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Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
Income Taxes | Note 16 Income Taxes The components of earnings (loss) before income tax provision were as follows:
|  | Year Ended December 31, |
(In millions) |  | 2016 |  |  | 2015 |  |  | 2014 |
Domestic |  | $ | 168.7 |  |  | $ | 102.8 |  |  | $ | (62.2 | )
Foreign |  |  | 397.2 |  |  |  | 323.1 |  |  |  | 329.4 |
Total |  | $ | 565.9 |  |  | $ | 425.9 |  |  | $ | 267.2 |
The components of our income tax provision (benefit) were as follows:
|  | Year Ended December 31, |
(In millions) |  | 2016 |  |  | 2015 |  |  | 2014 |
Current tax expense (benefit): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 31.3 |  |  | $ | 6.3 |  |  | $ | (216.0 | )
State and local |  |  | (1.3 | ) |  |  | 7.3 |  |  |  | 0.2 |
Foreign |  |  | 107.3 |  |  |  | 99.5 |  |  |  | 78.7 |
Total current expense (benefit) |  |  | 137.3 |  |  |  | 113.1 |  |  |  | (137.1 | )
Deferred tax expense (benefit): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (42.4 | ) |  |  | (35.7 | ) |  |  | 176.8 |
State and local |  |  | 5.7 |  |  |  | 10.9 |  |  |  | (27.2 | )
Foreign |  |  | (21.1 | ) |  |  | 2.2 |  |  |  | (3.4 | )
Total deferred tax expense (benefit) |  |  | (57.8 | ) |  |  | (22.6 | ) |  |  | 146.2 |
Total income tax provision |  | $ | 79.5 |  |  | $ | 90.5 |  |  | $ | 9.1 |
The Company’s income taxes payable have been reduced by the tax benefits from employee stock plan awards. The excess tax benefit recorded as an increase to additional paid-in capital was $13.1 million in 2015. As of January 1, 2016, the Company early adopted ASU 2016-09 on a prospective basis. As a result, there was no excess tax benefit recorded to additional paid-in capital in 2016. Refer to Note 2, “Summary of Significant Accounting Policies and Recently Issued Accounting Standards” of the Notes to the Consolidated Financial Statements for further details. Deferred tax assets (liabilities) consist of the following:
|  | December 31, |  |  |  |  | December 31, |
(In millions) |  | 2016 |  |  |  |  | 2015 |
Restructuring reserves |  | $ | 6.3 |  |  |  |  | $ | 9.1 |
Accruals not yet deductible for tax purposes |  |  | 33.5 |  |  |  |  |  | 45.6 |
Net operating loss carry forwards |  |  | 248.8 |  |  |  |  |  | 250.1 |
Foreign, federal and state credits and investment tax allowances |  |  | 144.0 |  |  |  |  |  | 162.2 |
Employee benefit items |  |  | 169.3 |  |  |  |  |  | 166.5 |
Capitalized expenses |  |  | 76.8 |  |  |  |  |  | 54.9 |
Other |  |  | — |  |  |  |  |  | 37.5 |
Gross deferred tax assets |  |  | 678.7 |  |  |  |  |  | 725.9 |
Valuation allowance |  |  | (218.1 | ) |  |  |  |  | (257.4 | )
Total deferred tax assets |  |  | 460.6 |  |  |  |  |  | 468.5 |
Depreciation and amortization |  |  | (33.3 | ) |  |  |  |  | (30.3 | )
Unremitted foreignearnings |  |  | (19.8 | ) |  |  |  |  | (44.1 | )
Intangibles |  |  | (243.9 | ) |  |  |  |  | (264.5 | )
Other |  |  | (4.1 | ) |  |  |  |  | — |
Total deferred tax liabilities |  |  | (301.1 | ) |  |  |  |  | (338.9 | )
Net deferred tax assets |  | $ | 159.5 |  |  |  |  | $ | 129.6 |
The increase in net deferred tax assets is primarily attributable to the decrease in the liability on unremitted foreign earnings, the increase in the capitalized expenses asset, and the decrease in the valuation allowance, partially offset by a decrease in credit carryovers and other assets. The unremitted foreign earnings liability decreased due to the Company’s ability to repatriate earnings in a more tax efficient manner. The capitalized expenses asset increased due to research and development costs expensed for book and capitalized for tax and project costs expensed for book and not yet deductible for tax. The Company’s foreign tax credits decreased due to expiration of unused credits offset by net increase in current credits. The other assets decreased as a result of changes to deferred tax assets related to other comprehensive income. We have concluded that it is more likely than not that we will realize the majority of deferred tax assets at December 31, 2016. In assessing the need for a valuation allowance, we estimate future reversals of existing temporary differences, future taxable earnings, taxable income in carryback periods and tax planning strategies to determine which deferred tax assets are more likely than not to be realized in the future. Changes to tax laws, statutory tax rates and future taxable earnings can have an impact on valuation allowances related to deferred tax assets. A valuation allowance has been provided based on the uncertainty of utilizing the tax benefits primarily related to the following deferred tax assets:
| • | $160.8 million of foreign net operating losses;
| • | $45.8 million of state net operating loss carry forwards; and
| • | $13.6 million of state tax credits.
For the year ended December 31, 2016, the valuation allowance decreased by $39.3 million. This decrease includes the release of $12.0 million of valuation allowance related to state net operating losses based on the expectation that the Company will have sufficient state taxable income in future periods to utilize previously valued attributes. Included in the $39.3 million decrease are also changes in foreign accruals and employee benefit items of $14.1 million and the expiration of foreign tax credit carry forwards of $16.1 million. As of December 31, 2016, we have foreign net operating loss carry forwards of $736.7 million expiring in years beginning in 2017 with the majority of losses having an unlimited carryover. The state net operating loss carryforwards totaling $1.6 billion expire in various amounts over one to 20 years. As of December 31, 2016, we have foreign and federal foreign tax credit carry forwards and investment allowances totaling $173.7 million that expire in calendar year 2017 through 2036. $11.6 million of foreign tax credits will expire in 2017 if not utilized. We have $20.9 million of state credit carryovers expiring in 2017 – 2036. We have provided a full valuation allowance on the state credits. The Company has provided a $19.8 million deferred tax liability for unremitted foreign earnings, which is net of foreign tax credits of approximately $86.7 million. The liability relates to approximately $1.1 billion of our foreign subsidiaries’ accumulated earnings that the Company plans to repatriate. The Company has not recorded a deferred tax liability related to the federal and state income taxes and foreign withholding taxes on approximately $3.0 billion of undistributed earnings of certain foreign subsidiaries indefinitely reinvested. Upon repatriation of those earnings the Company could be subject to both U.S. income taxes and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable due to the complexities associated with its hypothetical calculation; however, unrecognized foreign tax credits would be available to reduce a portion of the U.S. tax liability. We recorded an excess tax benefit of $46.2 million as an out-of-period adjustment in December 2015 related to shares of Common Stock issued in the Settlement agreement. A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate (35%) to income before provision for income taxes, is as follows (dollars in millions):
|  | Year Ended December 31, |
|  | 2016 |  |  | 2015 |  |  | 2014 |
Computed expected tax |  | $ | 198.1 |  |  |  | 35.0 | % |  | $ | 149.1 |  |  |  | 35.0 | % |  | $ | 93.5 |  |  |  | 35.0 | %
State income taxes, net of federal tax benefit |  |  | 10.3 |  |  |  | 1.8 | % |  |  | 5.2 |  |  |  | 1.2 | % |  |  | (5.7 | ) |  |  | (2.1 | )%
Foreign earnings taxed at lower rates |  |  | (31.2 | ) |  |  | (5.5 | )% |  |  | (21.8 | ) |  |  | (5.1 | )% |  |  | (35.2 | ) |  |  | (13.2 | )%
U.S. tax on foreign earnings |  |  | 26.9 |  |  |  | 4.8 | % |  |  | 12.1 |  |  |  | 2.8 | % |  |  | 10.5 |  |  |  | 3.9 | %
Foreign tax credits |  |  | (57.9 | ) |  |  | (10.2 | )% |  |  | (54.4 | ) |  |  | (12.8 | )% |  |  | — |  |  |  | (— | )%
Unremitted foreign earnings |  |  | (24.3 | ) |  |  | (4.3 | )% |  |  | (86.0 | ) |  |  | (20.2 | )% |  |  | (5.2 | ) |  |  | (1.9 | )%
Stock compensation |  |  | (16.6 | ) |  |  | (2.9 | )% |  |  | — |  |  |  | (— | )% |  |  | — |  |  |  | (— | )%
Overall foreign loss recapture |  |  | — |  |  |  | (— | )% |  |  | 67.9 |  |  |  | 15.9 | % |  |  | — |  |  |  | (— | )%
Net change in valuation allowance |  |  | (35.5 | ) |  |  | (6.4 | )% |  |  | (58.2 | ) |  |  | (13.7 | )% |  |  | (13.2 | ) |  |  | (4.9 | )%
Net change in unrecognized tax benefits |  |  | (28.8 | ) |  |  | (5.1 | )% |  |  | 56.8 |  |  |  | 13.3 | % |  |  | (23.4 | ) |  |  | (8.8 | )%
Deferred tax asset adjustments |  |  | 36.9 |  |  |  | 6.5 | % |  |  | 17.1 |  |  |  | 4.0 | % |  |  | — |  |  |  | (— | )%
Reorganization tax benefit |  |  | — |  |  |  | (— | )% |  |  | — |  |  |  | (— | )% |  |  | (2.2 | ) |  |  | (0.9 | )%
Other |  |  | 1.6 |  |  |  | 0.3 | % |  |  | 2.7 |  |  |  | 0.6 | % |  |  | (10.0 | ) |  |  | (3.7 | )%
Effective income tax rate |  | $ | 79.5 |  |  |  | 14.0 | % |  | $ | 90.5 |  |  |  | 21.2 | % |  | $ | 9.1 |  |  |  | 3.4 | %
The primary adjustments to the statutory rate in 2016 were the following items:
| • | decrease in tax expense related to unremitted earnings based on the Company’s ability to repatriate earnings in a tax efficient manner and utilize foreign tax credits against the expected U.S liability;
| • | net benefit for reduction in valuation allowance primarily based on release of foreign valuation allowances;
| • | benefit for stock compensation windfall recorded to tax expense due to adoption of ASU 2016-09;
| • | increase related to U.S. tax on foreign included income offset by benefit of recording foreign tax credits;
| • | decrease in tax expense for reserve releases for settlement of audits and lapses in statute of limitations; and
| • | increase in tax expense due to expiration of unused foreign tax credits and other deferred tax adjustments.
Tax expense for 2016 includes a $1.4 million benefit from adjustments that would appropriately be recorded in a prior period, but which management has determined are not material to the financial statements and therefore included in current year. These items include benefit from recognition of foreign tax credits, deferred tax adjustments and releases of reserves. Unrecognized Tax Benefits We are providing the following disclosures related to our unrecognized tax benefits and the effect on our effective income tax rate if recognized (in millions):
|  | Year Ended December 31, |
|  | 2016 |  |  | 2015 |  |  | 2014 |
Beginning balance of unrecognized tax benefits |  | $ | 239.1 |  |  | $ | 188.9 |  |  | $ | 221.9 |
Additions for tax positions of current year |  |  | 13.4 |  |  |  | 3.1 |  |  |  | 5.2 |
Additions for tax positions of prior years |  |  | 23.3 |  |  |  | 111.9 |  |  |  | 7.7 |
Reductions for tax positions of prior years |  |  | (23.0 | ) |  |  | (7.2 | ) |  |  | (39.8 | )
Reductions for lapses of statutes of limitation |  |  | (40.7 | ) |  |  | (57.6 | ) |  |  | (6.2 | )
Ending balance of unrecognized tax benefits |  | $ | 212.1 |  |  | $ | 239.1 |  |  | $ | 188.9 |
In 2016, our unrecognized tax benefit decreased by $27.0 million, primarily related to the expiration of the statute of limitations and settlement of audits. In 2015, we increased our unrecognized tax benefit by $50.2 million primarily related to the recording of a reserve related to the Settlement payment which was partially offset by the release of $57.6 million of tax reserves for which the statute of limitations has expired and were primarily recorded at the time of the Diversey Holdings, Inc. acquisition. If the unrecognized tax benefits at December 31, 2016 were recognized, our income tax provision would decrease by $156.7 million, resulting in a substantially lower effective tax rate. Based on the potential outcome of the Company’s global tax examinations and the expiration of the statute of limitations for specific jurisdictions, it is reasonably possible that the unrecognized tax benefits will change within the next 12 months. The associated impact on the reserve balance is estimated to be a decrease in the range of $0 to $15.0 million. We recognize interest and penalties related to unrecognized tax benefits in income tax provision in the Consolidated Statements of Operations. We had a liability of approximately of $31.8 million (of which $9.3 million represents penalties) at December 31, 2016 for the payment of interest and penalties (before any tax benefit), a liability of $28.8 million (of which $9.8 million represents penalties) at December 31, 2015 and a liability of approximately $29.2 million (of which $11.3 million represents penalties) at December 31, 2014. In 2016, there was a $1.6 million change in interest and penalties in the tax accruals for uncertainties in prior years. In 2015, there was a negligible change in interest and penalties in the tax accruals for uncertainties in prior years. In 2014, interest and penalties of $4.0 million were reversed in connection with the related tax accruals for uncertainties in prior years. Income Tax Returns The Internal Revenue Service (the “Service”) has concluded its examination of the legacy Sealed Air U.S. federal income tax returns for all years through 2008, except 2007 remains open to the extent of a capital loss carryback. The Service is currently auditing the 2007 and 2010-2011 consolidated U.S. federal income tax returns of legacy Sealed Air. We are also under examination by the IRS for the Consolidated 2012-2014 tax years. The outcome of the negotiations may affect the utilization of certain tax attributes and require us to return a portion of the refund from the carryback of the Settlement deduction. State income tax returns are generally subject to examination for a period of three to five years after their filing date. We have various state income tax returns in the process of examination, and are open to examination for periods after 2002. Our foreign income tax returns are under examination in various jurisdictions in which we conduct business. Income tax returns in foreign jurisdictions have statutes of limitations generally ranging from three to five years after their filing date and except where still under examination or where we are litigating, we have generally concluded all other income tax matters globally for years through 2007. Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.

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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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