Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.22.4
INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The following table presents income before income taxes used to calculate the provision for income taxes:
Year Ended December
(In thousands) 2022 2021 2020
Domestic $ 153,936  $ 118,142  $ 18,965 
Foreign 165,200  126,458  53,971 
Income before income taxes $ 319,136  $ 244,600  $ 72,936 
The following table presents components of the provision for income taxes:
Year Ended December
(In thousands) 2022 2021 2020
Current:
Federal $ 53,990  $ 24,514  $ (2,888)
Foreign 12,397  15,877  6,023 
State 7,129  5,149  (828)
Total current income taxes 73,516  45,540  2,307 
Deferred:
Federal and state (9,828) 2,951  10,140 
Foreign 9,955  686  (7,434)
Total deferred income taxes 127  3,637  2,706 
Total provision for income taxes $ 73,643  $ 49,177  $ 5,013 
The following table presents a reconciliation of the differences between income taxes computed by applying the statutory federal income tax rate and "income taxes" recorded in the Company's statements of operations:
Year Ended December
(In thousands) 2022 2021 2020
Tax at federal statutory rate $ 67,019  $ 51,366  $ 15,316 
State income tax, net of federal tax benefit 4,542  5,167  150 
Foreign rate differences (9,849) (13,698) (6,689)
Tax reform —  —  (6,170)
Employee compensation 2,121  940  (272)
Adjustments to opening balances —  —  (2,797)
Change in valuation allowance 4,881  2,010  3,900 
Global intangible low-tax income ("GILTI")
 3,586  2,852  2,345 
Other 1,343  540  (770)
Income taxes $ 73,643  $ 49,177  $ 5,013 
Foreign rate differences include tax benefits of $10.3 million, $5.5 million and $3.0 million in 2022, 2021 and 2020, respectively, from statutorily exempt foreign income.
On January 17, 2020, the Swiss canton of Ticino formally adopted The Federal Act on Tax and AVS Financing (“Swiss Tax Act”). Revaluation of deferred income tax asset and liability positions under the Swiss Tax Act had a one-time impact to tax expense of $6.2 million in 2020. During the year ended December 2022, the Company changed the tax jurisdiction for one of its subsidiaries from the Swiss canton of Ticino to Geneva. This required a revaluation of deferred income tax asset and liability positions, resulting in $1.8 million of tax expense in 2022.
The following table presents the components of "deferred income tax assets" and "deferred income tax liabilities" recorded in the Company's balance sheets:
(In thousands) December 2022 December 2021
Deferred income tax assets:
Inventories $ 29,211  $ 12,922 
Deferred compensation 10,454  10,907 
Other employee benefits 6,903  13,596 
Stock-based compensation 5,286  6,896 
Other accrued expenses 15,641  21,616 
Intangible assets 17,826  22,826 
Leases 11,161  12,621 
Operating loss carryforwards 25,708  27,835 
Gross deferred income tax assets 122,190  129,219 
Less: valuation allowance (25,799) (21,789)
Net deferred income tax assets 96,391  107,430 
Deferred income tax liabilities:
Leases 10,373  11,877 
Depreciation 22,152  22,846 
Taxes on unremitted earnings 3,503  3,403 
Deferred income tax liabilities 36,028  38,126 
Total net deferred income tax assets $ 60,363  $ 69,304 
Amounts included in the balance sheets:
Deferred income tax assets $ 67,282  $ 74,876 
Deferred income tax liabilities (6,919) (5,572)
$ 60,363  $ 69,304 
At the end of 2022, the Company is asserting indefinite reinvestment on foreign earnings totaling $90.9 million. The Company has determined the unrecorded deferred tax liability associated with the $90.9 million basis difference is approximately $0.6 million, primarily related to withholding taxes.
The Company has $17.1 million of potential tax benefits for foreign operating loss carryforwards, $15.7 million of which will expire between 2023 and 2031, and foreign tax credit carryforwards of $2.5 million that will expire between 2030 and 2032. In addition, there are $8.6 million of potential tax benefits for state operating loss and credit carryforwards, $8.3 million of which expire between 2023 and 2042.
A valuation allowance has been provided where it is more likely than not that deferred tax assets related to operating loss carryforwards will not be realized. Valuation allowances totaled $16.7 million for available foreign operating loss carryforwards, $6.5 million for available state operating loss and credit carryforwards, and $2.6 million for other foreign deferred income tax assets. During 2022, the Company recorded a tax benefit due to a $0.8 million decrease in valuation allowances related to state operating loss and credit carryforwards as well as other state deferred income tax assets, and a $4.8 million net increase in valuation allowances related to current year foreign operating losses and other deferred income tax assets, inclusive of foreign currency effects.
The following table presents a reconciliation of the change in the accrual for unrecognized income tax benefits:
(In thousands) Unrecognized
Income Tax
Benefits		 Accrued
Interest
and Penalties		 Unrecognized Income Tax Benefits
Including Interest
and Penalties
Balance, December 2019 $ 13,677  $ 4,215  $ 17,892 
Additions for current year tax positions 138  —  138 
Additions for prior year tax positions 350  872  1,222 
Reductions for prior year tax positions (1,881) (201) (2,082)
Reductions due to statute expirations (192) (22) (214)
Payments in settlement (199) —  (199)
Balance, December 2020 11,893  4,864  16,757 
Additions for current year tax positions 154  —  154 
Additions for prior year tax positions 18  525  543 
Reductions for prior year tax positions (348) (340) (688)
Balance, December 2021 11,717  5,049  16,766 
Additions for current year tax positions 169  —  169 
Additions for prior year tax positions 853  857  1,710 
Reductions for prior year tax positions —  (30) (30)
Reductions due to statute expirations (137) (58) (195)
Balance, December 2022 $ 12,602  $ 5,818  $ 18,420 
(In thousands) December 2022 December 2021
Amounts included in the balance sheets:
Unrecognized income tax benefits, including interest and penalties $ 18,420  $ 16,766 
Less: deferred tax benefits (3,445) (3,308)
Total unrecognized tax benefits $ 14,975  $ 13,458 
The unrecognized tax benefits of $15.0 million at the end of 2022, if recognized, would reduce the annual effective tax rate.
The Company files a consolidated U.S. federal income tax return, as well as separate and combined income tax returns in numerous state and international jurisdictions. In the U.S., the Company’s 2019 through 2021 tax years remain open and are subject to examination by the Internal Revenue Service. In addition, the Company is currently subject to examination by various state and international tax authorities. Management regularly assesses the potential outcomes of both ongoing and future examinations for the current and prior years and has concluded that the Company’s provision for income taxes is adequate. The outcome of any one examination is not expected to have a material impact on the Company’s financial statements. Management also believes that it is reasonably possible that the amount of unrecognized tax benefits may decrease by $2.4 million within the next 12 months due to expiration of statutes of limitations, all of which would reduce income tax expense.