Income Taxes

3 Months Ended

Mar. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The following table presents components of income tax expense for the three months ended March 31, 2021 and 2020:

	Three months ended March 31,
(in thousands, except percentages)	2021		2020
Income tax based on income from continuing operations, at estimated tax rates of 30.1% and 36.5%, respectively	$	11,332	$	7,309
Income tax before discrete items	11,332		7,309
Discrete tax expense:
Exercise of U.S. stock options	(142)		—
Adjustments to prior period tax liabilities	(1,443)		(112)
Provision for/resolution of tax audits and contingencies, net	278		(244)
Out-of-period adjustments	—		1,830
Tax effect of non-deductible foreign exchange loss on intercompany loan	—		3,668
Other	15		3
Total income tax expense	$	10,040	$	12,454

The first-quarter estimated annual effective tax rate on continuing operations was 30.1 percent in 2021, compared to 36.5 percent for the same period in 2020.

Income tax expense for the quarter was computed in accordance with ASC 740-270, Income Taxes – Interim Reporting. Under this method, loss jurisdictions, which cannot recognize a tax benefit with regard to their generated losses, are excluded from the annual effective tax rate (AETR) calculation and their taxes will be recorded discretely in each quarter.

The Company’s tax rate is affected by recurring items such as the income tax rate in the U.S. and in non-U.S. jurisdictions and the mix of income earned in those jurisdictions, including changes in losses and income from excluded loss jurisdictions, and the impact of discrete items in the respective quarter. The decrease in the estimated Q1 2021 income tax rate was primarily driven by a decrease in losses in a foreign jurisdiction that were excluded in calculating the quarterly income tax provision.

The Company records the residual U.S. and foreign taxes on certain amounts of foreign earnings that have been targeted for repatriation to the U.S. These amounts are not considered to be indefinitely reinvested, and the Company accrued for the tax cost on these earnings to the extent they cannot be repatriated in a tax-free manner. The Company has targeted for repatriation $203 million of current year and prior year earnings of the Company’s foreign

operations. If these earnings were distributed, the Company would be subject to foreign withholding taxes of $3.4 million and state income taxes of $2.0 million, which have already been recorded.

The Company conducts business globally and, as a result, files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business the Company is subject to examination by taxing authorities throughout the world, including major jurisdictions such as the United States, Brazil, Canada, France, Germany, Italy, Mexico, and Switzerland. The open tax years in these jurisdictions range from 2015 to 2021. The Company is currently under audit in U.S and certain non-U.S. tax jurisdictions.

In the first quarter of 2021, the Company recorded a net tax benefit of $1.4 million related to a U.S. adjustment of prior period liabilities and, additionally, the Company recorded an expense of $0.3 million related to the establishment of a foreign uncertain tax position. In the first quarter of 2020, the Company recorded a $1.8 million out-of-period charge related to developments in ongoing tax audits, which resulted in a corresponding decrease in deferred tax assets.