Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

As a global organization, we and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. As of December 31, 2024, the statute of limitations for the U.S. federal tax years 2018 through 2024 remain open to examination. For U.S. state and local jurisdictions, tax years 2020 through 2024 are open to examination. We are also subject to examination in various foreign jurisdictions for tax years 2017 through 2024.

A reconciliation of the beginning and ending amount of the liability for unrecognized tax benefits is as follows:

($ in millions)	2024		2023		2022
Balance at January 1	$	38.8	$	36.5	$	24.9
Increase due to current year position	5.3		6.4		11.4
Increase (decrease) due to prior year position	0.7		(1.0)		0.6
Reduction for expiration of statute of limitations/audits	(1.2)		(3.1)		(0.4)
Balance at December 31	$	43.6	$	38.8	$	36.5

In addition, we had balances in accrued liabilities for interest and penalties of $6.6 million and $3.8 million at December 31, 2024 and 2023, respectively. As of December 31, 2024, we had $43.6 million of total gross unrecognized tax benefits, which, if recognized, $43.6 million would favorably impact the effective income tax rate. It is reasonably possible that, due to the expiration of statutes and the closing of tax audits, the amount of gross unrecognized tax benefits may be reduced by approximately $3.3 million during the next twelve months, which would favorably impact our effective tax rate.

The components of income before income taxes and equity in net income of affiliated companies are:

($ in millions)	2024		2023		2022
U.S. operations	$	243.4	$	369.4	$	394.4
International operations	342.1		328.6		285.5
Total income before income taxes and equity in net income of affiliated companies	$	585.5	$	698.0	$	679.9

The related provision for income taxes consists of:

($ in millions)	2024		2023		2022
Current:
Federal	$	29.8	$	30.2	$	75.7
State	2.1		(4.2)		8.4
International	79.1		58.8		61.4
Current income tax provision	111.0		84.8		145.5
Deferred:
Federal and state	(18.3)		(11.6)		(20.3)
International	14.8		49.1		(10.5)
Deferred income tax provision	(3.5)		37.5		(30.8)
Income tax expense	$	107.5	$	122.3	$	114.7

Deferred income taxes result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes.

The significant components of our deferred tax assets and liabilities at December 31 are:

($ in millions)	2024		2023
Deferred tax assets:
Net operating loss carryforwards	$	6.1	$	10.0
Tax credit carryforwards	2.1		1.1
Pension and deferred compensation	28.9		22.7
Royalty acceleration	—		15.0
Other	17.9		22.4
Capitalized R&D expenses	30.1		23.9
Leases	21.5		18.6
Valuation allowance	(12.8)		(15.5)
Total deferred tax assets	93.8		98.2
Deferred tax liabilities:
Property, plant, and equipment	60.9		61.7
Tax on undistributed earnings of subsidiaries	0.4		3.8
Leases	22.0		18.1
Other	5.0		1.6
Total deferred tax liabilities	88.3		85.2
Net deferred tax asset	$	5.5	$	13.0

A reconciliation of the U.S. federal corporate tax rate to our effective consolidated tax rate on income before income taxes and equity in net income of affiliated companies is as follows:

	2024		2023		2022
U.S. federal corporate tax rate	21.0	%	21.0	%	21.0	%
Tax on international operations other than U.S. tax rate	1.5		1.2		(1.5)
Adjustments to reserves for unrecognized tax benefits	0.8		0.3		2.9
U.S. tax on international earnings, net of foreign tax credits	0.1		0.5		(0.3)
Foreign-Derived Intangible Income Deductions (FDII)	(1.2)		(1.6)		(2.1)
State income taxes, net of federal tax effect	0.3		0.1		1.0
U.S. research and development credits	(0.6)		(0.7)		(0.6)
Excess tax benefits on share-based payments	(3.3)		(4.6)		(2.4)
Royalty acceleration	—		0.5		—
Pension settlement	—		—		(1.2)
Tax on undistributed earnings of subsidiaries	(0.5)		0.3		—
Other	0.3		0.5		0.1
Effective tax rate	18.4	%	17.5	%	16.9	%

During 2024, we recorded a tax benefit of $19.5 million associated with stock-based compensation. The Company recognized a $2.3 million tax benefit related to a reduction in the tax liability on the unremitted earnings of its Germany subsidiaries due to a law change in 2024.

During 2023, we recorded a tax benefit of $32.0 million associated with stock-based compensation. The Company recognized a $3.0 million state tax benefit based on the outcome of a recent court case. In addition, the Company recorded $2.8 million of tax expense due to a change in the permanent reinvestment assertion of its German subsidiaries.

During 2022, we recorded tax expense of $5.7 million due to the impact of tax law changes enacted during the year, $19.8 million of tax expense due to the Company's recognition of reserves for unrecognized tax benefits, and a tax benefit of $16.5 million associated with stock-based compensation. A tax benefit of $20.6 million was recognized for the 2022 termination of our U.S. pension plan. The Company did not elect to reclassify to retained earnings the stranded tax effects on items within AOCI related to the Tax Cuts and Jobs Act of 2017, and therefore included within the $20.6 million pension termination benefit is a deferred tax benefit of $8.0 million.

State operating loss carryforwards of $98.8 million created a deferred tax asset of $5.4 million, while foreign operating loss carryforwards of $2.3 million created a deferred tax asset of $0.7 million. Management estimates that certain state and foreign operating loss carryforwards are unlikely to be utilized and the associated deferred tax assets have been appropriately reserved. State loss carryforwards expire as follows: $35.7 million in 2025 and $63.1 million thereafter. Foreign loss carryforwards will begin to expire in 2028, while $0.2 million of the total $2.3 million will not expire.

During 2019, we utilized all of our remaining U.S. federal research and development credit carryforwards. State research and development credit carryforwards of $2.7 million created a deferred tax asset of $2.1 million. As of December 31, 2024, $0.4 million of state research and development credits expire in 2025.

Since 2018, West has reasserted indefinite reinvestment related to all post-2017 unremitted earnings in all of our foreign subsidiaries. Beginning in 2023 and consistent with the approved plan mentioned in Note 4, Net Income Per Share, the Company began repurchasing common stock on the open market. To support the funding for this program, West may continue to repatriate earnings from its German affiliates in the future and has recorded a tax liability of $0.3 million. Accordingly, West will continue to not assert permanent reinvestment related to all of the earnings of its wholly owned German affiliates through 2024. West will continue to assert permanent reinvestment of earnings for all other foreign jurisdictions and intends to only repatriate earnings when the tax impact is de minimis.

Accordingly, no deferred taxes have been provided for withholding taxes or other taxes that would result upon repatriation of approximately $651 million of undistributed earnings from foreign subsidiaries (except our German affiliates) to the U.S., as those earnings continue to be permanently reinvested. Further, it is impracticable for us to estimate any future tax costs for any unrecognized deferred tax liabilities associated with our indefinite reinvestment assertion, because the actual tax liability, if any, would be dependent on complex analysis and calculations considering various tax laws, exchange rates, circumstances existing when there is a repatriation, sale or liquidation, or other factors.