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Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
Income Taxes | 13. Income Taxes The components of earnings before income taxes were:
| Years Ended December 31,
(in millions) | 2016 |  | 2015 |  | 2014
Domestic | $ | (60.5 | ) |  | $ | (66.9 | ) |  | $ | (5.8 | )
Foreign | 91.3 |  |  | 89.5 |  |  | 138.3 |
Total earnings before income taxes | $ | 30.8 |  |  | $ | 22.6 |  |  | $ | 132.5 |
Income tax expense for the years ended December 31, 2016, 2015 and 2014 is comprised of the following:
| Years Ended December 31,
(in millions) | 2016 |  | 2015 |  | 2014
Current: |  |  |  |  |
U.S. Federal | $ | — |  |  | $ | 1.9 |  |  | $ | 2.9 |
State and local | 0.1 |  |  | — |  |  | 0.2 |
Foreign | 10.1 |  |  | 12.7 |  |  | 22.3 |
Total current tax expense | 10.2 |  |  | 14.6 |  |  | 25.4 |
Deferred: |  |  |  |  |
U.S. Federal | $ | 0.9 |  |  | $ | (3.3 | ) |  | $ | (10.4 | )
State and local | 0.2 |  |  | (0.1 | ) |  | (0.1 | )
Foreign | 0.4 |  |  | (5.1 | ) |  | (2.0 | )
Total deferred tax expense (benefit) | 1.5 |  |  | (8.5 | ) |  | (12.5 | )
Total income tax expense | $ | 11.7 |  |  | $ | 6.1 |  |  | $ | 12.9 |
The reconciliation of the U.S. federal income tax rate to the Company’s effective income tax rate was as follows:
| Years Ended December 31,
| 2016 |  | 2015 |  | 2014
U.S. Federal income tax rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State and local taxes, net of Federal income tax benefit | 1.0 | % |  | (6.8 | )% |  | (0.3 | )%
Foreign operations tax effect | (28.0 | )% |  | (42.6 | )% |  | (10.7 | )%
Research & experimentation tax credits | (6.0 | )% |  | (11.3 | )% |  | (1.6 | )%
Valuation allowance | 74.6 | % |  | 103.1 | % |  | (0.1 | )%
Tax contingencies | (0.5 | )% |  | (2.1 | )% |  | 0.6 | %
Tax holiday | (58.6 | )% |  | (79.9 | )% |  | (19.0 | )%
Foreign taxes | 6.8 | % |  | 12.7 | % |  | 1.3 | %
Non-deductible transaction costs | — | % |  | 5.3 | % |  | — | %
Stock based compensation | 8.8 | % |  | 4.3 | % |  | — | %
Other, principally non-tax deductible items | 4.7 | % |  | 8.7 | % |  | 2.6 | %
Prior period items | 0.2 | % |  | 0.6 | % |  | 2.0 | %
Effective income tax rate | 38.0 | % |  | 27.0 | % |  | 9.8 | %
The Company’s effective tax rate is favorably impacted by two tax holidays granted to us by Malaysia effective through December 31, 2021. These tax holidays are subject to the Company’s satisfaction of certain conditions, including investment or sales thresholds, which the Company expects to maintain. During 2016, the Company applied for and received final approval to modify the terms of its main tax holiday in Malaysia, reducing the rate to 7.2% versus the statutory rate of 24.0%, effective January 1, 2017 through December 31, 2021. If the Company fails to satisfy such conditions, the Company’s effective tax rate may be significantly adversely impacted. The continuing operations benefit of these incentives for the years ending December 31, 2016, 2015 and 2014 is estimated to be $17.5 million, $17.7 million and $22.7 million, respectively. The continuing operations benefit of the tax holidays on a per share basis for the years ending December 31, 2016, 2015 and 2014 was $0.20, $0.20 and $0.27, respectively. The components of the Company’s deferred tax assets and liabilities included the following:
(in millions) | December 31, 2016 |  | December 31, 2015
Deferred tax assets: |  |  |
Accrued compensation, principally post-retirement and other employee benefits | $ | 19.0 |  |  | $ | 16.2 |
Accrued expenses, principally for state income taxes, interest and warranty | 6.5 |  |  | 5.0 |
Net operating loss and other carryforwards | 148.2 |  |  | 123.4 |
Inventories, principally due to reserves for financial reporting purposes and capitalization for tax purposes | 7.5 |  |  | 6.8 |
Convertible Note Hedges | 14.6 |  |  | — |
Plant and equipment, principally due to differences in depreciation | 4.4 |  |  | 6.5 |
Total gross deferred tax assets | 200.2 |  |  | 157.9 |
Valuation allowance | (161.3 | ) |  | (127.4 | )
Total deferred tax assets | $ | 38.9 |  |  | $ | 30.5 |
Deferred tax liabilities: |  |  |
Intangible assets, principally due to different tax and financial reporting bases and amortization lives | $ | (27.3 | ) |  | $ | (30.1 | )
Debt discount on convertible notes | (11.6 | ) |  | — |
Other liabilities | (6.7 | ) |  | (2.5 | )
Total gross deferred tax liabilities | (45.6 | ) |  | (32.6 | )
Net deferred tax liability | $ | (6.7 | ) |  | $ | (2.1 | )
Classified as follows in the consolidated balance sheets: |  |  |
Other assets and deferred charges (non-current deferred tax assets) (1) | $ | 15.0 |  |  | $ | 16.3 |
Deferred income taxes (non-current deferred tax liabilities) (1) | (21.7 | ) |  | (18.4 | )
Net deferred tax liability | $ | (6.7 | ) |  | $ | (2.1 | )
(1) The Company adopted ASU 2015-17 on a prospective basis effective December 31, 2015. See Note 1. Summary of Significant Accounting Policies for additional information regarding ASU 2015-17. The Company regularly assesses the need for a valuation allowance against its deferred tax assets by considering both positive and negative evidence related to the likelihood of the realization of its deferred taxes to determine whether it is more likely than not that some or all of its deferred tax assets will be realized. The Company recorded valuation allowances of $161.3 million and $127.4 million at December 31, 2016 and 2015, respectively, against deferred assets from continuing operations as the Company believes it is more likely than not that these assets will not be realized. The Company recorded a $1.6 million valuation allowance related to a change in judgment regarding the realizability of the beginning of the year deferred tax assets in the United Kingdom as of December 31, 2016. Management believes that it is more likely than not that the Company will realize the benefits of the remaining deferred tax assets. The amount of the deferred tax asset is considered realizable, however, it could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased, if objective negative evidence in the form of cumulative losses is no longer present, requiring that additional weight be given to subjective evidence such as our projections for growth. At December 31, 2016, the Company had $128.0 million of domestic Federal net operating losses that are available, of which $1.1 million will expire with in the next 5 years, $15.8 million will expire in the next 5 to 10 years and $111.1 million will expire in the next 10 to 20 years. There are $99.2 million of domestic State net operating losses that are available between 2017 and 2036. There are $310.0 million of non-U.S. net operating loss carryforwards, of which $2.7 million will expire in the next 5 to 10 years and $307.3 million can be carried forward indefinitely. The Company has $11.6 million of U.S. federal research and development credits that begin to expire in 2020 and $1.4 million of foreign tax credits that begin to expire in 2024. In addition, the Company has $11.6 million of state credits, of which $1.4 million will expire between 2017 and 2031 if unused and $10.2 million can be carried forward indefinitely. The Company has not provided for U.S. federal income taxes on the undistributed earnings of its international subsidiaries totaling approximately $1.6 billion at December 31, 2016, because such earnings are reinvested in foreign jurisdictions, and it is currently intended that they will continue to be reinvested indefinitely. It is not practicable to estimate the amount of additional tax that might be payable on this foreign income if distributed. Unrecognized Tax Benefits The Company records interest and penalties associated with unrecognized tax benefits as a component of income tax expense. During the years ended December 31, 2016, 2015 and 2014, the Company recorded potential interest expense of $0.3 million, nil and $0.6 million, respectively. Total accrued interest at December 31, 2016, 2015 and 2014 was $1.4 million, $1.3 million and $1.3 million, respectively, and was included in other liabilities. The Company's tax returns are routinely audited by the tax authorities in the relevant jurisdictions. For tax years before 2013, the Company is no longer subject to U.S. federal income tax examination. For tax years before 2011, the Company’s Malaysian subsidiaries are no longer subject to examination. It is reasonably possible that the gross amount of unrecognized tax benefits will decrease by $1.3 million during the next twelve months. Included in the balance of total unrecognized tax benefits at December 31, 2016 are potential benefits of $3.4 million, which if recognized, would affect the effective rate on income from continuing operations. Given the Company's current valuation allowance position, no benefit is expected to result from the reversal of any uncertain tax position associated with the acquired U.S. attributes.
Unrecognized tax benefits at January 1, 2014 | $ | 5.5 |
Additions based on tax positions related to the current year | 0.1 |
Additions for tax positions of prior years | 0.7 |
Reductions for tax positions of prior years | (1.3 | )
Unrecognized tax benefits at December 31, 2014 | $ | 5.0 |
Reductions for tax positions due to lapsed statutes of limitations | (0.6 | )
Additions for acquisitions | 8.4 |
Unrecognized tax benefits at December 31, 2015 | $ | 12.8 |
Reductions for tax positions due to lapsed statutes of limitations | (1.0 | )
Unrecognized tax benefits at December 31, 2016 | $ | 11.8 |

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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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