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Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
Income Taxes | Note 15: Income Taxes The Company's geographic sources of income before income taxes and non-controlling interest are as follows (in millions):
| Year ended December 31,
| 2016 |  | 2015 |  | 2014
United States | $ | (287.0 | ) |  | $ | (102.7 | ) |  | $ | (56.2 | )
Foreign | 467.6 |  |  | 322.5 |  |  | 248.1 |
| $ | 180.6 |  |  | $ | 219.8 |  |  | $ | 191.9 |
The Company's provision for income taxes is as follows (in millions):
| Year ended December 31,
| 2016 |  | 2015 |  | 2014
Current: |  |  |  |  |
Federal | $ | (0.1 | ) |  | $ | — |  |  | $ | (1.5 | )
State and local | 0.1 |  |  | 2.0 |  |  | — |
Foreign | 34.4 |  |  | 21.3 |  |  | 20.1 |
| 34.4 |  |  | 23.3 |  |  | 18.6 |
Deferred: |  |  |  |  |
Federal | 60.8 |  |  | 0.4 |  |  | (17.1 | )
State and local | — |  |  | (1.4 | ) |  | (2.9 | )
Foreign | (99.1 | ) |  | (11.5 | ) |  | 1.2 |
| (38.3 | ) |  | (12.5 | ) |  | (18.8 | )
Total provision (benefit) | $ | (3.9 | ) |  | $ | 10.8 |  |  | $ | (0.2 | )
A reconciliation of the U.S. federal statutory income tax rate to the Company's effective income tax rate is as follows:
|  | Year ended December 31,
|  | 2016 |  | 2015 |  | 2014
U.S. federal statutory rate |  | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Increase (decrease) resulting from: |  |  |  |  |  |
State and local taxes, net of federal tax benefit |  | (3.6 | ) |  | (1.0 | ) |  | (0.5 | )
Impact of foreign operations |  | (8.1 | ) |  | (39.8 | ) |  | (33.9 | )
Reversal of prior years’ indefinite reinvestment assertion |  | 172.1 |  |  | — |  |  | — |
Dividend income from foreign subsidiaries |  | 0.2 |  |  | 85.5 |  |  | 13 |
Change in valuation allowance and related effects |  | (190.7 | ) |  | (75.3 | ) |  | (17.8 | )
Nondeductible acquisition costs |  | 1.9 |  |  | 0.1 |  |  | 0.9 |
Nondeductible share-based compensation costs |  | 0.7 |  |  | 0.9 |  |  | 2.1 |
Deferred tax liability for assets with indefinite useful lives |  | — |  |  | (0.5 | ) |  | 1.7 |
US federal R&D credit |  | (10.1 | ) |  | — |  |  | — |
Return to accrual |  | (0.5 | ) |  | (0.9 | ) |  | (0.5 | )
Other |  | 0.9 |  |  | 0.9 |  |  | (0.1 | )
Total |  | (2.2 | )% |  | 4.9 | % |  | (0.1 | )%
The tax effects of temporary differences in the recognition of income and expense for tax and financial reporting purposes that give rise to significant portions of the deferred tax assets, net of deferred tax liabilities, as of December 31, 2016 and December 31, 2015, are as follows (in millions):
|  | Year ended December 31,
|  | 2016 |  | 2015
Net operating loss and tax credit carryforwards |  | $ | 978.1 |  |  | $ | 692.0 |
Tax-deductible goodwill and amortizable intangibles |  | (57.1 | ) |  | (35.9 | )
Reserves and accruals |  | 51.7 |  |  | 25.2 |
Property, plant and equipment |  | (60.9 | ) |  | 21.3 |
Inventories |  | 42.1 |  |  | 26.3 |
Undistributed earnings of foreign subsidiaries |  | (639.1 | ) |  | — |
Share-based compensation |  | 14.3 |  |  | 14.0 |
Pension |  | 21.5 |  |  | 17.9 |
Debt financing costs |  | (40.8 | ) |  | — |
Other |  | 14.3 |  |  | 2.1 |
Deferred tax assets and liabilities before valuation allowance |  | 324.1 |  |  | 762.9 |
Valuation allowance |  | (474.1 | ) |  | (735.7 | )
Net deferred tax asset (liability) |  | $ | (150.0 | ) |  | $ | 27.2 |
The Company continues to maintain a valuation allowance on a portion of its foreign tax credits and net operating losses ("NOLs"), a substantial portion, or $287.9 million, of which relate to Japan NOLs that expire in varying amounts from 2017 to 2024. In addition, the Company also maintains a valuation allowance in the U.S. on a portion of its foreign tax credit carryforwards and a full valuation allowance on its capital loss carryforwards and U.S. state deferred tax assets. As of December 31, 2016, the Company’s deferred tax assets do not include $194.5 million of excess tax deductions from employee equity exercises that are part of NOL carryforwards, which, if realized, will be accounted for as an addition to equity. See Note 3: "Recent Accounting Pronouncements" for the effective date of ASU 2016-09 impacting the accounting for share-based compensation arrangements. The Company uses the with or without method when determining when excess benefits have been realized. The consummation of the Fairchild acquisition during the quarter ended September 30, 2016, caused us to reassess our prior years’ indefinite reinvestment assertion because of the U.S. debt incurred to fund the acquisition. See Note 8 “Long-Term Debt” for additional information. This resulted in a change in judgment regarding our future cash flows by jurisdiction and our prior years’ indefinite reinvestment assertion. The change in assertion, which resulted in recording a deferred tax liability for future U.S. taxes, had a direct impact on our judgment about the realizability of our U.S. federal deferred tax assets which resulted in a release of valuation allowance. The change in our prior years’ indefinite reinvestment assertion resulted in an increase to income tax expense of $310.8 million, which was partially offset by a benefit of $267.9 million relating to the release of valuation allowance. The reversal of the prior years' indefinite reinvestment assertion and release of the U.S. federal valuation allowance did not have an effect on our cash taxes. We have not made an indefinite reinvestment assertion related to current year foreign earnings. In addition to the release of valuation allowance mentioned above, in past periods, we recorded a significant valuation allowance against our Japan consolidated groups deferred tax assets. In order for the Company to release this valuation allowance a substantial amount of positive evidence regarding current and future earnings was required to outweigh the significant negative evidence associated with historical losses. We have reassessed our need for a valuation allowance for our Japan consolidated group as of December 31, 2016. Due to our recent trend of positive operating results, which resulted in the Japan group being in a cumulative 12-quarter income position as of the period ended December 31, 2016, as well as the recent realignment of the former System Solutions Group segment, we realized a $89.4 million net tax benefit related to the release of a portion of our valuation allowance, to reflect the amount of our deferred tax assets which we expect to realize in future years. As of December 31, 2016 and 2015, the Company had approximately $1,203.6 million and $638.8 million, respectively, of federal NOL carryforwards, before reduction for uncertain tax positions, which are subject to annual limitations prescribed in Section 382 of the Internal Revenue Code. If not utilized, the NOLs will expire in varying amounts from 2021 to 2036. As of December 31, 2016 and 2015, the Company had approximately $211.9 million and $132.9 million, respectively, of federal credit carryforwards, before consideration of valuation allowance or reduction for uncertain tax positions, which are subject to annual limitations prescribed in Section 383 of the Internal Revenue Code. If not utilized, the credits will expire in varying amounts from 2017 to 2036. Additionally, the Company acquired through the Fairchild acquisition a $29.0 million federal capital loss carryforward of which $26.2 million expired as of December 31, 2016, the remaining amount expires in 2018. As of December 31, 2016 and 2015, the Company had approximately $1,191.2 million and $662.7 million, respectively, of state NOL carryforwards, before consideration of valuation allowance or reduction for uncertain tax positions. If not utilized, the NOLs will expire in varying amounts from 2017 to 2036. As of December 31, 2016 and 2015, the Company had $129.0 million and $51.3 million, respectively, of state credit carryforwards before consideration of valuation allowance or reduction for uncertain tax positions. If not utilized, a portion of the credits will begin to expire in varying amounts starting in 2017. As of December 31, 2016 and 2015, the Company had approximately $1,078.8 million and $1,000.5 million, respectively, of foreign NOL carryforwards, before consideration of valuation allowance. If not utilized, a portion of the NOLs will begin to expire in varying starting in 2017. As of December 31, 2016 and 2015, the Company had $50.5 million and $34.3 million, respectively, of foreign credit carryforwards before consideration of valuation allowance. The majority of these credits have an indefinite life and do not expire. In general, the increases in the Company’s NOL and credit carryforward amounts are primarily due to acquired attributes as a result of the Fairchild acquisition. This income tax benefit for the year ended December 31, 2016 consisted primarily of the reversal of $359.8 million of our previously established valuation allowance against part of our U.S. federal and foreign deferred tax assets and the release of $1.9 million for reserves and interest for uncertain tax positions in foreign taxing jurisdictions which were effectively settled or for which the statute lapsed during the year ended December 31, 2016. This is partially offset by $310.8 million related to the reversal of the prior years’ indefinite reinvestment assertion and $43.5 million for income and withholding taxes of certain of our foreign and domestic operations and $3.5 million of new reserves and interest on existing reserves for uncertain tax positions in foreign taxing jurisdictions. The income tax provision for the year ended December 31, 2015 consisted of the reversal of $12.1 million of our previously established valuation allowance against our U.S. deferred tax assets, the release of $4.3 million for reserves and interest for uncertain tax positions in foreign taxing jurisdictions that were effectively settled or for which the statute lapsed during the year ended December 31, 2015 and a change in tax rate that favorably impacted deferred balances by $1.6 million. This is partially offset by $24.4 million for income and withholding taxes of certain of the Company's foreign and domestic operations and $4.4 million of new reserves and interest on existing reserves for uncertain tax positions in foreign taxing jurisdictions. The income tax benefit for the year ended December 31, 2014 consisted of the reversal of $23.3 million of our previously established valuation allowance against our U.S. deferred tax assets as a result of a net deferred tax liability recorded as part of the Truesense acquisition and the reversal of $4.6 million for reserves and interest for uncertain tax positions in foreign taxing jurisdictions that were effectively settled or for which the statute lapsed during the year ended December 31, 2014. This is partially offset by $19.8 million for income and withholding taxes of certain of the Company's foreign and domestic operations, $4.6 million of new reserves and interest on existing reserves for uncertain tax positions in foreign taxing jurisdictions, and $3.3 million of deferred federal income taxes associated with tax deductible goodwill. Tax years prior to 2012 are generally not subject to examination by the Internal Revenue Services (“IRS”) except for items involving tax attributes that have been carried forward to tax years whose statute of limitations remains open. The Company is not currently under IRS examination. For state returns, the Company is generally not subject to income tax examinations for years prior to 2011. The Company is also subject to routine examinations by various foreign tax jurisdictions in which it operates. With respect to major jurisdictions outside the United States, our subsidiaries are no longer subject to income tax audits for years prior to 2006. The Company is currently under audit in the following significant jurisdictions: Malaysia, China, Philippines, and Japan. The Company maintains liabilities for uncertain tax positions. These liabilities involve considerable judgment and estimation and are continuously monitored by management based on the best information available, including changes in tax regulations, the outcome of relevant court cases, and other information. The Company is currently under examination by various taxing authorities. Although the outcome of any tax audit is uncertain, the Company believes that it has adequately provided in its consolidated financial statements for any additional taxes that the Company may be required to pay as a result of such examinations. If the payment ultimately proves not to be necessary, the reversal of these tax liabilities would result in tax benefits being recognized in the period the Company determines such liabilities are no longer necessary. However, if an ultimate tax assessment exceeds the Company's estimate of tax liabilities, additional tax expense will be recorded. The impact of such adjustments could have a material impact on the Company's results of operations in future periods. The activity for unrecognized gross tax benefits for 2016, 2015, and 2014 is as follows (in millions):
| 2016 |  | 2015 |  | 2014
Balance at beginning of year | $ | 33.5 |  |  | $ | 31.2 |  |  | $ | 20.9 |
Acquired balances | 86.9 |  |  | — |  |  | — |
Additions based on tax positions related to the current year | 4.6 |  |  | 9.2 |  |  | 9.0 |
Additions for tax positions of prior years | 13.7 |  |  | 3.4 |  |  | 5.3 |
Reductions for tax positions of prior years | (0.4 | ) |  | (6.9 | ) |  | (0.6 | )
Lapse of statute | (1.6 | ) |  | (3.3 | ) |  | (3.4 | )
Settlements | — |  |  | (0.1 | ) |  | — |
Balance at end of year | $ | 136.7 |  |  | $ | 33.5 |  |  | $ | 31.2 |
For the period ended December 31, 2016, the Company performed a U.S. R&D tax credit study which covered the years from 2012 to 2015. The results of the study were recorded during the period ended December 31, 2016. As a result the uncertain tax position related to the outcome of the prior year study was also recorded. Included in the December 31, 2016 balance of $136.7 million is $125.5 million related to unrecognized tax positions that, if recognized, would affect the annual effective tax rate. Although we cannot predict the timing of resolution with taxing authorities, if any, we believe it is reasonably possible that our unrecognized tax positions will be reduced by $3.8 million in the next 12 months due to settlement with tax authorities or expiration of the applicable statute of limitations. The Company recognizes interest and penalties accrued in relation to unrecognized tax benefits in tax expense. The Company recognized approximately $0.5 million of tax expenses for interest and penalties during the year ended December 31, 2016, and recognized approximately $0.9 million and $0.5 million of tax expenses for interest and penalties during the years ended December 31, 2015 and 2014, respectively. The Company had approximately $4.4 million, $3.9 million, and $3.2 million of accrued interest and penalties at December 31, 2016, 2015, and 2014, respectively.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
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