XML 35 R15.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Income Taxes
 12 Months Ended
Dec. 28, 2019
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES

Earnings before taxes is summarized as follows (in thousands):
 
 
2019
 
2018
 
2017
Domestic
$
336,688

 
$
328,870

 
$
290,866

Foreign
125,931

 
94,643

 
92,663

Total
$
462,619

 
$
423,513

 
$
383,529


 
The provision for income taxes is summarized as follows (in thousands):
 
 
2019
 
2018
 
2017
Federal
$
69,074

 
$
66,359

 
$
48,688

State and local
16,203

 
16,035

 
9,076

Foreign
25,102

 
23,967

 
27,637

Total
$
110,379

 
$
106,361

 
$
85,401

 
 
 
 
 
 
Current
$
88,167

 
$
85,872

 
$
99,893

Deferred
22,212

 
20,489

 
(14,492
)
Total
$
110,379

 
$
106,361

 
$
85,401


 
Reconciliation of the differences between income taxes computed at the federal statutory rate to the effective rate are as follows:

 
2019
 
2018
 
2017
U.S. federal statutory tax rate
21.0
 %
 
21.0
 %
 
35.0
 %
 
 
 
 
 
 
State taxes, net of federal benefit
3.2

 
3.0

 
1.5

U.S. domestic manufacturers deduction
—

 
—

 
(2.1
)
Permanent differences
0.6

 
0.2

 
(0.7
)
Foreign income tax rate at rates other than U.S. statutory
0.2

 
1.3

 
(1.6
)
Tax Cuts and Jobs Act of 2017 deferred tax changes
—

 
0.2

 
(10.0
)
Tax Cuts and Jobs Act of 2017 transition tax
—

 
(0.1
)
 
2.0

Change in valuation allowances (1)
0.1

 
(0.5
)
 
(2.0
)
Tax on unremitted earnings
0.3

 
—

 
1.5

Other
(1.5
)
 
—

 
(1.3
)
Consolidated effective tax
23.9
 %
 
25.1
 %
 
22.3
 %

(1) Net of changes in related tax attributes.

The company’s effective tax rate for 2019 was 23.9% as compared to 25.1% in 2018. The effective tax rate for 2019 reflects favorable tax adjustments for a refund of foreign taxes, enacted tax rate changes in several foreign jurisdictions and adjustments for the finalization of 2018 tax returns. The effective tax rate is higher than the federal tax rate of 21.0% primarily due to state taxes, non-deductible expenses and foreign tax rate differentials.
 
 
At December 28, 2019 and December 29, 2018, the company had recorded the following deferred tax assets and liabilities (in thousands):
 
 
2019
 
2018
Deferred tax assets:
 

 
 

Compensation related
$
4,744

 
$
3,776

Pension and post-retirement benefits
48,716

 
41,502

Inventory reserves
15,166

 
14,441

Accrued liabilities and reserves
17,321

 
13,835

Warranty reserves
16,550

 
10,641

Operating lease liability
17,521

 
—

Net operating loss carryforwards
17,873

 
36,629

Other
22,579

 
10,531

Gross deferred tax assets
160,470

 
131,355

Valuation allowance
(7,754
)
 
(26,023
)
Deferred tax assets
$
152,716

 
$
105,332

 
 
 
 
Deferred tax liabilities:
 

 
 

Intangible assets
$
(203,721
)
 
$
(167,197
)
Depreciable assets
(18,020
)
 
(13,617
)
Operating lease right-of-use assets
(17,542
)
 
—

Other
(10,001
)
 
(6,226
)
 
 
 
 
Deferred tax liabilities
$
(249,284
)
 
$
(187,040
)
 
 
 
 
Net deferred tax assets (liabilities)
$
(96,568
)
 
$
(81,708
)
 
 
 
 
Long-term deferred asset
36,932

 
32,188

Long-term deferred liability
(133,500
)
 
(113,896
)
Net deferred tax assets (liabilities)
$
(96,568
)
 
$
(81,708
)

 
The company has recorded tax reserves on undistributed foreign earnings not permanently reinvested of $5.6 million and $4.1 million at December 28, 2019 and December 29, 2018, respectively. No further provisions were made for income taxes that may result from future remittances of undistributed earnings of foreign subsidiaries that are determined to be permanently reinvested, which were $369.0 million on December 28, 2019. Determination of the total amount of unrecognized deferred income taxes on undistributed earnings net of foreign subsidiaries is not practicable.
 
The company has a deferred tax asset on net operating loss carryforwards totaling $17.9 million as of December 28, 2019. These net operating losses are available to reduce future taxable earnings of certain domestic and foreign subsidiaries. United States federal loss carryforwards total $19.5 million of which $13.4 million will expire through 2037 and $6.1 million have no expiration date. State loss carryforwards total $104.4 million and expire through 2039 and international loss carryforwards total $38.2 million and expire through 2038; however, some have no expiration date. Of these carryforwards, $5.2 million are subject to full valuation allowance. During 2019, the company wrote off $18.4 million of deferred tax assets on foreign loss carryforwards that had full valuation allowances. The deferred tax assets were written off as the entities were dissolved or otherwise disposed of during 2019.

As of December 28, 2019, the total amount of liability for unrecognized tax benefits related to federal, state and foreign taxes was approximately $31.6 million (of which $31.2 million would impact the effective tax rate if recognized) plus approximately $5.5 million of accrued interest and $7.2 million of penalties. The company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. Interest recognized in fiscal years 2019, 2018 and 2017 was $0.4 million, $0.6 million and $0.7 million, respectively. Penalties recognized in fiscal years 2019, 2018 and 2017 was $(0.9) million, $0.6 million and $1.3 million, respectively.
    
Although the company believes its tax returns are correct, the final determination of tax examinations may be different than what was reported on the tax returns. In the opinion of management, adequate tax provisions have been made for the years subject to examination.
 
The following table summarizes the activity related to the unrecognized tax benefits for the fiscal years ended December 30, 2017, December 29, 2018 and December 28, 2019 (in thousands):
  
Balance at December 30, 2017
$
29,930

 
 

Increases to current year tax positions
3,912

Increase to prior year tax positions
2,860

Decrease to prior year tax positions
(569
)
Lapse of statute of limitations
(4,221
)
 
 

Balance at December 29, 2018
$
31,912

 
 

Increases to current year tax positions
4,216

Increase to prior year tax positions
254

Lapse of statute of limitations
(4,823
)
 
 
Balance at December 28, 2019
$
31,559



It is reasonably possible that the amounts of unrecognized tax benefits associated with state, federal and foreign tax positions may decrease over the next twelve months due to expiration of a statute or completion of an audit. The company believes that it is reasonably possible that $5.3 million of its remaining unrecognized tax benefits may be recognized by the end of 2020 as a result of settlements with taxing authorities or lapses of statutes of limitations.
In the normal course of business, income tax authorities in various income tax jurisdictions both in the United States and internationally conduct routine audits of our income tax returns filed in prior years. These audits are generally designed to determine if individual income tax authorities are in agreement with our interpretations of complex tax regulations regarding the allocation of income to the various income tax jurisdictions. Income tax years are open from 2016 through the current year for the United States federal jurisdiction. Income tax years open for our other major jurisdictions range from 2014 through the current year.