Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

The components of income/(loss) before income taxes were as follows:

	Years Ended December 31,
(in thousands)	2022		2021		2020
Domestic	$	188,265	$	171,297	$	(63,025)
Foreign	94,055		70,771		33,040
	$	282,320	$	242,068	$	(29,985)

The components of provision/(benefit) for income taxes were as follows:

	Years Ended December 31,
(in thousands)	2022		2021		2020
Current:
Federal	$	36,983	$	32,983	$	(10,764)
State and local	6,057		3,711		(545)
Foreign	18,462		11,635		7,958
	61,502		48,329		(3,351)
Deferred:
Federal	2,705		(1,402)		(4,940)
State and local	466		1,888		(2,962)
Foreign	430		794		(451)
	3,601		1,280		(8,353)
	$	65,103	$	49,609	$	(11,704)

A reconciliation between income taxes computed at the federal statutory rate and the effective tax rate is as follows:

	Years Ended December 31,
(in thousands)	2022		2021		2020
Income taxes at federal statutory rate	21.0	%	21.0	%	21.0	%
Effects of foreign operations	(0.2)		(0.8)		10.3
Stock-based compensation	(0.5)		(2.4)		11.8
State and local income taxes - net of federal income tax benefit	2.0		2.1		12.9
Nondeductible items	0.5		1.2		(0.4)
Impact of tax reform	—		—		14.0
Global intangible low-taxed income ("GILTI")	—		—		(18.2)
Valuation allowance	0.1		(0.5)		(9.3)
Other	0.2		(0.1)		(3.1)
Effective tax rate	23.1	%	20.5	%	39.0	%

The primary changes between the Company’s effective tax rate for the year ended December 31, 2022 and 2021 are due to a lower tax benefit from the exercising and vesting of equity-based awards, and an increase in pre-tax income in jurisdictions with higher tax rates. The primary changes between the Company’s effective tax rate for the year ended December 31, 2021 and 2020 are due to the year-over-year benefit resulting from the exercising and vesting of share-based awards, a decrease in tax benefit related to a net operating loss carryback claim set forth by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), a decrease in the GILTI tax and an increase in pre-tax income in jurisdictions with higher tax rates.

The components of deferred tax assets and liabilities were as follows:

	As of December 31,
(in thousands)	2022		2021
Deferred tax assets
Receivable allowances	$	7,049	$	8,313
Inventory	8,367		7,992
Accrued expenses	315		310
Deferred compensation	6,461		6,486
Net operating loss carryforwards	5,685		6,129
Lease liability	26,038		26,436
Other	1,042		1,169
Gross deferred tax assets before valuation allowance	54,957		56,835
Less: valuation allowance	(3,948)		(3,753)
Gross deferred tax assets after valuation allowance	51,009		53,082
Deferred tax liabilities
Depreciation and amortization	(16,704)		(16,144)
Unremitted earnings of foreign subsidiaries	(2,599)		(3,138)
Right-of-use asset	(21,621)		(20,365)
Amortization of goodwill	(7,599)		(7,578)
Indefinite-lived intangibles	(4,654)		(4,654)
Gross deferred tax liabilities	(53,177)		(51,879)
Net deferred tax (liabilities)/assets	$	(2,168)	$	1,203

The Company applies the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax‑planning strategies in making this assessment.

The Company’s increase in valuation allowance of $195 is primarily due to an increase of net operating loss deferred tax assets in various foreign subsidiaries, which resulted in an aggregate valuation allowance of $3,948 for the year ended December 31, 2022.

A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:

	Years Ended December 31,
(in thousands)	2022		2021		2020
Beginning Balance	$	1,145	$	2,295	$	1,150
Additions for tax positions of prior years	—		—		1,145
Reductions for tax positions of prior years	—		(1,150)		—
Ending Balance	$	1,145	$	1,145	$	2,295

For the years ended December 31, 2022, 2021, and 2020 the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is approximately $1,145, $1,145, and $2,295, in the aggregate, respectively. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. Accrued interest and penalties on unrecognized tax benefits and interest and penalty expense was immaterial to the consolidated financial

statements for all periods presented. It is reasonably possible that a reduction of the unrecognized tax benefits in a range of $0 to $1,100 may occur within the next twelve months.

The Company files income tax returns in the U.S., for federal, state, and local purposes, and in certain other foreign jurisdictions. The Company's tax years 2019 through 2022 remain open to examination by most taxing authorities. During 2017, the U.S. Internal Revenue Service completed its audit of the Company's 2014 U.S. income tax return.

The Company’s consolidated financial statements provide for any related tax liability on amounts that may be repatriated from foreign operations, aside from undistributed earnings of certain of the Company’s foreign subsidiaries that are intended to be indefinitely reinvested in operations outside the U.S. The deferred tax liability of $2,599 at December 31, 2022 reflects the withholding tax on amounts that may be repatriated from foreign operations.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law, which contains certain revisions to the Internal Revenue Code, including a 15% corporate minimum income tax for tax years beginning after December 31, 2022. While the 15% corporate minimum income tax has no effect on the Company’s results of operations in the near term, we will continue to evaluate its impact on future years. The IRA also assesses a 1% excise tax on repurchases of corporate stock which will impact the Company’s stock repurchases effective January 1, 2023.