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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income (loss) before income taxes for the Company’s U.S. and non-U.S. operations was as follows:
(In millions) |  | 2017 |  | 2016 |  | 2015
U.S. |  | $ | (119.8 | ) |  | $ | (782.1 | ) |  | $ | (534.6 | )
Non-U.S. |  | 33.3 |  |  | 48.1 |  |  | 56.6 |
Loss before income taxes |  | $ | (86.5 | ) |  | $ | (734.0 | ) |  | $ | (478.0 | )
The income tax provision (benefit) was as follows:
(in millions) |  | 2017 |  | 2016 |  | 2015
Current: |  |  |  |  |  |
Federal |  | $ | (0.8 | ) |  | $ | 0.5 |  |  | $ | (60.7 | )
State |  | (1.3 | ) |  | (1.5 | ) |  | (0.4 | )
Foreign |  | 6.2 |  |  | 14.4 |  |  | 9.4 |
Total |  | 4.1 |  |  | 13.4 |  |  | (51.7 | )
Deferred: |  |  |  |  |  |
Federal |  | 2.4 |  |  | (115.8 | ) |  | (90.9 | )
State |  | (14.4 | ) |  | (3.5 | ) |  | 30.4 |
Foreign |  | 1.1 |  |  | (1.0 | ) |  | 0.1 |
Total |  | (10.9 | ) |  | (120.3 | ) |  | (60.4 | )
Income tax benefit |  | $ | (6.8 | ) |  | $ | (106.9 | ) |  | $ | (112.1 | )
The following is a reconciliation of income taxes computed at the statutory U.S. Federal income tax rate to the actual effective income tax benefit:
(In millions) |  | 2017 |  | 2016 |  | 2015
Taxes computed at the federal rate |  | $ | (30.3 | ) |  | $ | (256.9 | ) |  | $ | (167.3 | )
Goodwill impairment |  | 36.6 |  |  | — |  |  | — |
State and local income taxes, net of federal tax benefit |  | — |  |  | (26.8 | ) |  | (20.6 | )
Valuation allowance |  | (14.5 | ) |  | 171.5 |  |  | 74.5 |
Repatriation of foreign earnings |  | 14.2 |  |  | 2.1 |  |  | 13.4 |
Change in federal tax rate and law change |  | (4.1 | ) |  | — |  |  | — |
Foreign earnings taxed at different rate |  | (7.2 | ) |  | (5.3 | ) |  | (11.2 | )
Adjustment to prior years’ taxes |  | (5.2 | ) |  | 3.4 |  |  | (5.4 | )
Foreign exchange differences |  | 2.6 |  |  | — |  |  | — |
Withholding taxes |  | 2.2 |  |  | — |  |  | — |
Other |  | (1.1 | ) |  | 5.1 |  |  | 4.5 |
Income tax benefit |  | $ | (6.8 | ) |  | $ | (106.9 | ) |  | $ | (112.1 | )
We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. Valuation allowances are established when it is estimated that it is more likely than not that the tax benefit of the deferred tax asset will not be realized. In making such determination, we consider all available evidence, both positive and negative, regarding historical operating results including recent years with reported losses, the estimated timing of future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused. In situations where a three year cumulative loss condition exists, accounting standards limit the ability to consider projections of future results as positive evidence to assess the realizability of deferred tax assets. If we determine that we would not be able to realize our deferred tax assets in the future in excess of their recorded net amount, we would make an adjustment to the deferred tax asset valuation allowance. Since 2015, the Company’s results have reflected a three year cumulative loss from U.S. operations. As a result, the Company established $74.5 million in deferred tax asset valuation allowances in 2015, of which $68.4 million were for certain federal and state deferred tax assets. In 2016, the actions to indefinitely idle the Rowley, UT titanium sponge production facility (see Note 16 for further information) resulted in a reassessment of the realizability of U.S. federal deferred tax assets. In 2016, the Company’s results of operations included an increase to deferred tax asset valuation allowances of $171.5 million, including an additional $165.8 million valuation allowance on federal and state deferred tax assets. In addition, the Company established valuation allowances on amounts recorded in other comprehensive income in 2016 and 2017 of $45.6 million and $28.8 million, respectively, which are not reflected in the preceding table reconciling amounts recognized in the income tax benefit recorded on the statement of operations (see Note 12). On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to: (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; (6) creating the base erosion anti-abuse tax (BEAT), a new minimum tax; (7) creating a new limitation on deductible interest expense; and (8) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017. In connection with ATI’s initial analysis of the impact of the Tax Act, the following Tax Act impacts within the current year financial statements have been accounted for as provisional estimated amounts, pending further information which includes final tax return filings, and additional analysis of foreign earnings and profits, and the Company expects to finalize adjustments by the fourth quarter of 2018. The change in the U.S. federal corporate tax rate from 35% to 21% resulted in a $2.6 million benefit as it relates to the re-measurement of indefinite lived deferred tax liabilities. The repeal of the alternative minimum tax resulted in a $1.5 million decrease in the deferred tax asset valuation allowance. The $4.1 million combination of these items is reflected above in the income tax benefit reconciliation on the line labeled as change in federal tax rate and law change. In addition to these adjustments, the Company calculated an estimate related to the mandatory repatriation of foreign earnings resulting in 2017 federal taxable income of approximately $100 million, for which the Company expects to fully offset with the federal net operating loss carryover deferred tax asset. The Company will finalize the calculation of the mandatory repatriation throughout 2018, but does not anticipate a tax charge. In addition to the items related to the Tax Act, the Company had a current year goodwill impairment charge related to the ATI Cast Products operations which did not have a tax basis, resulting in a $36.6 million tax charge included within the net tax benefit for 2017. The Company continues to maintain a valuation allowance on the federal, state and some foreign net deferred tax assets as of December 31, 2017. Deferred income taxes result from temporary differences in the recognition of income and expense for financial and income tax reporting purposes, and differences between the fair value of assets acquired in business combinations accounted for as purchases for financial reporting purposes and their corresponding tax bases. Deferred income taxes represent future tax benefits or costs to be recognized when those temporary differences reverse. The categories of assets and liabilities that have resulted in differences in the timing of the recognition of income and expense at December 31, 2017 and 2016 were as follows:
(in millions) |  | 2017 |  | 2016
Deferred income tax assets |  |  |  |
Pensions |  | $ | 158.0 |  |  | $ | 294.9 |
Postretirement benefits other than pensions |  | 86.5 |  |  | 129.5 |
Net operating loss tax carryovers |  | 336.1 |  |  | 407.8 |
Tax credits |  | 92.6 |  |  | 56.7 |
Deferred compensation and other benefit plans |  | 13.8 |  |  | 25.7 |
Other items |  | 55.9 |  |  | 107.4 |
Gross deferred income tax assets |  | 742.9 |  |  | 1,022.0 |
Valuation allowance for deferred tax assets |  | (274.0 | ) |  | (291.4 | )
Total deferred income tax assets |  | 468.9 |  |  | 730.6 |
Deferred income tax liabilities |  |  |  |
Bases of property, plant and equipment |  | 375.3 |  |  | 547.1 |
Inventory valuation |  | 50.0 |  |  | 77.6 |
Bases of amortizable intangible assets |  | 38.7 |  |  | 65.6 |
Other items |  | 7.0 |  |  | 43.9 |
Total deferred tax liabilities |  | 471.0 |  |  | 734.2 |
Net deferred tax liability |  | $ | (2.1 | ) |  | $ | (3.6 | )
Federal deferred tax asset and liability balances at December 31, 2017 have been remeasured as a result of the Tax Act legislation, including the impact of the new 21% U.S. federal tax rate. Additionally, deferred tax balances at December 31, 2016 have been restated to correct classification differences between certain deferred tax assets, liabilities, and the valuation allowance, which was not material to reported results. The correction increased both total deferred income tax assets and liabilities by $48.9 million, with no net impact to the ending balance sheet position. The following summarizes the carryforward periods for the tax attributes related to net operating losses (NOL) and credits by jurisdiction.
($ in millions) |  |  |  |  |
Jurisdiction | Attribute | Amount | Expiration Period | Amount expiring within 5 years | Amount expiring in 5-20 years
U.S. | NOL | $980 | 20 years | $— | $980
U.S. | Foreign Tax Credit | $65 | 10 years | $19 | $46
U.S. | Research and Development Credit | $11 | 20 years | $— | $11
State | NOL | $168 | Various | $19 | $149
State | Credits | $23 | Various | $5 | $18
U.K. | NOL | $6 | Indefinite | $— | $—
Luxembourg | NOL | $19 | Indefinite | $— | $—
Poland | Economic Zone Credit | $12 | 9 years | $— | $12
Income taxes paid and amounts received as refunds were as follows:
(In millions) |  | 2017 |  | 2016 |  | 2015
Income taxes paid |  | $ | 10.4 |  |  | $ | 8.6 |  |  | $ | 10.8 |
Income tax refunds received |  | (7.1 | ) |  | (10.5 | ) |  | (63.3 | )
Income taxes paid (received), net |  | $ | 3.3 |  |  | $ | (1.9 | ) |  | $ | (52.5 | )
In general, the Company is responsible for filing consolidated U.S. Federal, foreign and combined, unitary or separate state income tax returns. The Company is responsible for paying the taxes relating to such returns, including any subsequent adjustments resulting from the redetermination of such tax liability by the applicable taxing authorities. In 2016 and 2017, the Company received $7.3 million and $3.2 million, respectively, for federal tax refunds of prior years’ taxes paid. Deferred taxes of $2.2 million have been recorded for foreign withholding taxes on earnings expected to be repatriated to the U.S. parent. The Company does not intend to distribute the approximately $100 million taxed under the Tax Act, and has not recorded any deferred taxes related to such amounts. The remaining excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries is indefinitely reinvested, and the determination of any deferred tax liability on this amount is not practicable. Uncertain tax positions are recorded using a two-step process based on (1) determining whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those positions that meet the more-likely-than-not-recognition threshold, the Company records the largest amount of the tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The changes in the liability for unrecognized income tax benefits for the years ended December 31, 2017, 2016 and 2015 were as follows:
(in millions) |  | 2017 |  | 2016 |  | 2015
Balance at beginning of year |  | $ | 22.7 |  |  | $ | 19.6 |  |  | $ | 76.8 |
Increases in prior period tax positions |  | — |  |  | 7.9 |  |  | 4.3 |
Decreases in prior period tax positions |  | (0.7 | ) |  | (0.1 | ) |  | (0.2 | )
Increases in current period tax positions |  | 0.7 |  |  | 0.6 |  |  | 1.3 |
Expiration of the statute of limitations |  | (0.4 | ) |  | (1.1 | ) |  | (0.5 | )
Settlements |  | (7.6 | ) |  | (4.2 | ) |  | (62.1 | )
Balance at end of year |  | $ | 14.7 |  |  | $ | 22.7 |  |  | $ | 19.6 |
The liability at December 31, 2017 includes $11.7 million of unrecognized tax benefits that are classified within deferred income taxes as a reduction of net operating loss carryforwards. We recognize accrued interest and penalties related to uncertain tax positions as income tax expense. The amounts accrued for interest and penalty charges for the years ended December 31, 2017, 2016 and 2015 were not significant. At December 31, 2017 and 2016, the accrued liabilities for interest and penalties related to unrecognized tax benefits were $3.2 million and $3.6 million, respectively. For the year beginning January 1, 2015, $60.9 million of the liability for unrecognized income tax benefits related to temporary differences, which would not impact the effective tax rate upon resolution of the uncertainty. In 2015, the Company resolved these various uncertain tax position matters related to temporary differences which resulted in this $60.9 million long-term liability for uncertain tax positions to be reclassified to a deferred tax liability. The total estimated unrecognized tax benefit that, if recognized, would affect ATI’s effective tax rate is approximately $6 million. At this time, the Company believes that it is reasonably possible that approximately $1 million of the estimated unrecognized tax benefits as of December 31, 2017 will be recognized within the next twelve months based on the expiration of statutory review periods. The Company, and/or one of its subsidiaries, files income tax returns in the U.S. Federal jurisdiction and in various state and foreign jurisdictions. A summary of tax years that remain subject to examination, by major tax jurisdiction, is as follows:
Jurisdiction |  | Earliest Year Open to Examination
U.S. Federal |  | 2016
States: |  |
Pennsylvania |  | 2014
Foreign: |  |
China |  | 2014
Poland |  | 2011
United Kingdom |  | 2015

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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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