XML 37 R22.htm IDEA: XBRL DOCUMENT
v3.22.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | 12. Income Taxes The components of income before income tax for the years ended December 31, 2021, 2020 and 2019 were as follows:
(in millions) | 2021 |  | 2020 |  | 2019
Domestic operations | $ | (5.6) |  |  | $ | 1.7 |  |  | $ | 32.0 |
Foreign operations | 117.0 |  |  | 76.9 |  |  | 131.5 |
Total | $ | 111.4 |  |  | $ | 78.6 |  |  | $ | 163.5 |
The reconciliation of income taxes computed at the U.S. federal statutory income tax rate of 21 percent to our effective income tax rate for the years ended December 31, 2021, 2020 and 2019 was as follows:
(in millions) | 2021 |  | 2020 |  | 2019
Income tax at U.S. statutory rate; 21% | $ | 23.4 |  |  | $ | 16.5 |  |  | $ | 34.3 |
Unrecognized tax benefits | (1.9) |  |  | — |  |  | — |
Impact on final GILTI regulations for 2018 and 2019 | (1.0) |  |  | (2.7) |  |  | — |
Statutory tax rate changes | (6.8) |  |  | (2.0) |  |  | — |
Statutory tax law changes | (1.2) |  |  | — |  |  | — |
State, local and other tax, net of federal benefit | 2.0 |  |  | 0.1 |  |  | 5.8 |
Impact from foreign inclusions | 3.2 |  |  | 1.3 |  |  | 3.1 |
U.S. effect of foreign dividends and withholding taxes | 1.2 |  |  | 1.0 |  |  | 2.1 |
Foreign income taxed at a higher effective rate | 1.5 |  |  | 1.4 |  |  | 4.2 |
Net Brazilian Tax Assessments impact | 0.5 |  |  | 1.5 |  |  | 6.5 |
(Decrease) increase in valuation allowance | (11.4) |  |  | 2.2 |  |  | 0.4 |
General business credit | (2.1) |  |  | — |  |  | — |
Excess expense from stock-based compensation | 0.5 |  |  | 0.9 |  |  | 0.2 |
Other increase (decrease) | 1.6 |  |  | (3.6) |  |  | 0.1 |
Income taxes as reported | $ | 9.5 |  |  | $ | 16.6 |  |  | $ | 56.7 |
Effective tax rate | 8.5 | % |  | 21.1 | % |  | 34.7 | %
For 2021, we recorded income tax expense of $9.5 million on income before taxes of $111.4 million, for an effective rate of 8.5 percent. The decrease in the effective rate versus 2020 was primarily due to beneficial adjustments to deferred taxes resulting from statutory tax rate changes and the release of the valuation allowance on the foreign tax credit carryforward. For 2020, we recorded income tax expense of $16.6 million on income before taxes of $78.6 million, for an effective rate of 21.1 percent. The decrease in the effective rate versus 2019 was primarily due to the increase in reserves for uncertain tax positions in the prior year end, the election to exclude high taxed intangible income from the global intangible low taxed income ("GILTI") computation, and beneficial adjustments to deferred taxes resulting from statutory tax rate changes. For 2019, we recorded income tax expense of $56.7 million on income before taxes of $163.5 million, for an effective rate of 34.7 percent. Final Section 951A Tax Regulations On July 20, 2020, the U.S. Department of the Treasury and the Internal Revenue Service issued final section 951A regulations ("Final Regulations") on an election to exclude high-tax global intangible income from a U.S. shareholder's gross income for purposes of computing the GILTI tax. After assessing the impact of these regulations on the 2018 and 2019 tax years, the Company decided to make the election to exclude high-tax global intangible income for both years and filed amended returns with benefits of $1.4 million and $2.1 million, respectively. The Company also made the election for 2020 with a comparable benefit to the prior years. The components of the income tax expense for the years ended December 31, 2021, 2020 and 2019 were as follows:
(in millions) | 2021 |  | 2020 |  | 2019
Current expense (benefit) |  |  |  |  |
Federal and other | $ | 2.0 |  |  | $ | (0.1) |  |  | $ | 5.8 |
Foreign | 28.5 |  |  | 24.3 |  |  | 42.2 |
Total current income tax expense | 30.5 |  |  | 24.2 |  |  | 48.0 |
Deferred expense (benefit) |  |  |  |  |
Federal and other | (16.5) |  |  | (2.0) |  |  | 8.4 |
Foreign | (4.5) |  |  | (5.6) |  |  | 0.3 |
Total deferred income tax (benefit) expense | (21.0) |  |  | (7.6) |  |  | 8.7 |
Total income tax expense | $ | 9.5 |  |  | $ | 16.6 |  |  | $ | 56.7 |
The components of deferred tax assets (liabilities) as of December 31, 2021 and 2020 were as follows:
(in millions) | 2021 |  | 2020
Deferred tax assets |  |  |
Compensation and benefits | $ | 14.4 |  |  | $ | 13.3 |
Pension | 41.2 |  |  | 60.1 |
Inventory | 10.8 |  |  | 10.2 |
Other reserves | 22.3 |  |  | 18.1 |
Accounts receivable | 9.7 |  |  | 7.5 |
Foreign tax credit carryforwards | 17.9 |  |  | 23.3 |
Net operating loss carryforwards | 96.5 |  |  | 103.1 |
Interest expense carryforwards | 15.2 |  |  | 9.3 |
Other | 4.5 |  |  | 5.7 |
Gross deferred income tax assets | 232.5 |  |  | 250.6 |
Valuation allowance | (52.4) |  |  | (55.4) |
Net deferred tax assets | 180.1 |  |  | 195.2 |
Deferred tax liabilities |  |  |
Depreciation | (13.2) |  |  | (19.0) |
Unremitted non-U.S. earnings accrual | (4.8) |  |  | (4.6) |
Identifiable intangibles | (191.2) |  |  | (199.9) |
Other | (0.2) |  |  | (5.8) |
Gross deferred tax liabilities | (209.4) |  |  | (229.3) |
Net deferred tax liabilities | $ | (29.3) |  |  | $ | (34.1) |
A valuation allowance of $52.4 million and $55.4 million as of December 31, 2021 and 2020, respectively, has been established for deferred income tax assets, primarily related to net operating loss (the "NOL") carryforwards that may not be realized. Realization of the net deferred income tax assets is dependent upon generating sufficient taxable income prior to the expiration of the applicable carryforward periods. Although realization is not certain, management believes that it is more likely than not that the net deferred income tax assets will be realized. However, the amount of net deferred tax assets considered realizable could change in the near term if estimates of future taxable income during the applicable carryforward periods fluctuate. As of December 31, 2021, the Company has state NOL tax benefits of $14.3 million which will expire between December 31, 2022 and December 31, 2032. As of December 31, 2021, the Company has $1.5 million of federal general business credit carryforwards which will start to expire on December 31, 2041. As of December 31, 2021, the Company has $17.9 million of foreign tax credit carryforwards which will expire on December 31, 2027. As of December 31, 2021, the Company has foreign NOLs of $367 million and tax benefits of $82.2 million, most of which have unlimited carryforward periods. As of December 31, 2021, the Company has recorded $4.8 million of deferred taxes on approximately $319 million of unremitted earnings of non-U.S. subsidiaries that may be remitted to the U.S. The Company has approximately $216 million of additional unremitted earnings of non-U.S. subsidiaries, which are indefinitely reinvested and for which no deferred taxes have been provided. A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2021, 2020 and 2019 was as follows:
(in millions) | 2021 |  | 2020 |  | 2019
Balance at beginning of year | $ | 45.1 |  |  | $ | 50.5 |  |  | $ | 43.7 |
Additions for tax positions of prior years | 4.5 |  |  | 2.9 |  |  | 8.4 |
Additions for tax positions of current year | — |  |  | — |  |  | 1.5 |
Reductions for tax positions of prior years | (4.2) |  |  | (1.1) |  |  | (2.5) |
Acquisitions | — |  |  | 1.4 |  |  | — |
Decrease resulting from foreign currency translation | (2.1) |  |  | (8.6) |  |  | (0.6) |
Balance at end of year | $ | 43.3 |  |  | $ | 45.1 |  |  | $ | 50.5 |
As of December 31, 2021, the amount of unrecognized tax benefits decreased to $43.3 million, all of which would impact our effective tax rate, if recognized. We expect the amount of unrecognized tax benefits to change within the next twelve months including releases of previously recorded reserves of approximately $3.0 to $4.0 million. Interest and penalties related to unrecognized tax benefits are recognized within "Income tax expense" in the Consolidated Statements of Income. As of December 31, 2021, we have accrued a cumulative $25.8 million for interest and penalties on the unrecognized tax benefits. As of December 31, 2021, the U.S. federal statute of limitations remains open for the year 2018 and forward. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from 2 to 5 years. As of December 31, 2021, years still open to examination by foreign tax authorities in major jurisdictions include Australia (2017 forward), Brazil (2015 forward), Canada (2017 forward), Germany (2016 forward), Sweden (2018 forward) and the U.K. (2019 forward). We are currently under examination in various foreign jurisdictions. Brazil Tax Assessments In connection with our May 1, 2012, acquisition of the Mead Consumer and Office Products business, we assumed all of the tax liabilities for the acquired foreign operations including Tilibra Produtos de Papelaria Ltda. ("Tilibra"). In December of 2012, the Federal Revenue Department of the Ministry of Finance of Brazil ("FRD") issued a tax assessment against Tilibra, challenging the tax deduction of goodwill from Tilibra's taxable income for the year 2007 (the "First Assessment"). A second assessment challenging the deduction of goodwill from Tilibra's taxable income for the years 2008, 2009 and 2010 was issued by FRD in October 2013 (the "Second Assessment" and together with the First Assessment, the "Brazil Tax Assessments"). The final administrative appeal of the Second Assessment was decided against the Company in 2017. In 2018, we appealed this decision to the judicial level. In the event we do not prevail at the judicial level, we will be required to pay an additional penalty representing attorneys' costs and fees; accordingly, in the first quarter of 2019, the Company recorded an additional reserve in the amount of $5.6 million. In connection with the judicial challenge, we were required to provide security to guarantee payment of the Second Assessment should we not prevail. In the third quarter of 2020, the final administrative appeal of the First Assessment was decided against the Company. We have also decided to appeal this decision to the judicial level. We recorded an additional expense in the third quarter of 2020 of $1.2 million representing additional attorneys' costs and fees, which we will be required to pay if we do not prevail at the judicial level. As with the Second Assessment, we were required to provide security to guarantee payment of the First Assessment should we not prevail. Tilibra is disputing both of the Brazil Tax Assessments. We believe we have meritorious defenses and intend to vigorously contest both of the Brazil Tax Assessments; however, there can be no assurances that we will ultimately prevail. The ultimate outcome will not be determined until the Brazilian tax appeal process is complete, which is expected to take a number of years. If the FRD's initial position is ultimately sustained, payment of the amount assessed would materially and adversely affect our cash flow in the year of settlement. Because there is no settled legal precedent on which to base a definitive opinion as to whether we will ultimately prevail, we consider the outcome of this dispute to be uncertain. Since it is not more likely than not that we will prevail, in 2012, we recorded a reserve in the amount of $44.5 million (at December 31, 2012 exchange rates) in consideration of this contingency, of which $43.3 million was recorded as an adjustment to the purchase price and which included the 2007-2012 tax years plus penalties and interest through December 2012. Because the Brazilian courts have determined that we will have to pay a standard penalty of 75 percent if we do not prevail on our challenge of the Brazil Tax Assessments instead of an enhanced penalty of 150 percent sought by the FRD, we have included an assumption of penalties at 75 percent in this reserve. We will continue to actively monitor administrative and judicial court decisions and evaluate their impact, if any, on our legal assessment of the ultimate outcome of our disputes. In addition, we will continue to accrue interest related to this contingency until such time as the outcome is known or until evidence is presented that we are more likely than not to prevail. The time limit for issuing an assessment for 2011 and 2012 has expired and we have reversed the amounts originally accrued for these periods. During the years ended December 31, 2021, 2020 and 2019, we accrued additional interest as a charge to current income tax expense of $0.5 million, $0.3 million and $0.9 million, respectively. At current exchange rates, our accrual through December 31, 2021, including tax, penalties and interest, is $27.1 million (reported in "Other non-current liabilities").

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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration