Income Taxes

6 Months Ended

Jun. 30, 2020

The effective tax rates, including discrete items, were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Effective tax rate	20.5	%	21.9	%	18.7	%	16.7	%

We determine our interim tax provision using an Estimated Annual Effective Tax Rate methodology (“EAETR”). The EAETR is applied to the year-to-date ordinary income, exclusive of discrete items. The tax effects of discrete items are then included to arrive at the total reported interim tax provision.

The determination of the EAETR is based upon a number of estimates, including the estimated annual pre-tax ordinary income in each tax jurisdiction in which we operate. As our projections of ordinary income change throughout the year, the EAETR will change period-to-period. The tax effects of discrete items are recognized in the tax provision in the period they occur. Depending on various factors, such as the item’s significance in relation to total income and the rate of tax applicable in the jurisdiction to which it relates, discrete items in any quarter may materially impact the reported effective tax rate. As a global enterprise, our tax expense may be impacted by changes in tax rates or laws, the finalization of tax audits and reviews, as well as other factors. As such, there may be significant volatility in interim tax provisions.

The below table provides a reconciliation between our reported effective tax rates and the EAETR.


	Three Months Ended June 30,
	2020										2019
In millions, except percentages	Before tax		Tax		Effective tax rate % impact		Before tax		Tax		Effective tax rate % impact
Consolidated operations	$	25.4	$	5.2	20.5	%	$	72.7	$	15.9	21.9	%
Discrete items:
Restructuring and other (income) charges, net	7.3		1.7				0.3		—
Acquisition and other-related costs ⁽¹⁾	0.4		0.1				0.8		0.3

Other tax only discrete items	—		(0.1)				—		0.1
Total discrete items	7.7		1.7				1.1		0.4
Consolidated operations, before discrete items	$	33.1	$	6.9			$	73.8	$	16.3
Quarterly effect of changes in the EAETR					20.8	%					22.1	%

	Six Months Ended June 30,
	2020										2019
In millions, except percentages	Before tax		Tax		Effective tax rate % impact		Before tax		Tax		Effective tax rate % impact
Consolidated operations	$	80.6	$	15.1	18.7	%	$	95.4	$	15.9	16.7	%
Discrete items:
Restructuring and other (income) charges, net	7.8		1.8				0.3		—
Acquisition and other-related costs ⁽¹⁾	1.7		0.4				32.0		5.6

Other tax only discrete items	—		1.2				—		6.8
Total discrete items	9.5		3.4				32.3		12.4
Consolidated operations, before discrete items	$	90.1	$	18.5			$	127.7	$	28.3
EAETR ⁽²⁾					20.5	%					22.2	%

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(1) See Note 4 for more information on our acquisition and other-related costs.

(2) Decrease in EAETR for the six months ended June 30, 2020, as compared to June 30, 2019, is due to a change in the mix of forecasted earnings in various tax jurisdictions with varying rates, offset by a large reduction in acquisition related costs and excess stock compensation benefit.

At June 30, 2020 and December 31, 2019, we had deferred tax assets of $9.8 million and $13.0 million, respectively, resulting from certain historical net operating losses from our Brazilian operations and U.S. state tax credits for which a valuation allowance has been established. The ultimate realization of these deferred tax assets depends on the generation of future taxable income during the periods in which these net operating losses and tax credits are available to be used. In evaluating the realizability of these deferred tax assets, we consider projected future taxable income and tax planning strategies in making our assessment. As of June 30, 2020, we cannot objectively assert that these deferred tax assets are more likely than not to be realized and therefore we have maintained a valuation allowance. We intend to continue maintaining a valuation allowance on these deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. A release of all or a portion of the valuation allowance could be possible, if we determine that sufficient positive evidence becomes available to allow us to reach a conclusion that the valuation allowance will no longer be needed. A release of the valuation allowance would result in the recognition of certain deferred tax assets and a reduction to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change based on the level of profitability that we are able to actually achieve.

- 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.

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