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Income Taxes | 9 Months Ended
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Sep. 30, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes We compute and apply to ordinary income an estimated annual effective tax rate on a quarterly basis based on current and forecasted business levels and activities, including the mix of domestic and foreign results and enacted tax laws. The estimated annual effective tax rate is updated quarterly based on actual results and updated operating forecasts. Ordinary income refers to income (loss) before income tax expense excluding significant, unusual, or infrequently occurring items. The tax effect of an unusual or infrequently occurring item is recorded in the interim period in which it occurs as a discrete item of tax. The following tables summarize the provision for income taxes for the three and nine months ended September 30, 2018 and September 30, 2017:
| For the Three Months Ended September 30, |  | For the Nine Months Ended September 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
| (Dollars in thousands)
Tax expense | $ | 24,871 |  |  | $ | 1,963 |  |  | $ | 36,250 |  |  | $ | 3,249 |
Pretax income (loss) | 225,063 |  |  | (5,190 | ) |  | 660,252 |  |  | (39,515 | )
Effective tax rates | 11.1 | % |  | (37.8 | )% |  | 5.5 | % |  | (8.2 | )%
The effective tax rate for the three months ended September 30, 2017 was (37.8)%. This rate differs from the 2017 U.S. statutory rate of 35% primarily due to recent losses in the U.S. and Switzerland where we received no tax benefit due to a full valuation allowance and worldwide earnings from various countries taxed at different rates. The recognition of the valuation allowance does not result in, or limit the Company's ability to utilize these tax assets in the future. The effective tax rate for the three months ended September 30, 2018 was 11.1%. This rate differs from the 2018 U.S. statutory rate of 21% primarily due to the tax impact of worldwide earnings from various countries taxed at different rates. This was partially offset by a favorable impact from the partial release of a valuation allowance recorded against the deferred tax asset related to U.S. tax attributes. The tax expense changed from a charge of $2.0 million for the quarter ended September 30, 2017 to a tax expense of $24.9 million for the quarter ended September 30, 2018. This change is primarily due to jurisdictional mix shifting from pre-tax losses in the third quarter of 2017 to pre-tax earnings in the third quarter of 2018. This was partially offset by a release of a portion of our valuation allowance recorded against the deferred tax asset related to U.S. tax attributes. For the nine months ended September 30, 2017, the effective tax rate of (8.2)% differs from the 2017 U.S. statutory rate of 35% primarily due to recent losses in the U.S. and Switzerland where we receive no tax benefit due to a full valuation allowance and worldwide earnings from various countries tax at different rates. The recognition of the valuation allowance does not result in, or limit the Company's ability to utilize these tax assets in the future. For the nine months ended September 30, 2018, the effective tax rate of 5.5% differs from the 2018 U.S. statutory rate of 21% primarily due to the partial release of a valuation allowance recorded against the deferred tax asset related to U.S. tax attributes and worldwide earnings from various countries taxed at different rates. The recognition of the valuation allowance does not result in or limit the Company's ability to utilize these tax assets in the future. The tax expense increased from $3.2 million for the nine months ended September 30, 2017 to $36.3 million for the nine months ended September 30, 2018. This change is primarily due to jurisdictional mix shifting from pre-tax losses in the nine months ended September 30, 2017 to pre-tax earnings in the same period of 2018. This was partially offset by a release of a portion of our valuation allowance recorded against the deferred tax asset related to U.S. tax attributes. As of September 30, 2018, we had unrecognized tax benefits of $2.2 million which, if recognized, would have a favorable impact on our effective tax rate. We file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. All U.S. federal tax years prior to 2014 are generally closed by statute or have been audited and settled with the applicable domestic tax authorities. All other jurisdictions are still open to examination beginning after 2011. As of September 30, 2018, we determined that sufficient positive evidence existed that allowed us to conclude that a full valuation allowance was no longer required to be recorded against the deferred tax assets related the U.S. tax attributes. This positive evidence was primarily supplied by the Company exiting a cumulative loss period, as well as sufficient U.S. forecasted taxable income that would utilize the U.S. tax attributes and thus generate the tax benefit recorded as of September 30, 2018. We continue to assess the realization of our deferred tax assets based on determinations of whether it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income. Appropriate consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. Examples of positive evidence would include a strong earnings history, an event or events that would increase our taxable income through a continued reduction of expenses, and tax planning strategies that would indicate an ability to realize deferred tax assets. In circumstances where the significant positive evidence does not outweigh the negative evidence in regards to whether or not a valuation allowance is required, we have established and maintained valuation allowances on those net deferred tax assets. Tax Cuts and Jobs Act On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act ("Tax Act"), which significantly revised the U.S. corporate income tax system. These changes include a federal statutory rate reduction from 35% to 21%, the elimination or reduction of certain domestic deductions and credits and limitations on the deductibility of interest expense and executive compensation. The Tax Act also transitioned international taxation from a worldwide system to a modified territorial system and includes base erosion prevention measures which have the effect of subjecting certain earnings of our foreign subsidiaries to U.S. taxation as global intangible low taxed income (or "GILTI"). In general, these changes were effective beginning in 2018. The Tax Act also includes a one time mandatory deemed repatriation or transition tax on the accumulated previously untaxed foreign earnings of our foreign subsidiaries. For the fourth quarter of 2017, we were able to reasonably estimate certain Tax Act effects and, therefore, recorded provisional adjustments associated with the deemed repatriation transition tax and remeasurement of certain deferred tax assets and liabilities. Due to the complexities involved in accounting for the enactment of the Tax Act, the SEC issued Staff Accounting Bulletin No. 118 ("SAB No. 118"), which allowed the Company to record provisional amounts in earnings for the year ended December 31, 2017. SAB No. 118 provides that where reasonable estimates can be made, the provisional accounting should be based on such estimates and when no reasonable estimate can be made, the provisional accounting may be based on the tax law in effect before the Tax Act. During the three and nine month periods ended September 30, 2018 , there were no changes made to the provisional amounts recognized in 2017. On August 1, 2018, the U.S. Department of Treasury and the U.S. Internal Revenue Service ("IRS") issued proposed regulations under code section 965. The Company continues to analyze the effects of the Tax Act and newly issued proposed regulations on its financial statements. Additional impacts from the enactment of the Tax Act will be recorded as they are identified during the measurement period as provided for in SAB No. 118, which extends up to one year from the enactment date. The final impact of the Tax Act may differ from the provisional amounts that have been recognized, possibly materially, due to, among other things, changes in the Company’s interpretation of the Tax Act, legislative or administrative actions to clarify the intent of the statutory language provided that differ from the Company’s current interpretation, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates utilized to calculate the impacts, including changes to current year earnings estimates and applicable foreign exchange rates. Additionally, the Company’s U.S. tax returns for 2017 will be filed during the fourth quarter of 2018 and any changes to the tax positions reflected in those returns compared to the estimates recorded in the Company’s earnings for the year ended December 31, 2017 will result in an adjustment of the estimated tax provision recorded as of December 31, 2017. The Company also continues to evaluate the impact of the GILTI provisions under the Tax Act which are complex and subject to continuing regulatory interpretation by the IRS. The Company is required to make an accounting policy election of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current period expense when incurred (the “period cost method”) or (2) factoring such amounts into the Company’s measurement of its deferred taxes (the “deferred method”). The Company’s accounting policy election with respect to the new GILTI Tax rules will depend, in part, on analyzing its global income to determine whether it can reasonably estimate the tax impact. While the Company has included an estimate of GILTI in its estimated effective tax rate for 2018, it has not completed its analysis and has not determined which method to elect. Adjustments related to the amount of GILTI Tax recorded in its consolidated financial statements may be required based on the outcome of this election.

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- 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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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