Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

On March 11, 2021, President Biden signed the American Rescue Plan (the Rescue Plan) into law. The Rescue Plan, among other things, extended and enhanced a number of current-law tax incentives for businesses. The Company has examined the impact of the Rescue Plan on its business and has determined it does not have a material impact to its consolidated financial statements.

Income (loss) before income taxes and income tax expense (benefit) are comprised of the following:

(Thousands)	2021		2020		2019
Income (loss) before income taxes:
Domestic	$	54,684	$	(1,153)	$	60,271
Foreign	22,641		9,428		5,265
Total income (loss) before income taxes	$	77,325	$	8,275	$	65,536
Income tax expense:
Current income tax expense (benefit):
Domestic	$	14,603	$	812	$	6,995
Foreign	3,205		1,851		1,202
Total current	$	17,808	$	2,663	$	8,197
Deferred income tax (benefit) expense:
Domestic	$	(7,953)	$	(5,641)	$	2,687
Foreign	(5,004)		(4,209)		1,258
Total deferred	$	(12,957)	$	(9,850)	$	3,945
Total income tax expense (benefit)	$	4,851	$	(7,187)	$	12,142

A reconciliation of the U.S. federal statutory income tax rate to the Company's effective income tax rate is as follows:

	2021		2020		2019
U.S. federal statutory rate	21.0	%	21.0	%	21.0	%
State and local income taxes, net of federal tax effect	(0.3)		(10.0)		1.0
Effect of excess of percentage depletion over cost depletion	(3.4)		(43.0)		(4.3)
Foreign derived intangible income deduction	(2.3)		(1.8)		(3.0)
Non-deductible goodwill impairment	—		7.1		1.1
Tax Cuts and Jobs Act impact	—		—		2.3
Research and development tax credit	(1.2)		(16.4)		(1.1)
Foreign tax credit	—		—		(0.3)
Impact of foreign operations	0.3		(5.3)		0.9
Non-deductible transaction costs	1.6		6.9		0.2
Interest from tax authorities	—		(3.8)		—
Adjustment to unrecognized tax benefits	(1.9)		1.8		0.2
Equity compensation	(0.5)		(5.3)		(3.2)
Non-deductible officers' compensation	1.4		6.8		0.8
Valuation allowance	(8.5)		(45.5)		2.1
Other items	0.1		0.6		0.8
Effective tax rate	6.3	%	(86.9)	%	18.5	%

Deferred tax assets and (liabilities) are determined based on temporary differences between the financial reporting and tax basis of assets and liabilities. Deferred tax assets and (liabilities) recorded in the Consolidated Balance Sheets consist of the following:

	December 31,
(Thousands)	2021		2020
Asset (liability)
Post-employment benefits other than pensions	$	1,714	$	1,564
Other reserves	1,901		226
Deferred compensation	3,263		3,322
Environmental reserves	1,358		1,301
Revenue recognition	5,027		—
Lease liabilities	11,639		10,469
Interest expense carryforward	14,163		—
Pensions	1,393		7,456
Accrued compensation expense	6,410		2,683
Net operating loss and credit carryforwards	11,423		12,711
Subtotal	58,291		39,732
Valuation allowance	(4,957)		(14,134)
Total deferred tax assets	53,334		25,598
Depreciation	(24,484)		(12,112)
Lease assets	(11,184)		(10,261)
Inventory	(2,329)		(3,532)
Amortization	(35,542)		(10,754)
Mine development	(917)		(1,669)
Unrealized gains	(663)		—
Total deferred tax liabilities	(75,119)		(38,328)
Net deferred tax liabilities	$	(21,785)	$	(12,730)

The Company had deferred income tax assets offset with a valuation allowance for certain foreign and state net operating losses, a domestic capital loss carryforward, state investment and research and development tax credit carryforwards, and deferred tax assets that are not likely to be realized for certain of the Company's controlled foreign corporations. The Company intends to maintain a valuation allowance on these deferred tax assets until a realization event occurs to support reversal of all or a portion of the allowance.

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of December 31, 2021, the Company came out of a three year cumulative loss in Germany in the fourth quarter due to improving profitability. Management determined that there is sufficient positive evidence to conclude that it is more likely than not that additional deferred taxes are realizable and released the related $6.9 million valuation allowance on deferred tax assets in Germany, resulting in an income tax benefit for this amount.

At December 31, 2021, for income tax purposes, the Company had foreign net operating loss carryforwards of $20.8 million that do not expire, and $6.7 million that expire in calendar years 2022 through 2027. The Company had state net operating loss carryforwards of $24.5 million that expire in calendar years 2022 through 2040 and state tax credits of $4.2 million that expire in calendar years 2022 through 2036. The Company also had a capital loss carryforward of $8.4 million that expires in 2026. A valuation allowance of $5.0 million has been provided against certain foreign and state net operating loss carryforwards, a U.S. capital loss carryforward, and state tax credits due to uncertainty of their realization.

The Company files income tax returns in the U.S. federal jurisdiction, and in various state, local, and foreign jurisdictions. With limited exceptions, the Company is no longer subject to U.S. federal examinations for years before 2018, state and local examinations for years before 2017, and foreign examinations for tax years before 2015.

We operate under a tax holiday in Malaysia, which is effective through July 31, 2022 and may be extended if certain additional requirements are satisfied. The tax holiday is conditional upon our meeting certain employment, sales, and investment thresholds. The impact of this tax holiday decreased foreign taxes by $0.4 million and $0.5 million in 2021 and 2020, respectively. The benefit of the tax holiday on net income per share (diluted) was $0.02 and $0.03 in 2021 and 2020, respectively.

A reconciliation of the Company’s unrecognized tax benefits for the year-to-date periods ended December 31, 2021 and 2020 is as follows:

(Thousands)	2021		2020
Balance at January 1	$	2,360	$	3,221
Additions to tax provisions related to the current year	431		191
Additions to tax positions related to prior years	—		—
Reduction to tax positions related to prior years	(45)		(349)
Lapses on statutes of limitations	(1,604)		(703)
Balance at December 31	$	1,142	$	2,360

Included in the balance of unrecognized tax benefits, including interest and penalties, as of December 31, 2021 and December 31, 2020 are $1.2 million and $2.7 million, respectively, of tax benefits that would affect the Company’s effective tax rate if recognized. It is reasonably possible that the amount of unrecognized tax benefits will change in the next twelve months; however, we do not expect the change to have a material impact on the Consolidated Statements of Income or the Consolidated Balance Sheets.

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying Consolidated Statements of Income. Accrued interest and penalties are included on the related tax liability line in the Consolidated Balance Sheets. The amount of interest and penalties, net of the related tax benefit, recognized in earnings was immaterial during 2021, 2020, and 2019. As of December 31, 2021 and 2020, accrued interest and penalties, net of the related tax benefit, were immaterial.

Income taxes paid during 2021, 2020, and 2019, were approximately $21.8 million, $3.9 million, and $9.3 million, respectively.

No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations as of December 31, 2021. The amount of such unrepatriated earnings totaled $102.3 million as of

December 31, 2021. It is not practicable to estimate the additional income taxes and applicable withholding taxes that would be payable on the remittance of such undistributed earnings.