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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Pre-tax Income by Jurisdiction The following sets forth the amount of income before income taxes attributable to each of the Company's geographies for the years ended December 31, 2024, 2023 and 2022:
| Year Ended December 31,
(in millions) | 2024 |  | 2023 |  | 2022
Income before income taxes: |  |  |  |  |
United States | $ | 279.2 |  |  | $ | 288.5 |  |  | $ | 382.5 |
Rest of the world | 225.1 |  |  | 185.6 |  |  | 194.7 |
| $ | 504.3 |  |  | $ | 474.1 |  |  | $ | 577.2 |
Reconciliation of Statutory Tax Rate to Effective Tax Rate The Company's effective income tax provision differs from the amount calculated using the statutory U.S. federal income tax rate, principally due to the following:
| Year Ended December 31,
| 2024 |  | 2023 |  | 2022
(dollars in millions) | Amount |  | Percentage of Income Before Income Taxes |  | Amount |  | Percentage of Income Before Income Taxes |  | Amount |  | Percentage of Income Before Income Taxes
Statutory U.S. federal income tax | $ | 105.9 |  |  | 21.0 | % |  | $ | 99.6 |  |  | 21.0 | % |  | $ | 121.2 |  |  | 21.0 | %
State income taxes, net of federal benefit | 12.8 |  |  | 2.5 | % |  | 9.1 |  |  | 1.9 | % |  | 12.5 |  |  | 2.2 | %
Foreign tax differential | 8.0 |  |  | 1.6 | % |  | 5.8 |  |  | 1.2 | % |  | 2.9 |  |  | 0.5 | %
Change in valuation allowances | (0.9) |  |  | (0.2) | % |  | 6.4 |  |  | 1.4 | % |  | 1.3 |  |  | 0.2 | %
Uncertain tax positions and interest | (3.0) |  |  | (0.6) | % |  | (0.8) |  |  | (0.2) | % |  | (19.2) |  |  | (3.3) | %
Global Intangible Low-Taxed Income ("GILTI") | 2.0 |  |  | 0.4 | % |  | 2.7 |  |  | 0.6 | % |  | 3.2 |  |  | 0.5 | %
Expiration of foreign tax credits | — |  |  | — | % |  | 10.6 |  |  | 2.2 | % |  | 1.6 |  |  | 0.3 | %
Stock compensation | (9.6) |  |  | (1.9) | % |  | (7.8) |  |  | (1.6) | % |  | (13.8) |  |  | (2.4) | %
Nondeductible compensation | 15.1 |  |  | 3.0 | % |  | 12.7 |  |  | 2.7 | % |  | 14.6 |  |  | 2.5 | %
Danish Tax Matter | — |  |  | — | % |  | (13.7) |  |  | (2.9) | % |  | — |  |  | — | %
Notional interest deduction | (2.2) |  |  | (0.4) | % |  | (14.0) |  |  | (3.0) | % |  | — |  |  | — | %
Permanent and other | (9.5) |  |  | (1.9) | % |  | (7.2) |  |  | (1.5) | % |  | (5.3) |  |  | (0.9) | %
Effective income tax provision | $ | 118.6 |  |  | 23.5 | % |  | $ | 103.4 |  |  | 21.8 | % |  | $ | 119.0 |  |  | 20.6 | %
Income Tax Provision The income tax provision consisted of the following:
| Year Ended December 31,
(in millions) | 2024 |  | 2023 |  | 2022
Current provision |  |  |  |  |
Federal | $ | 71.4 |  |  | $ | 47.2 |  |  | $ | 85.0 |
State | 19.5 |  |  | 15.9 |  |  | 18.3 |
Foreign | 46.9 |  |  | 32.0 |  |  | 26.2 |
Total current | $ | 137.8 |  |  | $ | 95.1 |  |  | $ | 129.5 |
Deferred provision |  |  |  |  |
Federal | $ | (16.3) |  |  | $ | 6.3 |  |  | $ | (7.7) |
State | (3.2) |  |  | 2.0 |  |  | (2.3) |
Foreign | 0.3 |  |  | — |  |  | (0.5) |
Total deferred | (19.2) |  |  | 8.3 |  |  | (10.5) |
Total income tax provision | $ | 118.6 |  |  | $ | 103.4 |  |  | $ | 119.0 |
The income tax provision includes federal, state and foreign income taxes currently payable and those deferred or prepaid because of temporary differences between financial statement and tax bases of assets and liabilities. Deferred Income Tax Assets and Liabilities The net deferred tax assets and liabilities recognized in the accompanying Consolidated Balance Sheets, determined using the income tax rate applicable to each period in which those items will reverse, consist of the following:
| December 31,
(in millions) | 2024 |  | 2023
Deferred tax assets: |  |  |
Stock-based compensation | $ | 22.9 |  |  | $ | 28.8 |
Operating lease obligations | 169.2 |  |  | 180.6 |
Accrued expenses and other | 61.1 |  |  | 64.0 |
Net operating losses, foreign tax credits and other tax attribute carryforwards | 44.5 |  |  | 42.1 |
Inventories | 16.6 |  |  | 10.6 |
Transaction costs | 26.9 |  |  | 16.5 |
Property, plant and equipment | 6.8 |  |  | 9.9 |
Total deferred tax assets | 348.0 |  |  | 352.5 |
Valuation allowances | (48.1) |  |  | (49.5) |
Total net deferred tax assets | $ | 299.9 |  |  | $ | 303.0 |
Deferred tax liabilities: |  |  |
Intangible assets | $ | (171.1) |  |  | $ | (174.3) |
Operating lease right-of-use assets | (153.0) |  |  | (164.5) |
Property, plant and equipment | (49.2) |  |  | (56.6) |
Accrued expenses and other | (19.6) |  |  | (19.9) |
Total deferred tax liabilities | (392.9) |  |  | (415.3) |
Net deferred tax liabilities | $ | (93.0) |  |  | $ | (112.3) |
Tax Attributes Included in Deferred Tax Assets Included in the calculation of the Company's deferred tax assets are the following gross income tax attributes available at December 31, 2024 and 2023, respectively:
(in millions) | 2024 |  | 2023
State net operating losses ("SNOLs") | $ | 103.4 |  |  | $ | 134.0 |
U.S. state income tax credits ("SITCs") | 2.8 |  |  | 3.2 |
Foreign net operating losses ("FNOLs") | 45.8 |  |  | 49.8 |
Notional interest deduction ("NID") | 46.3 |  |  | 40.0 |
State charitable contribution carryover ("SCCCs") | 0.6 |  |  | 0.7 |
The SNOLs, SITCs, FNOLs and SCCCs generally begin to expire in 2025, 2031, 2025 and 2025, respectively. Management believes that, based on a number of factors, the available objective evidence creates sufficient uncertainty regarding the realizability of certain of the SNOLs, SITCs, FNOLs, NID, the SCCCs and certain other deferred tax assets related to certain foreign operations (together, the "Tax Attributes"). The Company has established a valuation allowance for certain deferred tax assets (including the Tax Attributes) where it is more likely than not such deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible or creditable. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making its assessment regarding the recoverability of its deferred tax assets. The Company has recorded valuation allowances against $43.2 million of the SNOLs, $26.5 million of FNOLs, $46.3 million of the NID and $0.6 million of the SCCCs as of December 31, 2024. With respect to all other Tax Attributes above, based upon the level of historical taxable income and projections for future taxable income, management believes it is more likely than not the Company will realize the benefits of the underlying deferred tax assets. However, there can be no assurance that such assets will be realized if circumstances change. Deferred Tax Liability for Undistributed Foreign Earnings As it relates to the book to tax basis difference with respect to the stock of each of the Company's foreign subsidiaries, at December 31, 2024, the book basis of each exceeds the tax basis in the hands of such foreign subsidiaries' shareholders. The Company maintains such cumulative stock basis differences are indefinitely reinvested. However, the Company has provided for income taxes on the amount of estimated near-term distributions from each foreign subsidiary, measured by each such subsidiary's free cash flow to be generated. The income taxes provided for consist of the recipient's local country income taxes on the distributions, as well as local country income tax withholding on such distributions. Earnings in excess of the estimated near-term distributions are indefinitely reinvested by each foreign subsidiary in its own operations. Consequently at December 31, 2024 the Company has accrued approximately $1.4 million for such income and withholding taxes. Uncertain Income Tax Positions GAAP prescribes a recognition threshold and measurement attribute for the accounting and financial statement disclosure of tax positions taken or expected to be taken in a tax return. The evaluation of a tax position is a two-step process. The first step requires the Company to determine whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position. The second step requires the Company to recognize in the financial statements each tax position that meets the more likely than not criteria, measured at the largest amount of benefit that has a greater than 50.0% likelihood of being realized. Interest and penalties related to unrecognized tax benefits are recorded in income tax expense. Uncertain income tax liabilities reflect the Company's best judgement of the facts, circumstances and information available through December 31, 2024. Uncertain income tax liabilities are derived using the cumulative probability approach and applying the tax technical requirements applicable to U.S. and other international tax and transfer pricing requirements. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(in millions) |
Balance as of December 31, 2022 | $ | 39.0 |
Expiration of statutes of limitations | (0.2) |
Reduction for tax positions of prior years | (0.3) |
Settlements of uncertain tax positions with tax authorities | (34.0) |
Balance as of December 31, 2023 | $ | 4.5 |
Additions for tax positions of prior years | 0.2 |
Expiration of statutes of limitations | (2.6) |
Balance as of December 31, 2024 | $ | 2.1 |
The amount of unrecognized tax benefits that would impact the effective tax rate if recognized at December 31, 2024 and 2023 would be $2.1 million and $4.5 million, respectively. During the years ended December 31, 2024 and 2023, the Company recognized $0.7 million and $4.0 million in interest and penalties as a benefit in the income tax provision, respectively. The Company had $0.3 million and $1.0 million of accrued interest and penalties at December 31, 2024 and 2023, respectively. The Company anticipates it is reasonably possible an increase or decrease in the amount of unrecognized tax benefits could be made in the next twelve months as a result of the statute of limitations expiring and/or the examinations being concluded on these returns. However, the Company does not presently anticipate that any increase or decrease in unrecognized tax benefits will be material to the Consolidated Financial Statements. With few exceptions, the Company is no longer subject to tax examinations by the U.S., state and local municipalities or non-U.S. jurisdictions for periods prior to 2018. The Company is currently under examination by various tax authorities around the world. The OECD (Organization for Economic Co-operation and Development) has proposed a global minimum effective tax of 15.0% on income arising in each jurisdiction ("Pillar 2") that has been agreed upon in principle by over 140 countries. During 2024 and 2023, many countries took steps to incorporate Pillar 2 model rule concepts into their domestic laws. Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar 2 slightly differently than the model rules and on different timelines and may adjust domestic tax incentives in response to Pillar 2. Accordingly, the Company is evaluating the potential consequences of Pillar 2 on its longer-term financial position. The Company does not expect Pillar 2 to have a material impact on its financial results. The Danish Tax Matter The Company was involved in a dispute with the Danish tax authority ("SKAT") regarding the royalty paid by a U.S. subsidiary to a Danish subsidiary for tax years 2012 through 2022. The issues involved the royalty paid by the U.S. subsidiary for the right to utilize certain intangible assets owned by the Danish subsidiary in the U.S. production process. In October 2018, the Company initiated an Advanced Pricing Agreement ("APA") process for SKAT and the U.S. Internal Revenue Service ("IRS") to negotiate a resolution of this dispute. The Company had previously estimated an uncertain tax position with respect to additional Danish income tax (and interest) related to an increase in Danish taxable income resulting from the dispute. Conversely, the Company also previously recorded a deferred tax asset for the correlative benefit for the U.S. reduction in taxable income that would result from the dispute. In December 2022, SKAT and the IRS reached a preliminary framework agreement (the "Framework") to resolve the dispute. In the year ended December 31, 2022, the Company remeasured the uncertain tax position and associated deferred tax asset to reflect the terms of the Framework, which resulted in a net income tax benefit for the year ended December 31, 2022 of $14.7 million. On October 12, 2023, the IRS Advanced Pricing and Mutual Agreement ("APMA") team and SKAT formally agreed on final terms of a bilateral advance pricing agreement ("BAPA") with respect to the ongoing royalty matter for the periods 2012 through 2024 (the "Settlement"). The terms of the BAPA are substantially identical with those preliminarily agreed upon in the Preliminary Framework in December 2022. With respect to impact of the Settlement on the Company's Danish tax position, pursuant to the BAPA, in December 2023 SKAT issued revised or initial assessments for each of the years 2012 through 2022. The final tax and interest assessed was materially consistent with the income tax reserves the Company previously recorded, which was $37.8 million as of December 31, 2022. The Company offset the income tax reserves in the fourth quarter of 2023 against the previous amounts on deposit with SKAT and recorded a net income tax benefit in the Company's consolidated financial statements of approximately $4.8 million (largely interest to be paid by SKAT on the overpayment of tax). The assessments reflected a net refund of deposits previously paid to SKAT of approximately $24.8 million, which the Company recorded as an income tax receivable included in prepaid expenses and other current assets in the accompanying Consolidated Balance Sheets. In addition, at December 31, 2024 and 2023 the Company had approximately $10.7 million and $7.6 million remaining on deposit with SKAT for an unrelated matter recorded in other non-current assets. With respect to the impact of the Settlement on the Company’s U.S. tax position, on November 9, 2023, the Company formally agreed on a Mutual Agreement Procedure ("MAP") and APA with APMA related to the implementation of the terms of the BAPA for U.S. income tax purposes, which included reporting the U.S. result of the Settlement for all years 2012 through 2022 in an amended 2022 income tax return, which the Company filed in February 2024. As a result, in the year ended December 31, 2023, the Company released the deferred tax asset associated with its U.S. income tax positions of $21.6 million and recorded a net income tax benefit and incremental receivable in the Company's consolidated financial statements at December 31, 2023. Further, for the year ended December 31, 2023, the net income tax benefit recorded was approximately $8.9 million (consisting of a gross benefit of $10.5 million, offset by U.S. tax of approximately $1.6 million related to subpart F income resulting from the interest paid by SKAT on the Danish overpayment of tax). The incremental U.S. income tax receivable at December 31, 2024 and 2023 is approximately $31.1 million and $30.1 million, respectively, and is included in other non-current assets in the accompanying Consolidated Balance Sheets.

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