Income Taxes

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes [Text Block]

Income Taxes

The provision for income taxes for the years ended December 31 consists of the following:

	2018			2017			2016
Current:
Federal	$	(12,345	)	$	119,298		$	45,371
State	20,141			(6,156		)	7,022
International	178,767			134,987			109,598
	$	186,563		$	248,129		$	161,991
Deferred:
Federal	$	19,207		$	31,167		$	29,973
State	312			13,535			7,161
International	(18,283		)	(6,290		)	(8,394		)
	1,236			38,412			28,740
	$	187,799		$	286,541		$	190,731

The principal causes of the difference between the U.S. federal statutory tax rate of 21% and effective income tax rates for the years ended December 31 are as follows:

	2018			2017			2016
United States	$	186,677		$	115,664		$	235,317
International	722,696			578,253			480,202
Income before income taxes	$	909,373		$	693,917		$	715,519
Provision at statutory tax rate	$	190,968		$	242,415		$	250,446
State taxes, net of federal benefit	18,888			5,184			9,219
International effective tax rate differential	7,480			(88,444		)	(64,002		)
Capital loss	60,757			—			—
Change in valuation allowance	(66,557		)	1,408			7,174
Other non-deductible expenses	14,128			12,700			3,516
Changes in tax accruals	(3,968		)	(7,973		)	(3,679		)
Tax credits	(7,884		)	(8,170		)	(14,510		)
Tax Act's transition tax (a)	(28,323		)	196,010			—
Tax Act's impact on deferred taxes (b)	—			(71,261		)	—
Other	2,310			4,672			2,567
Provision for income taxes	$	187,799		$	286,541		$	190,731

(a) For the year ended December 31, 2017, the company accrued a provisional estimate of $196,010 of tax expense for the Tax Act’s one-time transition tax on the foreign subsidiaries’ accumulated, unremitted earnings in accordance with U.S. Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB 118”). Additionally, during the fourth quarter of 2018 the company recorded a $28,323 benefit upon finalizing its analysis of the impact from the Tax Act.

(b) For the year ended December 31, 2017, the company accrued $71,261 in provisional tax benefit related to the net change in deferred tax liabilities stemming from the Tax Act’s reduction of the U.S. federal tax rate from 35% to 21%, and disallowance of certain incentive based compensation tax deductibility under Internal Revenue Code Section 162(m).

With the effective date of January 1, 2018, the Tax Act also introduced a provision to tax global intangible low-taxed income (“GILTI”) of foreign subsidiaries and a measure to tax certain intercompany payments under base erosion anti-abuse tax (“BEAT”)

regime. For the period ended December 31, 2018, the company did not generate intercompany transactions that met BEAT threshold, but did generate GILTI tax, which was not material to the company's consolidated financial position or results of operations. The company elected to account for GILTI tax as a current period cost.

During the fourth quarter of 2018, the company completed its analysis of the impact from the Tax Act and recorded a favorable adjustment in the amount of $28,323, recorded within "Provision for income taxes" in the company's consolidated statements of operations, which is entirely related to the previously recorded provisional estimate for the Transition tax on non-U.S. subsidiaries’ unremitted earnings of $196,010.

After considering the impact of taxable losses, tax payments, tax credits, and other tax accruals, as of December 31, 2018, the company’s remaining cash tax payable for the transition tax on foreign unremitted earnings is $38,000, which is reported as a long-term tax payable due to the company’s intent to pay this federal transition tax over a period of eight years as permitted by the Tax Act.

The company evaluates and establishes liabilities for uncertain tax positions that may be challenged by local tax authorities and that may not be fully sustained, despite the belief that the underlying tax positions are fully supportable. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law and closing of statutes of limitations. Such adjustments are reflected in the tax provision as appropriate.

At December 31, 2018, the company had a liability for unrecognized tax position of $35,879. The timing of the resolution of these uncertain tax positions is dependent on the tax authorities' income tax examination processes. Material changes are not expected, however, it is possible that the amount of unrecognized tax benefits with respect to uncertain tax positions could increase or decrease during 2019. Currently, the company is unable to make a reasonable estimate of when tax cash settlement would occur and how it would impact the effective tax rate.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31 is as follows:

	2018			2017			2016
Balance at beginning of year	$	24,361		$	31,534		$	36,935
Additions based on tax positions taken during a prior period	583			2,342			2,356
Reductions based on tax positions taken during a prior period	(1,248		)	(1,242		)	(6,305		)
Additions related to positions taken upon finalization of Tax Act during the current period	16,506			—			—
Additions based on tax positions taken during the current period	3,133			6,543			3,935
Reductions based on tax positions taken during the current period	(233		)	—			—
Reductions related to settlement of tax matters	(136		)	(2,921		)	(2,795		)
Reductions related to a lapse of applicable statute of limitations	(7,087		)	(11,895		)	(2,592		)
Balance at end of year	$	35,879		$	24,361		$	31,534

Interest costs related to unrecognized tax benefits are classified as a component of "Interest and other financing expense, net" in the company's consolidated statements of operations. In 2018, 2017, and 2016, the company recognized $945, $(2,792), and $(1,946), respectively, of interest benefit (expense) related to unrecognized tax benefits. At December 31, 2018 and 2017, the company had accrued a liability of $4,189 and $3,301, respectively, for the payment of interest related to unrecognized tax benefits.

In many cases the company's uncertain tax positions are related to tax years that remain subject to examination by tax authorities. The following describes the open tax years, by major tax jurisdiction, as of December 31, 2018:

United States - Federal	2015 - present
United States - States	2012 - present
Germany (c)	2010 - present
Hong Kong	2012 - present
Italy (c)	2013 - present
Sweden	2013 - present
United Kingdom	2015 - present

(c) Includes federal as well as local jurisdictions.

Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated balance sheets. These temporary differences result in taxable or deductible amounts in future years.

The deferred tax assets and liabilities consist of the following at December 31:

	2018			2017
Deferred tax assets:
Net operating loss carryforwards	$	129,641		$	113,327
Capital loss carryforwards	60,606			—
Inventory adjustments	52,094			42,376
Allowance for doubtful accounts	17,016			12,368
Accrued expenses	27,088			28,229
Interest carryforward	5,008			15,964
Stock-based compensation awards	12,824			12,982
Integration and restructuring	2,547			6,726
Other	—			17,015
	306,824			248,987
Valuation allowance	(80,471		)	(13,915		)
Total deferred tax assets	$	226,353		$	235,072
Deferred tax liabilities:
Goodwill	$	(121,346	)	$	(109,994	)
Depreciation	(131,848		)	(116,725		)
Intangible assets	(18,754		)	(18,760		)
Other comprehensive income items	(8,301		)	(5,542		)
Other	(6,634		)	—
Total deferred tax liabilities	$	(286,883	)	$	(251,021	)
Total net deferred tax assets (liabilities)	$	(60,530	)	$	(15,949	)

At December 31, 2018, the company had international tax loss carryforwards of approximately $391,598, of which $26,663 have expiration dates ranging from 2019 to 2038, and the remaining $364,935 have no expiration date. Deferred tax assets related to these international tax loss carryforwards were $120,148 with a corresponding valuation allowance of $7,533.

At December 31, 2018, the company also had deferred tax assets of $1,496 related to U.S. Federal net operating loss carryforwards from acquired subsidiaries. These U.S. Federal net operating losses expire in various years beginning after 2027. Additionally, as of December 31, 2018, the company had U.S. state net operating loss carryforwards related deferred tax assets of approximately $7,997 with a corresponding valuation allowance for the same amount. Valuation allowances are needed when deferred tax assets

may not be realized due to the uncertainty of the timing and the ability of the company to generate sufficient future taxable income in certain tax jurisdictions.

The company historically considered the undistributed earnings of its foreign subsidiaries to be indefinitely reinvested and as a result has not provided for taxes on such earnings. The company has not changed previous indefinite reinvestment assertion following the enactment of the Tax Act, which required a one-time transition tax for deemed repatriation of accumulated undistributed earnings of certain foreign subsidiaries. At December 31, 2018, cumulative undistributed earnings of foreign subsidiaries were approximately $4,800,000, which partially have been already subjected to U.S. transition tax as part of the Tax Act. If the company determines that all or a portion of its foreign earnings are no longer indefinitely reinvested, then the company may be subject to additional foreign withholding taxes and U.S. state income taxes, beyond the Tax Act’s one-time transition tax.

Income taxes paid, net of income taxes refunded, amounted to $226,422, $231,183, and $190,109 in 2018, 2017, and 2016, respectively.