XML 35 R20.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes U.S. and foreign income before income taxes consist of the following (in millions):
| 2018 |  | 2017 |  | 2016
United States | $ | (63.6 | ) |  | $ | (152.3 | ) |  | $ | (85.4 | )
Foreign | 248.5 |  |  | 131.2 |  |  | 227.5 |
| $ | 184.9 |  |  | $ | (21.1 | ) |  | $ | 142.1 |
The income tax provision (benefit) related to income before income taxes consists of the following components (in millions):
| 2018 |  | 2017 |  | 2016
Current: |  |  |  |  |
U.S. federal statutory tax | $ | 8.2 |  |  | $ | 94.6 |  |  | $ | 7.5 |
State | (1.6 | ) |  | 5.6 |  |  | 0.8 |
Foreign | 46.3 |  |  | 34.2 |  |  | 30.4 |
| 52.9 |  |  | 134.4 |  |  | 38.7 |
Deferred: |  |  |  |  |
U.S. federal statutory tax | 4.0 |  |  | 15.1 |  |  | (29.3 | )
State | (6.2 | ) |  | 8.9 |  |  | (4.2 | )
Foreign | (1.0 | ) |  | (10.0 | ) |  | (2.5 | )
| (3.2 | ) |  | 13.9 |  |  | (36.0 | )
Non-current tax expense (income) | 6.2 |  |  | 0.9 |  |  | 13.0 |
| $ | 55.9 |  |  | $ | 149.2 |  |  | $ | 15.7 |
Non-current tax expense (income) is primarily related to income tax associated with the reserve for uncertain tax positions. A reconciliation of the U.S. federal statutory income tax rate to our effective income tax rate is as follows:
| 2018 |  | 2017 |  | 2016
U.S. federal statutory tax rate | 21.0 | % |  | 35.0 | % |  | 35.0 | %
Foreign earnings, net of foreign taxes | (11.6 | ) |  | 245.4 |  |  | (42.4 | )
State income taxes, net of U.S. federal income tax benefit | (3.3 | ) |  | (51.8 | ) |  | (1.5 | )
U.S. tax on deemed dividends | (0.4 | ) |  | (14.0 | ) |  | 1.3 |
Tax Act impact | 0.7 |  |  | (704.3 | ) |  | — |
Tax Reform - GILTI | 9.7 |  |  | — |  |  | — |
Tax Reform - BEAT | 2.8 |  |  | — |  |  | — |
Deferred tax impact on foreign unrepatriated earnings | (1.0 | ) |  | (65.5 | ) |  | — |
Goodwill impairment | — |  |  | (81.5 | ) |  | — |
Sale of subsidiary | — |  |  | — |  |  | 3.8 |
Uncertain tax positions | 3.4 |  |  | (4.1 | ) |  | 9.2 |
Foreign currency adjustments | 2.2 |  |  | (0.7 | ) |  | (0.4 | )
Intercompany interest transfer pricing adjustment | 1.5 |  |  | — |  |  | — |
Tax authority settlements | — |  |  | (10.0 | ) |  | — |
Nontaxable interest income | (2.7 | ) |  | 36.9 |  |  | — |
Nondeductible interest expense | — |  |  | (12.6 | ) |  | — |
Valuation allowance | 3.0 |  |  | (19.6 | ) |  | 2.0 |
Other permanent differences | 5.0 |  |  | (60.4 | ) |  | 4.0 |
Effective income tax rate | 30.2 | % |  | (707.1 | )% |  | 11.0 | %
On December 22, 2017, the Tax Act was signed into law. This legislation significantly changed the U.S. Internal Revenue Code, including taxation of U.S. corporations, by, among other things, limiting interest deductions, reducing the U.S. corporate income tax rate, altering the expensing of capital expenditures, adopting elements of a territorial tax system, GILTI, assessing a repatriation tax or “toll-charge” on undistributed earnings and profits of U.S. owned foreign corporations, and introducing certain anti-base erosion provisions. Since the Tax Act was signed into law, various notices, proposed regulations, and other clarifications of the law have been issued by the IRS and the Treasury Department. However, the legislation will require further interpretations and implementing regulations by the IRS, as well as state tax authorities, and the legislation could be subject to potential amendments and technical corrections, any of which could increase certain adverse impacts of the legislation. In accordance with Staff Accounting Bulletin No. 118, we completed our analysis of the one-time toll-charge and recorded the related tax impact in the fourth quarter of 2018. Additionally, we have completed our assessment of GILTI and have established a policy to account for this tax on a period basis beginning in the tax year 2018 and for subsequent years. For the year ended 2018, our effective income tax rate was 30.2%, and our income tax provision was $55.9 million, as compared to an effective income tax rate of (707.1)% and an income tax provision of $149.2 million for 2017. The higher effective income tax rate for 2018, as compared to 2017, resulted principally from the effects of the Tax Act's $143.7 million one-time transition tax on historic accumulated foreign earnings, and differences in the results of our subsidiaries in tax jurisdictions with different income tax rates. For 2017, our effective income tax rate was (707.1)%, for an income tax provision of $149.2 million, as compared to an effective income tax rate of 11.0% and an income tax provision of $15.7 million for 2016. The lower effective income tax rate for 2017 resulted primarily from the effects of the Tax Act's $143.7 million one-time transition tax on historic accumulated foreign earnings. Without the transition tax charge, the effective income tax rate for 2017 would have been (25.9)%. For 2016, our effective income tax rate was 11.0%, for an income tax provision of $15.7 million, as compared to an effective income tax rate of 21.7% and an income tax provision of $47.2 million for 2015. The lower effective income tax rate for 2016 compared to 2015, resulted primarily from differences in the results of our subsidiaries in tax jurisdictions with different income tax rates. Through September 30, 2017, we considered all of the earnings in our non-U.S. subsidiaries to be indefinitely reinvested and, accordingly, recorded no deferred income taxes. The passage of the Tax Act in December of 2017 dramatically changed the US taxation of foreign earnings. Following a transition period and one-time toll-charge of our foreign earnings and profits, foreign dividends will be exempt from US federal income tax. We have analyzed our global working capital and cash requirements and the potential tax liabilities attributable to repatriation and have determined that we intend to continue our assertion to permanently reinvest $814 million of our foreign earnings in non-US business operations. For these investments, if not reinvested indefinitely, we would owe approximately $179.0 million in foreign withholding tax. For the remaining $1.1 billion accumulated foreign earnings that are actually or deemed repatriated, we have made a reasonable provisional estimate of the associated foreign withholding and state income tax effects of $11.2 million. The temporary differences which comprise our net deferred tax liabilities are as follows (in millions):
| As of December 31,
| 2018 |  | 2017
Gross Deferred Tax Assets: |  |  |
Bad debt reserve | $ | 4.7 |  |  | $ | 3.5 |
Net operating loss | 33.7 |  |  | 23.0 |
Accrued and other share-based compensation | 23.2 |  |  | 18.8 |
Accrued expenses | 10.2 |  |  | 11.7 |
U.S. foreign income tax credits | 2.3 |  |  | — |
Other income tax credits | 0.2 |  |  | 0.2 |
Customer deposits | 3.1 |  |  | 1.9 |
Investments | 1.9 |  |  | 1.3 |
Cash flow hedges | — |  |  | 3.2 |
Total gross deferred tax assets | 79.4 |  |  | 63.7 |
Less: Valuation allowance | 24.3 |  |  | 24.6 |
Gross deferred tax assets, net of valuation allowance | 55.1 |  |  | 39.1 |
Deferred Tax Liabilities: |  |  |
Depreciation | (11.2 | ) |  | (6.4 | )
Goodwill and intangible assets | (47.5 | ) |  | (43.6 | )
Unrealized foreign exchange | (4.5 | ) |  | (0.9 | )
Prepaid expenses, deductible for tax purposes | (3.9 | ) |  | (3.8 | )
Deferred tax costs on foreign unrepatriated earnings | (11.3 | ) |  | (13.8 | )
Unrealized derivatives | (4.1 | ) |  | (1.1 | )
Cash flow hedges | (2.5 | ) |  | — |
Other | (3.5 | ) |  | (1.1 | )
Total gross deferred tax liabilities | (88.5 | ) |  | (70.8 | )
Net deferred tax liability | $ | 33.4 |  |  | $ | 31.7 |
Net deferred tax asset | — |  |  | — |
Reported on the consolidated balance sheets as: |  |  |
Identifiable intangible and other non-current assets for deferred tax assets, non-current | $ | 11.4 |  |  | $ | 12.8 |
Non-current income tax liabilities, net for deferred tax liabilities, non-current | $ | 44.8 |  |  | $ | 44.5 |
As of December 31, 2018 and 2017, we had net operating losses (“NOLs”) of approximately $275.3 million and $240.3 million, respectively. The NOLs as of December 31, 2018, originated in various U.S. states and countries including Argentina, Australia, South Africa, Brazil, Luxembourg, France, Italy, Canada, and the Netherlands. We have recorded a deferred tax asset of $33.7 million reflecting the benefit of the NOL carryforward as of December 31, 2018. This deferred tax asset expires as follows (in millions):
Expiration Date | Deferred Tax Asset
December 31, 2020 |  |
December 31, 2021 | 0.3 |
December 31, 2022 | 0.7 |
December 31, 2023 | 0.7 |
December 31, 2024 | 0.4 |
December 31, 2025 | 0.4 |
December 31, 2026 | 0.4 |
December 31, 2027 | 0.4 |
December 31, 2028 | 0.3 |
December 31, 2029 | 0.6 |
December 31, 2030 | 0.4 |
December 31, 2031 | 0.2 |
December 31, 2032 | 0.4 |
December 31, 2033 | 0.3 |
December 31, 2034 | 0.3 |
December 31, 2035 | 0.5 |
December 31, 2036 | 2.6 |
December 31, 2037 | 4.1 |
December 31, 2038 | 3.3 |
Indefinite | 17.4 |
Total | $ | 33.7 |
We assessed the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. On the basis of this evaluation, as of December 31, 2018, a valuation allowance of $24.3 million has been recorded to recognize only the portion of the deferred tax assets related to NOLs and other deferred tax assets that are more likely than not to be realized. The amount of the deferred tax asset considered realizable could be adjusted if estimates of future taxable income during the carryforward period change or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as growth projections. We operated under a special income tax concession in Singapore which began January 1, 2008. The special income tax concession is conditional upon our meeting certain employment and investment thresholds which, if not met in accordance with our agreement, may eliminate the benefit beginning with the first year in which the conditions are not satisfied. The income tax concession reduces the income tax rate on qualified sales and derivative gains and losses. The impact of this tax concession was not material for 2018. Income Tax Contingencies We recorded a decrease of $1.8 million of liabilities related to unrecognized income tax benefits (“Unrecognized Tax Liabilities”) and an increase of $4.3 million of assets related to unrecognized income tax benefits (“Unrecognized Tax Assets”) during 2018. In addition, during 2018, we recorded a decrease of $0.9 million to our Unrecognized Tax Liabilities related to a foreign currency translation gain, which is included in other income (expense), net, in the accompanying consolidated statements of income and comprehensive income. As of December 31, 2018, our Unrecognized Tax Liabilities, including penalties and interest, were $70.2 million and our Unrecognized Tax Assets were $29.7 million. During 2017, we recorded a decrease of $3.4 million of liabilities related to Unrecognized Tax Benefits and an increase of $19.8 million of assets related to Unrecognized Tax Benefits. In addition, during 2017, we recorded an increase of $1.4 million to our Unrecognized Tax Liabilities related to a foreign currency translation loss, which is included in other income (expense), net, in the accompanying consolidated statements of income and comprehensive income. As of December 31, 2017, our Unrecognized Tax Liabilities, including penalties and interest, were $72.6 million and our Unrecognized Tax Assets were $25.4 million. The following is a tabular reconciliation of the total amounts of gross unrecognized income tax liabilities for the year (in millions):
| 2018 |  | 2017 |  | 2016
Gross Unrecognized Tax Liabilities – opening balance | $ | 58.8 |  |  | $ | 62.2 |  |  | $ | 47.8 |
Gross increases – tax positions in prior period | 3.6 |  |  | 10.9 |  |  | 19.7 |
Gross decreases – tax positions in prior period | (10.6 | ) |  | — |  |  | (15.4 | )
Gross increases – tax positions in current period | 11.5 |  |  | 10.7 |  |  | 12.9 |
Gross decreases – tax positions in current period | — |  |  | — |  |  | — |
Settlements | (1.5 | ) |  | (23.0 | ) |  | — |
Lapse of statute of limitations | (4.8 | ) |  | (2.1 | ) |  | (2.8 | )
Gross Unrecognized Tax Liabilities – ending balance | $ | 57.0 |  |  | $ | 58.8 |  |  | $ | 62.2 |
If our gross Unrecognized Tax Liabilities, net of our Unrecognized Tax Assets of $29.7 million, as of December 31, 2018, are settled by the taxing authorities in our favor, our income tax expense would be reduced by $27.4 million (exclusive of interest and penalties) in the period the matter is considered settled in accordance with Accounting Standards Codification 740. This would have the impact of reducing our 2018 effective income tax rate by 14.8%. As of December 31, 2018, it does not appear that the total amount of our unrecognized income tax benefits will materially increase or decrease within the next twelve months. We record accrued interest and penalties related to unrecognized income tax benefits as income tax expense. Related to the uncertain income tax benefits noted above, for interest we recorded expense of $1.2 million and $3.4 million and an income $0.7 million during 2018, 2017, and 2016, respectively. For penalties, we recorded income of $1.9 million, and expense of $0.1 million and $2.3 million during 2018, 2017 and 2016, respectively. As of December 31, 2018 and 2017, we had recognized liabilities of $8.5 million and $7.3 million for interest and $4.6 million and $6.5 million for penalties, respectively. We have various tax returns under examination both in the U.S. and foreign jurisdictions. The most significant of these are in South Korea for the 2011 - 2014 tax years, Denmark for the 2013 - 2015 tax years, and the U.S. for 2013 - 2016 tax years. In 2017, the Korean Branch of one of our subsidiaries received income tax assessment notices for $10.2 million (KRW 11.3 billion) from the South Korea tax authorities. We believe that these assessments are without merit and are currently appealing. In addition, in 2017 we received a notice of examination from the IRS for the 2013 - 2016 tax years. In 2018, one of our subsidiaries in Denmark received an audit inquiry from the Danish tax authorities regarding transfer pricing and other related matters for the tax years 2013 -2015. We are currently responding to the requests from the U.S. and Danish tax authorities. An unfavorable resolution of one or more of the above matters could have a material adverse effect on our result of operations or cash flows in the quarter or year in which the adjustments are recorded or the tax is due or paid. As examinations are still in process or have not yet reached the final stages of the appeals process, the timing of the ultimate resolution and/or payments that may be required cannot be determined at this time. In many cases, our uncertain tax positions are related to tax years that remain subject to examination by the relevant taxing authorities. The following table summarizes these open tax years by jurisdiction with major uncertain tax positions:
| Open Tax Year
Jurisdiction | Examination in progress |  | Examination not yet initiated
United States | 2013 - 2016 |  | 2017 - 2018
Korea | 2011 - 2014 |  | 2015 - 2018
United Kingdom | None |  | 2016 - 2018
The Netherlands | None |  | 2013 - 2018
Greece | None |  | 2012 - 2018
Denmark | 2013 - 2015 |  | 2016 - 2018

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