Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The components of earnings before income taxes consisted of the following for the years ended December 31:

(In thousands)	2021		2020		2019
United States	$	378,460	$	216,234	$	189,834
Foreign	3,584		(6,753)		1,580
Total earnings before income taxes	$	382,044	$	209,481	$	191,414

The provision for income taxes in the Consolidated Statements of Income was as follows for the years ended December 31:

(In thousands)	2021		2020		2019
Current:
Federal	$	78,604	$	42,541	$	33,655
State and local	17,044		9,165		6,764
Foreign	1,936		839		1,070
Total current provision	97,584		52,545		41,489
Deferred:
Federal	2,192		2,342		5,923
State and local	(517)		(671)		(969)
Foreign	(4,954)		(3,175)		(1,538)
Total deferred provision	(3,279)		(1,504)		3,416
Provision for income taxes	$	94,305	$	51,041	$	44,905

The Company had cash and cash equivalents of approximately $62.9 million and $51.8 million at December 31, 2021 and 2020, respectively, of which approximately 71 percent and 66 percent was held by subsidiaries in foreign countries. The Company historically reinvested all unremitted earnings of its foreign subsidiaries and affiliates, and therefore had not recognized any U.S. deferred tax liability on those earnings. However, the Tax Cuts and Jobs Act change in the U.S. taxation of foreign income led the Company to reassess its position as it relates to permanent reinvestment, and it has now determined that it will only assert permanent reinvestment in its Canadian subsidiaries. The Company examined the potential liabilities related to investments in foreign subsidiaries and concluded that there is no material deferred tax liabilities that should be recorded.

The provision for income taxes differs from the amount computed by applying the federal statutory rate of 21 percent for 2021, 2020, and 2019 to income before income taxes for the following reasons for the years ended December 31:

(In thousands)	2021		2020		2019
Income tax at federal statutory rate	$	80,229	$	43,991	$	40,197
State income tax, net of federal income tax impact	13,056		6,710		4,578
Section 162(m) permanent addback	6,153		3,015		587
Federal tax credits	(1,230)		(1,307)		(1,435)
Share-based payment compensation excess tax benefit	(1,191)		(190)		(1,579)
Other	(2,712)		(1,178)		2,557
Provision for income taxes	$	94,305	$	51,041	$	44,905

At December 31, 2021, the Company had domestic federal income taxes payable of $8.5 million, domestic state income taxes payable of $1.6 million, and foreign taxes receivable of $1.6 million recorded. At December 31, 2020, the Company had domestic federal income taxes payable of $7.2 million, domestic state income taxes payable of $1.9 million, and foreign taxes receivable of $1.8 million recorded.

Deferred Income Tax Assets and Liabilities and Valuation Allowances

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows at December 31:

(In thousands)	2021		2020
Deferred tax assets:
Stock-based compensation	$	2,632	$	2,084
Pension	8,594		8,694
Deferred compensation	15,923		13,325
Warranty	10,790		10,848
Convertible debt bond hedge	21,699		—
Inventory	16,502		7,443
Other	5,792		6,390
Lease obligation asset	41,066		22,488
Net operating loss and interest carryforwards	10,132		4,857
Total deferred tax assets before valuation allowance	133,130		76,129
Less: Valuation allowance	(1,054)		(2,809)
Total deferred tax assets net of valuation allowance	132,076		73,320
Deferred tax liabilities:
Lease obligation liability	(38,770)		(21,523)
Fixed assets	(45,562)		(35,637)
Intangible assets	(87,035)		(69,992)
Total deferred tax liabilities	(171,367)		(127,152)
Net deferred tax liabilities	$	(39,291)	$	(53,832)

At December 31, 2021 and 2020, the Company had net foreign deferred tax liabilities of $26.2 million and $17.3 million, respectively, primarily related to intangible assets and foreign pension obligations included in other long-term liabilities on the Consolidated Balance Sheets.

As of December 31, 2021, the Company had deferred tax assets recorded related to foreign net operating losses and tax credit carryforwards of $10.1 million, net. This includes $1.2 million related to U.K. entities, $2.4 million related to Italian entities, and $6.5 million related to Hong Kong entities. The net operating losses and tax credit carryforwards have indefinite lives.

The foreign valuation allowance for U.K. deferred tax assets as of December 31, 2021 and 2020 was $0.9 million and $2.6 million, respectively. These valuation allowances were related to net operating losses and tax credit carryforwards related to the U.K. entities. The net change in the total valuation allowance for the year ended December 31, 2021 was a decrease of $1.7 million. The decrease in the valuation allowance was due to income in the U.K. in 2021. Based upon historical results and estimated future results, it is the judgment of management that these tax carryforward attributes related to the U.K. entities are not likely to be realized. The Company has concluded it is more likely than not that it will realize the benefit of all other existing deferred tax assets, net of the valuation allowances mentioned above.

Unrecognized Tax Benefits

The following table reconciles the total amounts of unrecognized tax benefits, at December 31:

(In thousands)	2021		2020		2019
Balance at beginning of period	$	8,921	$	8,214	$	4,325
Changes in tax positions of prior years	(69)		—		480
Additions based on tax positions related to the current year	12,826		1,720		4,288
Closure of tax years	(1,216)		(1,013)		(879)
Balance at end of period	$	20,462	$	8,921	$	8,214

In addition, the total amount of accrued interest and penalties related to taxes, recognized as a liability, was $0.8 million, $0.7 million, and $0.4 million at December 31, 2021, 2020, and 2019, respectively.

The total amount of unrecognized tax benefits, net of federal income tax benefits, of $20.5 million, $8.8 million, and $7.9 million at December 31, 2021, 2020, and 2019, respectively, would, if recognized, increase the Company’s earnings, and lower the Company's annual effective tax rate in the year of recognition.

The year over year increase in the total amount of unrecognized tax benefits was to reflect a reserve recorded as part of a current year acquisition.

The Company is subject to taxation in the United States and various states and foreign jurisdictions. In the normal course of business, the Company is subject to examinations by taxing authorities in these jurisdictions. For U.S. federal and state income tax purposes, tax years 2020, 2019, and 2018 remain subject to examination. The Company is currently under examination by the U.S. Internal Revenue Service for the tax year 2018.

The Company has assessed its risks associated with all tax return positions, and believes its tax reserve estimates reflect its best estimate of the deductions and positions it will be able to sustain, or it may be willing to concede as part of a settlement. At this time, the Company does not anticipate any material change in its tax reserves in the next twelve months. The Company will continue to monitor the progress and conclusion of all audits and will adjust its estimated liability as necessary.