XML 43 R27.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income taxes are determined using the liability method of accounting for income taxes, under which deferred tax assets ("DTAs") and deferred tax liabilities ("DTLs") are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities. If, based upon all available evidence, both positive and negative, it is more likely than not that such deferred tax assets will not be realized, a valuation allowance is recorded. Management assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2017. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, as of December 31, 2017, a valuation allowance of $158.8 million has been recorded to recognize only the portion of the deferred tax assets that are more likely than not to be realized. The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as projections for future growth. We apply a recognition threshold and measurement attribute related to uncertain tax positions taken or expected to be taken on our tax returns. We recognize a tax benefit for financial reporting of an uncertain income tax position when it has a greater than 50% likelihood of being sustained upon examination by the taxing authorities. We measure the tax benefit of an uncertain tax position based on the largest benefit that has a greater than 50% likelihood of being ultimately realized including evaluation of settlements. The components of net loss from continuing operations before income taxes are as follows:
|  | Year Ended December 31,
|  | 2017 |  | 2016 |  | 2015
United States |  | $ | (336.6 | ) |  | $ | (563.7 | ) |  | $ | (1,662.5 | )
Foreign |  | 108.8 |  |  | 85.0 |  |  | (31.7 | )
Net loss before income tax expense (benefit) |  | $ | (227.8 | ) |  | $ | (478.7 | ) |  | $ | (1,694.2 | )
The components of income tax expense (benefit) are as follows:
|  | Year Ended December 31,
|  | 2017 |  | 2016 |  | 2015
Current |  |  |  |  |  |
U.S. Federal |  | $ | 5.0 |  |  | $ | 10.2 |  |  | $ | (24.6 | )
U.S. State |  | (4.0 | ) |  | (0.3 | ) |  | (0.8 | )
Foreign |  | 24.8 |  |  | 32.0 |  |  | 36.4 |
Total |  | 25.8 |  |  | 41.9 |  |  | 11.0 |
Deferred |  |  |  |  |  |
U.S. Federal |  | (5.8 | ) |  | (129.5 | ) |  | (287.4 | )
U.S. State |  | 2.5 |  |  | (8.5 | ) |  | (22.0 | )
Foreign |  | (8.0 | ) |  | (28.9 | ) |  | (1.5 | )
Total |  | (11.3 | ) |  | (166.9 | ) |  | (310.9 | )
Total income tax expense (benefit) |  | $ | 14.5 |  |  | $ | (125.0 | ) |  | $ | (299.9 | )
The reconciliation of the U.S. federal statutory tax rate to the actual tax rate is presented below:
|  | Year Ended December 31,
|  | 2017 |  | 2016 |  | 2015
Statutory U.S. federal income tax rate |  | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Foreign earnings at rates different than U.S. federal rate |  | (5.7 | )% |  | (1.5 | )% |  | 0.2 | %
Impact of goodwill impairments |  | — | % |  | (0.1 | )% |  | (19.4 | )%
Valuation allowance adjustments |  | (40.8 | )% |  | (6.5 | )% |  | 0.7 | %
Impact of Tax Reform |  | 4.3 | % |  | — | % |  | — | %
Other |  | 0.8 | % |  | (0.8 | )% |  | 1.2 | %
Effective income tax rate |  | (6.4 | )% |  | 26.1 | % |  | 17.7 | %
The Company’s 2017 effective tax rate was impacted by the change in valuation allowances totaling $49.7 million against domestic (federal and state) net deferred tax assets. The Company’s 2016 effective tax rate was impacted by the recording of valuation allowances totaling $37.1 million against domestic (federal and state) net deferred tax assets. Deferred income taxes reflect the net tax effects of temporary differences between the carrying values of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The deferred income tax balances are established using the enacted statutory tax rates and are adjusted for changes in such rates in the period of change.
|  | December 31,
|  | 2017 |  | 2016
Deferred tax assets: |  |  |  |
Inventory valuation |  | $ | 16.7 |  |  | $ | 23.4 |
Reserves and other accrued expenses |  | 29.4 |  |  | 59.8 |
Net operating loss carry forwards |  | 395.5 |  |  | 530.4 |
Tax credit carry forwards |  | 26.7 |  |  | 44.5 |
Differences in financial reporting and tax basis for: |  |  |  |
Other |  | 54.0 |  |  | 36.6 |
Valuation allowance |  | (158.8 | ) |  | (119.0 | )
Realizable deferred tax assets |  | 363.5 |  |  | 575.7 |
Deferred tax liabilities: |  |  |  |  |  |
Reserves and other accrued expenses |  | (16.0 | ) |  | — |
Differences in financial reporting and tax basis for: |  |  |  |
Identifiable intangible assets |  | (352.0 | ) |  | (597.1 | )
Other |  | (35.7 | ) |  | (24.2 | )
Total deferred tax liabilities |  | (403.7 | ) |  | (621.3 | )
Net deferred tax liability on balance sheet |  | $ | (40.2 | ) |  | $ | (45.6 | )
At December 31, 2017, we had the following NOL, R&D, AMT, and state credit carry forwards:
| December 31, 2017
| Federal |  | State |  | Foreign
NOL carry forwards | $ | 1,318.2 |  |  | $ | 1,337.8 |  |  | $ | 186.2 |
R&D, AMT and state credit carry forwards | 25.3 |  |  | 2.3 |  |  | — |
The Federal and state tax loss carryforwards will expire through 2037. The foreign NOL carryforwards can be carried forward for periods that vary from five years to indefinitely. R&D tax credit carryforwards will expire through 2037, alternative minimum tax credit carryforwards can be carried forward indefinitely and state tax credits expire through 2023. At December 31, 2017 and 2016, we had the following valuation allowances:
|  | December 31,
|  | 2017 |  | 2016
Federal |  | $ | 69.4 |  |  | $ | 27.3 |
State |  | 48.9 |  |  | 41.3 |
FTC |  | — |  |  | 12.7 |
Foreign |  | 40.5 |  |  | 37.7 |
Undistributed earnings of subsidiaries are accounted for as a temporary difference, except that DTLs are not recorded for undistributed earnings of foreign subsidiaries that are deemed to be indefinitely reinvested in foreign jurisdictions. The Tax Act required the Company to compute a tax on previously undistributed earnings and profits of its foreign subsidiaries upon transition from a worldwide tax system to a territorial tax system during the year ended December 31, 2017. The repatriation of such amounts in the future should generally be exempt from income taxes in the U.S. (as a result of the Tax Act) and in those jurisdictions that have a similar territorial system of taxation. Substantially all of our current year foreign cash flows are not intended to be indefinitely reinvested offshore, and therefore the tax effects of repatriation (including applicable withholding taxes) of such cash flows are provided for in our financial reporting. Unrecognized Tax Benefits The total amount of unrecognized tax benefits as of December 31, 2017 was $21.8 million. Of this amount, $21.8 million, if recognized, would be included in our Consolidated Statements of Operations and Comprehensive Loss and have an impact on our effective tax rate. SGC determined it is reasonably possible that the UTBs may decrease by $4.3 million due to settlements with the tax authorities and/or expiration of applicable statutes before December 31, 2018. We recognize interest and penalties for unrecognized tax benefits in income tax expense. The amount recognized for interest and penalties during the years ended December 31, 2017, 2016 and 2015 was not material. We had $1.3 million and $1.0 million for the payment of interest and penalties accrued at December 31, 2017 and 2016, respectively. We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. We are currently under examination by the Internal Revenue Service for years 2013 and 2014. There are no material state, local or non-U.S. examinations by tax authorities for years prior to 2013. The Company had the following activity for unrecognized tax benefits:
|  | Year Ended December 31,
|  | 2017 |  | 2016 |  | 2015
Balance at beginning of period |  | $ | 27.4 |  |  | $ | 10.8 |  |  | $ | 13.9 |
Tax positions related to current year additions |  | 2.3 |  |  | 8.4 |  |  | 2.0 |
Additions for tax positions of prior years |  | — |  |  | 9.7 |  |  | 2.4 |
Tax positions related to prior years reductions |  | (7.3 | ) |  | (0.3 | ) |  | (3.0 | )
Reductions due to lapse of statute of limitations on tax positions |  | — |  |  | (0.4 | ) |  | (0.1 | )
Settlements |  | (0.6 | ) |  | (0.8 | ) |  | (4.4 | )
Balance at end of period |  | $ | 21.8 |  |  | $ | 27.4 |  |  | $ | 10.8 |
Tax Reform 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 that will affect the 2017 tax year, including, but not limited to, (1) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries and (2) bonus depreciation that will allow for full expensing of qualified property. The Tax Act also establishes new tax laws that will affect the 2018 tax year and future tax years, including, but not limited to: (1) reduction of the U.S. federal corporate tax rate from 35 percent to 21 percent; (2) a new limitation on deductible interest expense; (3) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries; (4) elimination of the corporate alternative minimum tax (AMT); (5) a new provision designed to tax global intangible low-taxed income (GILTI); (6) the creation of the base erosion anti-abuse tax (BEAT), a new minimum tax; (7) limitations on the deductibility of certain executive compensation; and (8) changing rules related to uses of and limitations of net operating losses (NOLs) generated after December 31, 2017. The SEC staff issued SAB 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. In connection with our initial analysis of the impact of the Tax Act, we have recorded a discrete tax benefit of $9.9 million in the period ending December 31, 2017. For various reasons that are discussed more fully below, we have not completed our accounting for the income tax effects of the Tax Act. Our accounting for the following elements of the Tax Act is incomplete. However, we were able to make reasonable estimates of certain effects and, therefore, recorded provisional adjustments as follows: Impact on DTAs and DTLs from reduction of U.S. federal corporate tax rate We have computed the provisional impact of the reduced tax rate (from 35% to 21%) on our U.S. federal DTAs and DTLs, which have been remeasured as of December 31, 2017. We have also computed the provisional impact on our valuation allowance as it relates to our U.S. federal DTAs and DTLs and have appropriately adjusted our valuation allowance as of December 31, 2017. The provisional net impact on our Q4 2017 tax provision related to the remeasuring of DTAs, DTLs, and associated valuation allowance as a result of the reduced U.S. federal corporate tax rate was a $9.9M tax benefit. Included in this net amount is tax expense of $31.0 million related to remeasured deferred taxes, offset by the tax benefit of the remeasured corresponding valuation allowance of $31.0 million. While we are able to make a reasonable estimate of the impact of the reduction in corporate tax rate on our deferred taxes, it may be affected by other analyses related to the Tax Act, including, but not limited to, our calculation of deemed repatriation of untaxed foreign earnings and profits and the state tax effect of adjustments made to federal temporary differences. Deemed Repatriation Transition Tax The Deemed Repatriation Transition Tax (Transition Tax) is a tax on previously untaxed accumulated and current earnings and profits (E&P) of certain of our foreign subsidiaries. To determine the amount of the Transition Tax, we must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. The Tax Act provides that the Transition Tax may be satisfied by a reduction in a company's available NOLs. As a result, we expect that the impact of the Transition Tax will be a reduction in our NOL carry forward as of December 31, 2017 and will not result in a cash tax obligation. We are able to make a reasonable estimate of the Transition Tax and recorded a provisional reduction in our NOLs of $102.6 million on a pre-tax basis; however, we are continuing to gather additional information to more precisely compute the amount of the Transition Tax. The reduction in our NOLs is offset by a corresponding reduction in the valuation allowance, and therefore has not resulted in an impact in our tax provision for the period ending December 31, 2017. Valuation allowances The company must determine whether valuation allowance assessments are affected by various aspects of the Tax Act (e.g., deemed repatriation of deferred foreign income and GILTI inclusions). Since, as discussed herein, the company has not completed its accounting for the income tax effects of the Tax Act, any corresponding determination of the need for or change in a valuation allowance has not been completed. Our accounting for the following elements of the Tax Act is incomplete, and we were not yet able to make reasonable estimates of the effects. Therefore, no provisional adjustments were recorded. Global intangible low taxed income (GILTI) The Tax Act creates a new requirement that certain income (i.e., GILTI) earned by controlled foreign corporations (CFCs) must be included currently in the gross income of the CFCs’ U.S. shareholder. GILTI is the excess of the shareholder’s “net CFC tested income” over the "net deemed tangible income return," which is currently defined as the excess of (1) 10 percent of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain interest expense taken into account in the determination of net CFC-tested income. Because of the complexity of the new GILTI tax rules, we are continuing to evaluate this provision of the Tax Act and the application of ASC 740. Under U.S. GAAP, we are allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into a company’s measurement of its deferred taxes (the “deferred method”). Our selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing our global income to determine whether we expect to have future U.S. inclusions in taxable income related to GILTI and, if so, the related impact. Because whether we expect to have future U.S. inclusions in taxable income related to GILTI depends on not only our current structure and estimated future results of global operations but also our intent and ability to modify our structure and/or our business, we are not yet able to reasonably estimate the effect of this provision of the Tax Act; therefore, we have not made any adjustments related to potential GILTI tax in our financial statements and have not made a policy decision regarding whether to record deferred taxes on GILTI.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration