INCOME TAXES

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The effective tax rates for the three months ended September 30, 2022 and 2021 were 26.3% and 15.1%, respectively. The effective tax rates for the nine months ended September 30, 2022 and 2021 were 29.6% and 21.5%, respectively. The 2022 effective tax rate for the three months ended September 30, 2022 was negatively impacted by the increased profits in higher-tax jurisdictions, primarily Brazil. The effective tax rate for the nine months ended September 30, 2022 was negatively impacted by an increase in pre-tax losses for which deferred tax benefits were not recognized and the derecognition of certain deferred tax assets, both of which related to Russia. Further, a discrete tax charge related to the sale of Raven’s Engineered Films Division and discrete tax charges associated with unrecognized tax benefits led to a higher effective tax rate for the nine months ended September 30, 2022. The sale of Raven’s Engineered Films Division increased effective tax rate for the nine months ended September 30, 2022 by 170 basis points.

As in all financial reporting periods, the Company assessed the realizability of its deferred tax assets, which relate to multiple tax jurisdictions in all regions of the world. During the nine-month period ended September 30, 2022, the Company changed its assessment regarding the recognition of its Russian deferred tax assets as of the beginning of the period. In addition, the Company was unable to recognize deferred tax assets associated with the current year pre-tax losses in that jurisdiction. These two items combined increased the Company’s current period effective tax rate for the nine months ended September 30, 2022 by 100 basis point.

The Company operates in many jurisdictions around the world and is routinely subject to income tax audits. As various ongoing audits are concluded, or as the applicable statutes of limitations expire, it is possible the Company’s amount of unrecognized tax benefits

could change during the next twelve months. Those changes, however, are not expected to have a material impact on the Company’s results of operations, balance sheet, or cash flows.

The Inflation Reduction Act (“IRA”) was enacted on August 16, 2022. The IRA includes provisions imposing a 1% excise tax on share repurchases by U.S. domestic corporations that occur after December 31, 2022 and introduces a 15% corporate alternative minimum tax (“CAMT”) on the adjusted financial statement income of U.S. companies and their subsidiaries. The CAMT will be effective beginning in fiscal 2023. We currently do not expect the IRA to have a material adverse impact to the Company’s financial statements.