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Income Taxes | 12 Months Ended
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Oct. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act of 2017 (the “Tax Reform Act”). The legislation significantly changed U.S. tax law by, among other items, (1) lowering the corporate income tax rate from 35% to 21%, effective January 1, 2018; (2) allowing for the acceleration of expensing of qualified business assets; (3) requiring companies to pay a one-time transition tax on certain unremitted earnings of foreign subsidiaries that may be payable over eight years; (4) a new limitation on deductible interest expense; (5) limitations on the deductibility of certain executive compensation; and (6) eliminating U.S. federal income tax on dividends from foreign subsidiaries. The corporate income tax rate change was administratively effective as of the beginning of the Company's fiscal 2018 year. Therefore, the Company used a blended statutory rate for fiscal 2018 of 23.33% on U.S. earnings. The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. The Bulletin also provides for a measurement period that should not extend beyond one year from the U.S. Tax Reform enactment date. In accordance with the Bulletin, the Company recorded a provisional estimate of the revaluation of deferred tax assets and liabilities of $69.3 million in the third quarter of 2018. Due to the consideration of full year financial information and additional analysis of the Tax Reform Act, the Company revised its calculation and recorded the tax benefit related to the revaluation of deferred tax assets and liabilities of $72.0 million as of October 31, 2018. The Company considers the accounting for this element of the Tax Reform Act to be complete. As of October 31, 2018, our accounting for U.S. Tax Reform for the transition tax liability remains provisional. In the third quarter of 2018, the Company had recorded a provisional tax expense as a result of the accrual for the transition tax liability of $35.9 million. As a result of additional analysis and support related to the Tax Reform Act, the Company revised its calculation and recorded a provisional tax expense for the transition tax liability of $52.8 million as of October 31, 2018. Adjustments to the transition tax provisional estimate will be recorded and disclosed prospectively during the measurement period and may differ from this provisional amount, due to, among other things, additional analyses, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Reform Act. In addition, the Act also establishes new tax provisions that will affect the Company beginning November 1, 2018, including (1) eliminating the U.S. manufacturing deduction; (2) establishing new limitations on deductible interest expense and certain executive compensation; (3) creating the base erosion anti-abuse tax (“BEAT”); (4) creating a new provision designed to tax global intangible low-tax income (“GILTI”); (5) establishing a deduction for foreign-derived intangible income (“FDII”); and (6) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries. Regarding the new GILTI tax rules, the Company is allowed to make an accounting policy election to either (1) treat taxes due on future GILTI exclusions in U.S. taxable income as a current period expense when incurred or (2) reflect such portion of the future GILTI exclusions in U.S. taxable income that relate to existing basis differences in the Company’s measurement of deferred taxes. The Company’s analysis of the new GILTI rules and ultimate impact are incomplete and the Company has not made a policy election regarding the treatment of the GILTI tax. With respect to the pre October 31, 2016 undistributed foreign earnings, the Company is permanently reinvested as defined under ASC 740-30-25-1. For earnings post October 31, 2016, the Company is not permanently reinvested with respect to the earnings of the controlled foreign corporations. During 2017, the Company started recording a deferred tax liability for earnings after October 31, 2016 with respect to the foreign unremitted earnings, generally based on foreign jurisdiction withholding taxes. With respect to U.S. taxes on undistributed earnings, post October 31, 2017, as a result of the Tax Reform Act, the Company should not incur any additional U.S. taxes on such distributions. The provision for income taxes consists of the following:
| Year Ended October 31,
(in millions) | 2018 |  | 2017 |  | 2016
Current |  |  |  |  |
Federal | $ | 74.0 |  |  | $ | 33.0 |  |  | $ | 20.3 |
State and local | 8.0 |  |  | 6.0 |  |  | 4.4 |
Non-U.S. | 36.1 |  |  | 25.9 |  |  | 40.3 |
| 118.1 |  |  | 64.9 |  |  | 65.0 |
Deferred |  |  |  |  |
Federal | (45.2 | ) |  | 4.5 |  |  | 0.5 |
State and local | 0.8 |  |  | (2.0 | ) |  | 0.5 |
Non-U.S. | (0.4 | ) |  | (0.2 | ) |  | 0.5 |
| (44.8 | ) |  | 2.3 |  |  | 1.5 |
| $ | 73.3 |  |  | $ | 67.2 |  |  | $ | 66.5 |
The non-U.S. income before income tax expense was $102.3 million, $85.2 million and $49.9 million in 2018, 2017, and 2016, respectively. The U.S. income before income tax was $197.5 million, $115.1 million and $91.3 million in 2018, 2017, and 2016, respectively. The following is a reconciliation of the provision for income taxes based on the federal statutory rate to the Company’s effective income tax rate:
| Year Ended October 31,
| 2018 |  | 2017 |  | 2016
Federal statutory rate | 23.33 | % |  | 35.00 | % |  | 35.00 | %
Impact of foreign tax rate differential | (0.57 | )% |  | (9.86 | )% |  | (11.15 | )%
State and local taxes, net of federal tax benefit | 2.38 | % |  | 1.35 | % |  | 2.19 | %
Net impact of changes in valuation allowances | 5.65 | % |  | 20.74 | % |  | 1.91 | %
Non-deductible write-off and impairment of goodwill and other intangible assets | 0.06 | % |  | (0.02 | )% |  | 7.37 | %
Unrecognized tax benefits | 3.41 | % |  | (2.00 | )% |  | 4.84 | %
Permanent book-tax differences | (4.03 | )% |  | (15.71 | )% |  | (4.78 | )%
Withholding taxes | 1.84 | % |  | 1.88 | % |  | 4.64 | %
Tax Reform Act (1) | (7.31 | )% |  | — | % |  | — | %
Other items, net | (0.33 | )% |  | 2.20 | % |  | 7.08 | %
| 24.43 | % |  | 33.58 | % |  | 47.10 | %
(1)Reflects the net impact of the change in deferred tax assets and liabilities and the estimated transition tax resulting from the Tax Reform Act. The primary items which decreased the Company’s effective income tax rate from the federal statutory rate in 2018 was the remeasurement of the domestic deferred tax liabilities, net of the transition tax liability due to the Tax Reform Act, and permanent book-tax differences; offset primarily by increases in valuation allowances and unrecognized tax benefits. The primary items which decreased the Company’s effective income tax rate from the federal statutory rate in 2017 were permanent book-tax differences, unrecognized tax benefits, the impact of foreign tax rates that differ from the federal statutory tax rate, and other immaterial items; offset primarily by increases in valuation allowances. Also, in 2017, the Company included in the table above a $38.6 million and 19.26% change in valuation allowance, with offsetting amounts in permanent book-tax differences, for certain intercompany financing transactions. The primary items which increased the Company’s effective income tax rate from the federal statutory rate in 2016 were non- deductible expenses, such as the write-off of goodwill allocated to divestitures and impairments, withholding taxes, unrecognized tax benefits, state and local taxes, net of federal tax benefit, the net impact of changes in valuation allowances due to changes in circumstances in several legal entities and other tax items. Cumulatively, these items impacted the 2016 effective income tax rate by approximately 28.0 percent. This increase was offset by the impact of foreign tax rates and permanent book-tax differences, which decreased the effective income tax rate by approximately 15.9 percent in 2016. The components of the Company’s deferred tax assets and liabilities as of October 31 for the years indicated were as follows:
(in millions) | 2018 |  | 2017
Deferred Tax Assets |  |  |
Net operating loss and other carryforwards | $ | 122.8 |  |  | $ | 116.4 |
Foreign tax credits | 20.7 |  |  | 5.1 |
Pension liabilities | 12.2 |  |  | 38.8 |
Incentive liabilities | 12.1 |  |  | 14.7 |
Workers compensation accruals | 6.6 |  |  | 4.5 |
Inventories | 4.9 |  |  | 7.6 |
State income taxes | 4.5 |  |  | 7.1 |
Deferred compensation | 2.2 |  |  | 4.2 |
Other | 16.5 |  |  | 30.0 |
Total Deferred Tax Assets | 202.5 |  |  | 228.4 |
Valuation allowance | (157.2 | ) |  | (132.4 | )
Net Deferred Tax Assets | $ | 45.3 |  |  | $ | 96.0 |
Deferred Tax Liabilities |  |  |
Properties, plants and equipment | $ | 78.9 |  |  | $ | 99.1 |
Timberland transactions | 73.5 |  |  | 113.5 |
Goodwill and other intangible assets | 49.2 |  |  | 74.0 |
Other | 15.6 |  |  | 16.7 |
Total Deferred Tax Liabilities | 217.2 |  |  | 303.3 |
Net Deferred Tax Liability | $ | 171.9 |  |  | $ | 207.3 |
As of October 31, 2018 and 2017 respectively, the Company had deferred income tax benefits of $122.8 million and $116.4 million from net operating loss carryforwards, almost all of which were related to non-US operations. The Company has recorded valuation allowances of $137.1 million and $127.3 million against non-US deferred tax assets as of October 31, 2018 and 2017 respectively. The Company has also recorded valuation allowances of $20.1 million and $5.1 million, as of October 31, 2018 and 2017, respectively, against U.S. deferred tax assets. The Company had net changes in valuation allowances in 2018 of $24.8 million, resulting in a net increase of 11.66% in the effective tax rate related to these changes. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(in millions) | 2018 |  | 2017 |  | 2016
Balance at November 1 | $ | 26.8 |  |  | $ | 29.7 |  |  | $ | 29.6 |
Increases in tax positions for prior years | 7.8 |  |  | 2.1 |  |  | 5.7 |
Decreases in tax positions for prior years | (1.4 | ) |  | (1.8 | ) |  | (10.5 | )
Increases in tax positions for current years | 8.0 |  |  | 6.7 |  |  | 6.9 |
Settlements with taxing authorities | — |  |  | (7.4 | ) |  | — |
Lapse in statute of limitations | (3.6 | ) |  | (4.6 | ) |  | (2.6 | )
Currency translation | (1.4 | ) |  | 2.1 |  |  | 0.6 |
Balance at October 31 | $ | 36.2 |  |  | $ | 26.8 |  |  | $ | 29.7 |
The 2018 net increase is primarily related to decreases related to the settlement of prior years’ tax audits and lapse in statute of limitations, offset by increases in unrecognized tax benefits related to prior years and the current year. The Company files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various non-U.S. jurisdictions and is subject to audit by various taxing authorities for 2012 through the current fiscal year. The Company has completed its U.S. federal tax audit for the tax years through 2013. The October 31, 2018, 2017, 2016 balances include $36.2 million, $26.8 million and $28.5 million, respectively, of unrecognized tax benefits that, if recognized, would have an impact on the effective tax rate. The Company also recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense net of tax, as applicable. As of October 31, 2018 and October 31, 2017, the Company had $4.9 million and $3.7 million, respectively, accrued for the payment of interest and penalties. The Company has estimated the reasonably possible expected net change in unrecognized tax benefits through October 31, 2018 under ASC 740. The Company’s estimate is based on lapses of the applicable statutes of limitations, settlements and payments of uncertain tax positions. The estimated net decrease in unrecognized tax benefits for the next 12 months ranges from zero to $3.0 million. Actual results may differ materially from this estimate.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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