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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | —Income Taxes U.S. Tax Reform On December 22, 2017, the U.S. enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act included significant changes to existing tax law including, among other things, a reduction to the U.S. federal corporate income tax rate from 35% to 21% and a one-time tax on deferred foreign income ("Transition Tax"). The changes included in the Tax Act are broad and complex. As such, on December 22, 2017, the Securities and Exchange Commission (“SEC”) issued SAB 118. SAB 118 expresses views of the SEC regarding ASC Topic 740, Income Taxes in the reporting period that includes the enactment date of the Tax Act. The SEC staff issuing SAB 118 recognized that a registrant’s review of certain income tax effects of the Tax Act may be incomplete at the time financial statements are issued for the reporting period that includes the enactment date, including interim periods therein. If a company does not have the necessary information available, prepared or analyzed for certain income tax effects of the Tax Act, SAB 118 allows a company to report provisional numbers and adjust those amounts during the measurement period not to extend beyond one year. The Company has recorded provisional amounts for all known and estimable impacts of the Tax Act that are effective for the year ended December 31, 2017. Future adjustments to the provisional numbers will be recorded as discrete adjustments to income tax provision in the period in which those adjustments become estimable and/or are finalized. For the year ended December 31, 2017, the estimated impact of the Tax Act resulted in a provisional tax benefit of $57.7 million. This benefit is comprised of a charge of $32.5 million related to the Transition Tax and a benefit of $90.2 million from the rate reduction impacting the valuation of the Company’s U.S. deferred tax balances. The Company continues to review the anticipated impacts of the global intangible low taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”) on the Company, which are not effective until calendar year 2018 and are not expected to impact 2017 balances. Within the calculation of the Company’s tax balances, the Company has used assumptions and estimates that may change as a result of future guidance, interpretation and rule-making from various regulatory bodies. Income Tax Disclosures A summary of pre‑tax income from U.S. and non-U.S. operations for the years ended December 31 follows:
(in millions) |  | 2017 |  | 2016 |  | 2015
Continuing operations: |  |  |  |  |  |
U.S. domestic |  | $ | 395.2 |  |  | $ | 319.0 |  |  | $ | 393.8 |
Foreign |  | 73.0 |  |  | 91.5 |  |  | 74.1 |
Total pre-tax income from continuing operations |  | 468.2 |  |  | 410.5 |  |  | 467.9 |
Discontinued operations: |  |  |  |  |  |  |  |  |
U.S. domestic |  | 0.3 |  |  | (1.1 | ) |  | 0.1 |
Foreign |  | — |  |  | — |  |  | — |
Total pre-tax income (loss) from discontinued operations |  | 0.3 |  |  | (1.1 | ) |  | 0.1 |
Total pre-tax income |  | $ | 468.5 |  |  | $ | 409.4 |  |  | $ | 468.0 |
The provision for income taxes from continuing operations for the years ended December 31 follows:
(in millions) |  | 2017 |  | 2016 |  | 2015
Current expense: |  |  |  |  |  |
Federal and State |  | $ | 133.0 |  |  | $ | 155.5 |  |  | $ | 140.1 |
Foreign |  | 28.4 |  |  | 29.2 |  |  | 24.0 |
Total current expense |  | 161.4 |  |  | 184.7 |  |  | 164.1 |
Deferred expense (benefit): |  |  |  |  |  |  |  |  |
Federal and State |  | (64.7 | ) |  | (15.5 | ) |  | (12.7 | )
Foreign |  | 6.2 |  |  | (9.5 | ) |  | (3.1 | )
Total deferred expense (benefit) |  | (58.5 | ) |  | (25.0 | ) |  | (15.8 | )
Total tax expense |  | $ | 102.9 |  |  | $ | 159.7 |  |  | $ | 148.3 |
A reconciliation of the tax provision from continuing operations computed at the U.S. federal statutory rate to the actual tax provision for the years ended December 31 follows:
(in millions) |  | 2017 |  | 2016 |  | 2015
Taxes at the 35% U.S. statutory rate |  | $ | 163.9 |  |  | $ | 143.7 |  |  | $ | 163.8 |
State and local taxes, net of federal income tax benefit |  | 10.8 |  |  | 8.6 |  |  | 1.9 |
Benefit of foreign earnings taxed at lower rates |  | (6.7 | ) |  | (8.1 | ) |  | (7.9 | )
Benefit for domestic manufacturing deduction |  | (10.4 | ) |  | (12.6 | ) |  | (11.5 | )
Tax credits |  | (2.3 | ) |  | (10.7 | ) |  | — |
Tax impact of impairment of goodwill |  | — |  |  | 41.2 |  |  | — |
Impact of U.S. tax reform |  | (57.7 | ) |  | — |  |  | — |
Change in investment assertion on foreign earnings |  | 5.1 |  |  | — |  |  | — |
Other, net |  | 0.2 |  |  | (2.4 | ) |  | 2.0 |
Tax expense |  | $ | 102.9 |  |  | $ | 159.7 |  |  | $ | 148.3 |
Effective income tax rate on continuing operations |  | 22.0 | % |  | 38.9 | % |  | 31.7 | %
Cash payments for income taxes, net of refunds, were $142.8 million, $192.3 million and $123.0 million, in 2017, 2016 and 2015, respectively. The components of deferred tax assets (liabilities) as of December 31 follows:
(in millions) |  | 2017 |  | 2016
Deferred revenue |  | $ | 20.1 |  |  | $ | 26.9 |
Warranty reserves |  | 4.7 |  |  | 7.1 |
Inventory reserves |  | 8.7 |  |  | 12.1 |
Allowance for doubtful accounts |  | 3.7 |  |  | 4.5 |
Employee benefits |  | 31.3 |  |  | 45.2 |
Foreign loss carryforwards |  | 3.8 |  |  | 2.9 |
Federal tax credit carryovers |  | 3.1 |  |  | 6.6 |
Deferred state tax attributes |  | 13.6 |  |  | 14.6 |
Other, net |  | 2.4 |  |  | 7.0 |
Gross deferred assets |  | 91.4 |  |  | 126.9 |
Valuation allowances |  | (4.3 | ) |  | (1.3 | )
Deferred tax assets after valuation allowances |  | $ | 87.1 |  |  | $ | 125.6 |
Undistributed foreign earnings |  | (7.9 | ) |  | (1.7 | )
Depreciation |  | (42.7 | ) |  | (42.4 | )
Amortization |  | (47.3 | ) |  | (60.7 | )
Acquired identifiable intangibles |  | (188.3 | ) |  | (134.7 | )
Gross deferred liabilities |  | (286.2 | ) |  | (239.5 | )
Net deferred tax liabilities |  | $ | (199.1 | ) |  | $ | (113.9 | )
As of December 31, 2017, the Company had no deferred tax assets related to net operating loss (“NOL”) carryforwards for U.S. federal tax purposes but had a deferred tax asset for state NOL carryforwards and credits of approximately $9.5 million (expiring 2018 through 2037) and deferred tax assets related to NOL carryforwards in foreign jurisdictions of approximately $3.8 million (expiring 2022 through 2026). The Company believes that it is likely that certain of the state attributes will expire unused and therefore has established a valuation allowance of approximately $1.2 million against the deferred tax assets associated with these attributes. The Company believes that substantially all of the foreign NOLs will be utilized before expiration and therefore has not established a valuation allowance against the deferred tax assets associated with these NOL carryforwards. As of December 31, 2017, the Company has $3.1 million of federal passive foreign tax credit carryover (expiring in 2023). The Company believes that it is unlikely that passive foreign source income will be generated to utilize the passive foreign tax credit before expiration and therefore has established a full valuation allowance. Deferred tax assets and liabilities are classified as long-term. Foreign deferred tax assets and (liabilities) are grouped separately from U.S. domestic assets and liabilities and are analyzed on a jurisdictional basis. Deferred tax assets (liabilities) included in the Consolidated Balance Sheet as of December 31 follows:
(in millions) |  | 2017 |  | 2016
Other long-term assets |  | $ | 1.4 |  |  | $ | 1.1 |
Other long-term liabilities |  | (200.5 | ) |  | (115.0 | )
Net deferred tax liabilities |  | $ | (199.1 | ) |  | $ | (113.9 | )
The Company is not required to provide income taxes on the excess of the amount of the financial reporting over the tax basis of investments in foreign subsidiaries that are essentially permanent in duration. The Company’s excess of financial reporting over the tax basis of investments in foreign subsidiaries is approximately equal to the cumulative unremitted earnings and cumulative translation adjustments of its foreign subsidiaries. The Company reconsiders this assertion quarterly. The Company’s cumulative unremitted earnings and cumulative translation adjustments at December 31, 2017, were approximately $608.0 million. The Company previously intended to permanently reinvest substantially all of the earnings of its foreign subsidiaries. The Transition Tax resulted in elimination of the taxable basis differences in our foreign subsidiaries related to foreign earnings for US tax purposes. However, basis differences still may remain at the local country level. The Company has determined that an amount approximately equal to foreign cash balances will no longer be permanently reinvested for local country purposes, which results in an accrual of $7.9 million related to withholding taxes. Unrecognized tax benefits reflect the difference between the tax benefits of positions taken or expected to be taken on income tax returns and the tax benefits that meet the criteria for current recognition in the financial statements. The Company periodically assesses its unrecognized tax benefits. A summary of the movement in gross unrecognized tax benefits (before estimated interest and penalties) for the years ended December 31 follows:
(in millions) |  | 2017 |  | 2016 |  | 2015
Balance as of January 1 |  | $ | 24.6 |  |  | $ | 27.7 |  |  | $ | 23.8 |
Additions based on tax positions related to current year |  | 3.0 |  |  | 0.6 |  |  | 0.9 |
Additions related to acquisition positions |  | 15.8 |  |  | — |  |  | 3.0 |
Adjustments for tax positions of prior years |  | 1.5 |  |  | — |  |  | 1.3 |
Reductions due to statute of limitations |  | (3.3 | ) |  | (2.1 | ) |  | (1.2 | )
Reductions due to settlements |  | (1.7 | ) |  | (1.4 | ) |  | — |
Adjustments due to foreign exchange rates |  | 0.7 |  |  | (0.2 | ) |  | (0.1 | )
Balance as of December 31 |  | $ | 40.6 |  |  | $ | 24.6 |  |  | $ | 27.7 |
If the unrecognized tax benefits as of December 31, 2017, were to be recognized, approximately $44.3 million would impact the Company’s effective tax rate. The amount impacting the Company’s effective rate is calculated by adding accrued interest and penalties to the gross unrecognized tax benefit and subtracting the tax benefit associated with state taxes and interest. The Company classifies and reports interest and penalties associated with unrecognized tax benefits as a component of the income tax provision on the Consolidated Statements of Earnings and as a long‑term liability on the Consolidated Balance Sheets. The total amount of such interest and penalties accrued, but excluded from the table above, at the years ending 2017, 2016 and 2015 were $6.5 million, $4.7 million and $4.9 million, respectively. The Company is subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions. During the year the Company is working with the IRS to complete its compliance assurance process for the 2016 tax year. The Company is also currently working with the IRS to complete its compliance assurance audit for the 2017 tax year and expects conclusion of the process within the next twelve months. Generally, state income tax returns are subject to examination for a period of three to five years after filing. Substantially all material state tax matters have been concluded for tax years through 2012. Various state income tax returns for subsequent years are in the process of examination. At this stage the outcome is uncertain; however, the Company believes that contingencies have been adequately provided for. Statutes of limitation vary among the foreign jurisdictions in which the Company operates. Substantially all foreign tax matters have been concluded for tax years through 2008. The Company believes that foreign tax contingencies associated with income tax examinations underway or open tax years have been provided for adequately. Based on the outcome of certain examinations or as a result of the expiration of statutes of limitations for certain jurisdictions, the Company believes that within the next 12 months it is reasonably possible that previously unrecognized tax benefits could decrease by approximately $6 million to $7 million. These previously unrecognized tax benefits relate to a variety of tax issues including tax matters relating to prior acquisitions and various state matters.

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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 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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