Income Taxes

6 Months Ended

Jun. 30, 2019

Our income tax provision for the periods presented and the respective effective income tax rates for such periods are as follows (in millions, except for income tax rates):



	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Income tax provision	$	20.0		$	12.4		$	34.0		$	19.7

Effective income tax rate	34.7		%	29.7		%	31.2		%	24.6		%

Our provision for income taxes for the three months ended June 30, 2019 was $20.0 million, resulting in an effective income tax rate of 34.7%. The provision includes a $3.0 million discrete tax expense relating to a change in legislation in several states, which together with other discrete tax items, resulted in a net discrete tax expense of $0.8 million for the period. Without the $0.8 million in net discrete tax expense, the effective income tax rate would have been 33.3% for the three months ended June 30, 2019.

Our provision for income taxes for the three months ended June 30, 2018 was $12.4 million resulting in an effective tax rate of 29.7%. Our provision for income taxes was adjusted for an income tax benefit of $3.9 million, net, for discrete items related to an adjustment for stock based compensation in accordance with ASU 2016-09, an adjustment pursuant to the accounting of the Act, and changes in the valuation allowance in various jurisdictions. Without the $3.9 million in discrete items, the effective income tax rate would have been 39.2% for the three months ended June 30, 2018.

Our provision for income taxes for the six months ended June 30, 2019 was $34.0 million, which included a $3.2 million discrete tax benefit recorded during the three months ended March 31, 2019 that should have been recognized in a prior period and which, together with all other discrete tax items, resulted in a net discrete tax benefit of $2.0 million, for the six months ended June 30, 2019. Without the $2.0 million net discrete tax benefit, the effective income tax rate would have been 33.1%. See Note 1 - Basis of Presentation and Significant Accounting Policies for additional information.

Our provision for income taxes for the six months ended June 30, 2018 was $19.7 million and was adjusted for an income tax benefit of $8.8 million, net, for discrete items primarily related to an adjustment pursuant to the accounting of the Act, changes in estimates in uncertain tax positions, and adjustment for stock based compensation in accordance with ASU 2016-09, and changes in the valuation allowance in various jurisdictions. Without the $8.8 million benefit in discrete items, the effective income tax rate would have been 35.6%.

Our provision for income taxes for each of the three and six months ended June 30, 2019 and 2018 was calculated based on the estimated annual effective income tax rate for the 2019 and 2018 fiscal years. The actual effective income tax rate for the 2019 fiscal year may be materially different as a result of differences between estimated versus actual results and the geographic tax jurisdictions in which the results are earned.

We have various income tax returns under examination both in the U.S. and foreign jurisdictions. The most significant of these are in South Korea for the 2011 to 2014 tax years, Denmark for the 2013 to 2015 tax years and the U.S. for the 2013 to 2016 tax years. In 2016, the South Korean branch of one of our subsidiaries received income tax assessment notices for the years 2011 to 2014 totaling $9.8 million (KRW 11.3 billion). We believe that these assessments are without merit and are currently appealing the actions. In addition, during the quarter ended March 31, 2018, one of our Danish subsidiaries received an audit inquiry from the Danish tax authority relating to transfer pricing and related issues for the tax years 2013 to 2015. We have been responding to the request and related questions and in April 2019, we received a proposed tax adjustment for the 2013 tax year which is not material. We have not yet received any proposed tax adjustments with respect to the 2014 or 2015 tax years. We believe that the proposed adjustment received for the 2013 tax year is without merit and intend to defend our positions. Finally, in 2017, we received a notice of examination from the U.S. Internal Revenue Service for the 2013 to 2016 tax years. We have responded to all requests and are awaiting further communication from the U.S. Internal Revenue Service.

An unfavorable resolution of one or more of the above matters could have a material adverse effect on our results of operations or cash flows in the quarter and year in which an adjustment is recorded or the tax is due or paid. As audits and examinations are still in process or we have not yet reached the final stages of the appeals process, the timing of the ultimate resolution and any payments that may be required for the above matters cannot be determined at this time.