XML 74 R20.htm IDEA: XBRL DOCUMENT
v3.19.3.a.u2

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Note 10. Income Taxes A roll-forward of unrecognized tax benefits and associated accrued interest and penalties is as follows:
(in millions) |  | Unrecognised Tax Benefits |  |  | Interest and Penalties |  |  | Total |
Opening balance at January 1, 2017 |  | $ | 2.2 |  |  | $ | 0.1 |  |  | $ | 2.3 |
Additions for tax positions of prior periods |  |  | 0.5 |  |  |  | 0.2 |  |  |  | 0.7 |
Reductions due to lapsed statute of limitations |  |  | (0.5 | ) |  |  | 0.0 |  |  |  | (0.5 | )
Closing balance at 31 December , 2017 |  |  | 2.2 |  |  |  | 0.3 |  |  |  | 2.5 |
C urren t |  |  | 0.0 |  |  |  | 0.0 |  |  |  | 0.0 |
Non-cur rent |  | $ | 2.2 |  |  | $ | 0.3 |  |  | $ | 2.5 |
Ope ning balance at January 1, 2018 |  | $ | 2.2 |  |  | $ | 0.3 |  |  | $ | 2.5 |
Addition s for tax positions of p rior periods |  |  | 11.7 |  |  |  | 0.4 |  |  |  | 12.1 |
Reductions due to lapsed statute of limitations |  |  | (0.5 | ) |  |  | (0.1 | ) |  |  | (0.6 | )
Closing balance at 31 December, 201 8 |  |  | 13.4 |  |  |  | 0.6 |  |  |  | 14.0 |
Current |  |  | 0.0 |  |  |  | 0.0 |  |  |  | 0.0 |
Non- current |  | $ | 13.4 |  |  | $ | 0.6 |  |  | $ | 14.0 |
Opening balance at January 1, 2019 |  | $ | 13.4 |  |  | $ | 0.6 |  |  | $ | 14.0 |
Additions for tax positions of prior periods |  |  | 1.0 |  |  |  | 1.4 |  |  |  | 2.4 |
Closing balance at 31 December, 2019 |  |  | 14.4 |  |  |  | 2.0 |  |  |  | 16.4 |
Current |  |  | 0.0 |  |  |  | 0.0 |  |  |  | 0.0 |
Non-current |  | $ | 14.4 |  |  | $ | 2.0 |  |  | $ | 16.4 |
All of the $14.4 million of unrecognised tax benefits would impact our effective tax rate if recognised. T ax audits have been opened by the Italian tax authorities in respect of Innospec Performance Chemicals Italia Srl, acquired as part of the Huntsman business, in relation to the period 2011 to 2013 inclusive. D uring the third quarter of 2019, the Italian tax authorities opened a tax au dit into 2014. The Company believes that additional tax of approximately $ 0.5 million, together with associated interest of $ 0.2 million, may arise as a result of the 2011 audit. This amount was recorded at December 31 , 2017 . During 2018 , the Company determined that additional tax of approximately $ 0.9 million, together with associated interest of $ 0.3 million, may arise as a result of the 2012 and 2013 audits collectively. Duri ng 2019, the company recor ded additi onal tax of $1.0 million in relation to 2014, together with additional interest of $0.5 million relating to all years. As any additional tax arising as a consequence of the tax audit would be reimbursed by the previous owner under the terms of the sale and purchase agreement, an unre co gnized t a x bene fit of $3.4 million is recorded, together with an indemnification asset of the same amount to reflect the fact that the final liability would be reimbursed by the previous owner. I n the fourth quarter of 2018, the Company recorded an uncertain tax position of $10.8 million. This portion primarily related to a potential adjustment that could arise as a consequence of the Tax Act, but for which retrospective adjustment to the filed 2017 U.S. federal income tax returns was not permissible. Additional interest of $0.9 million has bee n re corded during the period e nding December 31, 2019 . Innospec Performance Chemicals France SAS and Innospec Saint-Mihiel SAS are currently subject to a corporate income tax audit in France in respect of 2016 to 2018. The Company currently anticipates that adjustments, if any, arising out of this tax audit would not result in a material change to the Company’s financial position as at December 31, 2019. Any additional tax arising as a consequence of the 2016 tax audit would be reimbursed by the previous owner under the terms of the sale and purchase agreement. The Company and its U.S. subsidiaries remain open to examination by the IRS for years 2016 onwards. The Company’s subsidiaries in foreign tax jurisdictions are open to examination including Spain (2015 onwards), France (2016 onwards), Germany (2016 onwards), Switzerland (2017 onwards) and the United Kingdom (2018 onwards). The sources of income before income taxes were as follows:
( in millions ) |  | 2019 |  |  | 2018 |  |  | 2017 |
Domestic |  | $ | 52.4 |  |  | $ | 37.1 |  |  | $ | 3.1 |
Foreign |  |  | 98.0 |  |  |  | 94.5 |  |  |  | 125.0 |
|  | $ | 150.4 |  |  | $ | 131.6 |  |  | $ | 128.1 |
The components of income tax expense are summarized as follows:
( in millions ) |  | 2019 |  |  | 2018 |  |  | 2017 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 13.8 |  |  | $ | 12.5 |  |  | $ | 51.2 |
State and local |  |  | 2.3 |  |  |  | 2.0 |  |  |  | 0.9 |
Foreign |  |  | 22.9 |  |  |  | 26.6 |  |  |  | 21.0 |
|  |  | 39.0 |  |  |  | 41.1 |  |  |  | 73.1 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (3.0 | ) |  |  | 4.2 |  |  |  | (8.1 | )
State and local |  |  | (0.5 | ) |  |  | 0.3 |  |  |  | 0.7 |
Foreign |  |  | 2.7 |  |  |  | 1.0 |  |  |  | 0.6 |
|  |  | (0.8 | ) |  |  | 5.5 |  |  |  | (6.8 | )
|  | $ | 38.2 |  |  | $ | 46.6 |  |  | $ | 66.3 |
Cash payments for income taxes were $37.6 million, $35.4 million and $24.2 million during 2019, 2018 and 2017, respectively. The effective tax rate varies from the U.S. federal statutory rate because of the factors indicated below:
(in percent) |  | 2019 |  |  | 2018 |  |  | 2017 |
Statutory rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 35.0 | %
Foreign income inclusions |  |  | 0.3 |  |  |  | 0.7 |  |  |  | 2.1 |
Foreign tax rate differential |  |  | (0.2 | ) |  |  | (0.5 | ) |  |  | (13.7 | )
Tax charge from previous years |  |  | 1.8 |  |  |  | 0.7 |  |  |  | 1.1 |
Net charge/(credit) from unrecognized tax benefits |  |  | 1.1 |  |  |  | 0.3 |  |  |  | (0.4 | )
Foreign currency transactions |  |  | (0.3 | ) |  |  | 1.4 |  |  |  | (0.9 | )
Effect of U.S. tax law change |  |  | 0.6 |  |  |  | 9.3 |  |  |  | 31.7 |
Tax on unremitted earning s |  |  | (0.1 | ) |  |  | 0.9 |  |  |  | 0.0 |
Non-deductible foreign interest |  |  | 0.8 |  |  |  | 1.3 |  |  |  | 1.1 |
Other items and adjustments, ne t |  |  | 0.4 |  |  |  | 0.3 |  |  |  | (4.2 | )
|  |  | 25.4 | % |  |  | 35.4 | % |  |  | 51.8 | %
The 2019 effective tax rate was negatively impacted by the change in tax estimates for 2018 compared to actual filed returns, including the impact of the final U.S. FDII regulations which were released during the first quarter of 2019. During 2019, the Company recorded additional tax and interest arising as a consequence of the tax audit into Innospec Performance Chemicals Italia Srl. This has had a negative impact on the tax rate in 2019, although any finally determined tax liabilities would be reimbursed by the previous owner under the terms of the sale and purchase agreement. Additional interest arising on the uncertain tax position relating to a potential adjustment that could arise as a consequence of the Tax Act has had a negative impact on the effective tax rate in 2019. In the United Kingdom, tax legislation prohibits a tax deduction in relation to certain intercompany interest expense arising. This has also had a negative impact on the effective tax rate in 201 9 . Other items do not have a material impact on the effective tax rate. Details of deferred tax assets and liabilities are analyzed as follows:
( in millions ) |  | 2019 |  |  | 2018 |
Deferred tax assets: |  |  |  |  |  |  |  |
Stock compensation |  | $ | 6.7 |  |  | $ | 4.9 |
Net operating loss carry forwards |  |  | 7.3 |  |  |  | 8.8 |
Other intangible assets |  |  | 6.0 |  |  |  | 5.6 |
Accretion expense |  |  | 3.3 |  |  |  | 3.3 |
Restructuring provision |  |  | 0.0 |  |  |  | 1.9 |
Foreign t ax credits |  |  | 3.6 |  |  |  | 0.0 |
Other |  |  | 5.9 |  |  |  | 4.8 |
Subtotal |  |  | 32.8 |  |  |  | 29.3 |
Less valuation allowance |  |  | (0.8 | ) |  |  | 0.0 |
Total net deferred tax assets |  | $ | 32.0 |  |  | $ | 29.3 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Property, plant and equipment |  | $ | (19.5 | ) |  | $ | (17.1 | )
Intangible assets including goodwill |  |  | (28.1 | ) |  |  | (28.1 | )
Pension asset |  |  | (18.2 | ) |  |  | (15.0 | )
Investment impairment recapture |  |  | (1.0 | ) |  |  | (2.0 | )
Customer relationships |  |  | (4.2 | ) |  |  | (4.9 | )
Unremitted overseas earnings |  |  | (1.0 | ) |  |  | (1.1 | )
Other |  |  | (0.5 | ) |  |  | (0.5 | )
Total deferred tax liabilities |  | $ | (72.5 | ) |  | $ | (68.7 | )
Net deferred tax liability |  | $ | (40.5 | ) |  | $ | (39.4 | )
Deferred tax assets |  | $ | 9.1 |  |  | $ | 8.8 |
Deferred tax liabilities |  |  | (49.6 | ) |  |  | (48.2 | )
|  | $ | (40.5 | ) |  | $ | (39.4 | )
The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative losses incurred in certain jurisdictions over the three-year period ended December 31, 2019. 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, 2019, a valuation allowance of $0.8 million has been recorded to recognise only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carry forward 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 our projections for growth . Gross net operating loss carry forwards of $33.7 million result in a deferred tax asset of $7.3 million , ne t of valuation allowances . The net operating loss carry forwards arose in the U.S. and in five of the Company’s foreign subsidiaries. Net operating loss carry forwards of $3.9 million arose from state tax losses in prior periods in certain of the Company’s U.S. subsidiaries. It is expected that sufficient taxable profits will be generated in the U.S. against which the state net operating loss carry forwards of $3.8 million can be relieved before their expiration in the period 2031 to 2038. The remaining $0.1 million of the U.S. net operating losses can be carried forward indefinitely without expiration. Net operating loss carry forwards of $29.8 million arose in five of the Company’s foreign subsidiaries. It is expected that sufficient taxable profits will be generated against which $26.4 million of these net operating loss carry forwards can be relieved. These losses can be carried forward indefinitely without expiration.

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://fasb.org/us-gaap/role/ref/legacyRef -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