.S. subsidiaries net operating loss carryforwards |  |  | 1,494 |  |  |  | 2,495 |
Amortization of intangibles |  |  | 5,092 |  |  |  | — |
Inventories |  |  | 3,108 |  |  |  | — |
Tax credit carryforwards |  |  | 2,829 |  |  |  | 4,713 |
|  | $ | 56,136 |  |  | $ | 56,274 |
Deferred Tax Liabilities: |  |  |  |  |  |  |  |
Depreciation |  | $ | (42,299 | ) |  | $ | (62,986 | )
Unrealized foreign exchange loss |  |  | (2,908 | ) |  |  | (2,444 | )
Amortization of intangibles |  |  | — |  |  |  | (842 | )
Inventories |  |  | — |  |  |  | (2,504 | )
Other |  |  | (1,614 | ) |  |  | (386 | )
|  | $ | (46,821 | ) |  | $ | (69,162 | )
Valuation Allowance |  | $ | (862 | ) |  | $ | (896 | )
Net Deferred Tax Assets (Liabilities) |  | $ | 8,453 |  |  | $ | (13,784 | )
Reconciliation to Consolidated Balance Sheet: |  |  |  |  |  |  |  |
Non-current deferred tax assets (in other non-current assets) |  |  | 20,944 |  |  |  | 6,961 |
Non-current deferred tax liabilities |  |  | (12,491 | ) |  |  | (20,745 | )
Net Deferred Tax Assets (Liabilities) |  | $ | 8,453 |  |  | $ | (13,784 | )
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 2021, the Company repatriated $15,340,000 between May and December from its Brazilian, Colombian, and Mexican subsidiaries. The Company did not incur any incremental taxes as a result of this repatriation. 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’s U.S. parent received 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, 2021. 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, and one of its Singapore 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, 2021. In 2021, the Company dissolved its China joint venture that prior to dissolution had not been considered indefinitely reinvested. The dissolution resulted in $142,000 of additional income tax expense in 2021. 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 had non-U.S. tax loss carryforwards of $3,351,000 (pretax) as of December 31, 2021, and $6,551,000 as of December 31, 2020, that are available for use by the Company between 2022 and 2029. The Company had tax credit carryforwards of $2,829,000 as of December 31, 2021, and $4,713,000 as of December 31, 2020, that are available for use by the Company between 2022 and 2034. The Company had non-U.S. capital loss carryforwards of $638,000 as of December 31, 2021, and $633,000 as of December 31, 2020. The Company’s capital loss carryforwards do not expire. As of December 31, 2021, and 2020, the Company had valuation allowances of $862,000 and $896,000, respectively, which were attributable to deferred tax assets in Canada, 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, 2021, 2020 and 2019, unrecognized tax benefits totaled $7,292,000, $4,735,000 and $3,273,000, 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 $6,973,000, $4,545,000 and $3,105,000 at December 31, 2021, 2020 and 2019, 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 2021, the Company recognized net interest and penalty expense of $260,000 compared to $31,000 of net interest and penalty expense in 2020 and $19,000 of net interest and penalty expense in 2019. At December 31, 2021 the liability for interest and penalties was $340,000 compared to $80,000 at December 31, 2020. 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 2016. Some foreign jurisdictions and various U.S. states jurisdictions may be subject to examination back to 2014. During 2021, the Internal Revenue Service started its audit of the 2016-2019 tax years. As of December 31, 2021, these audits were still open and the Company had not been notified of any significant proposed adjustments. Below are reconciliations of the January 1 and December 31 balances of unrecognized tax benefits for 2021, 2020 and 2019:
(In thousands) |  | 2021 |  |  | 2020 |  |  | 2019 |
Unrecognized tax benefits, opening balance |  | $ | 4,735 |  |  | $ | 3,273 |  |  | $ | 168 |
Gross increases – tax positions in prior period |  |  | 938 |  |  |  | 190 |  |  |  | 2,760 |
Gross increases – current period tax positions |  |  | 1,662 |  |  |  | 1,288 |  |  |  | 355 |
Foreign currency translation |  |  | (14 | ) |  |  | 15 |  |  |  | 7 |
Lapse of statute of limitations |  |  | (29 | ) |  |  | (31 | ) |  |  | (17 | )
Unrecognized tax benefits, ending balance |  | $ | 7,292 |  |  | $ | 4,735 |  |  | $ | 3,273 |

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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=121826272&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=122134291&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=121826272&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=122134291&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=121826272&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 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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