Income Taxes

12 Months Ended

Nov. 30, 2018

The components of income (loss) before income taxes are as follows:



	Years Ended November 30,
	2019			2018			2017
	(Dollars in millions)
Income (Loss) Before Income Taxes:
U.S.	$	(17.8	)	$	(2.0	)	$	(9.1	)
Foreign	(1.2		)	16.5			5.0
	$	(19.0	)	$	14.5		$	(4.1	)



	Years Ended November 30,
	2019			2018			2017
	(Dollars in millions)
Income Tax (Expense) Benefit:
Current:
U.S. Federal	$	(0.2	)	$	(0.1	)	$	(0.6	)
U.S. State and Local	(0.1		)	(0.2		)	(0.1		)
Foreign	(5.1		)	(7.3		)	(5.9		)
	(5.4		)	(7.6		)	(6.6		)
Deferred:
U.S. Federal	0.5			10.5			(72.6		)
U.S. State and Local	0.6			(0.1		)	(7.8		)
Foreign	0.9			3.4			3.3
	2.0			13.8			(77.1		)
Income Tax (Expense) Benefit	$	(3.4	)	$	6.2		$	(83.7	)



	Years Ended November 30,
	2019			2018				2017
	(Dollars in millions)
Effective Income Tax (Expense) Benefit:
Tax at federal statutory rate	$	4.0		$	(3.2	)		$	1.4
Valuation allowances	16.6			5.5				(79.9		)
U.S. legislative change	—			4.1				—
Foreign taxes at different rates	(3.1		)	(0.5		)		1.3
U.S. tax on foreign dividends	—			—				(0.4		)
Non-deductible impairment	—			—				(6.9		)
GILTI	(3.9		)	—				—
Transition Tax	(5.8		)	—				—
Executive stock compensation	(0.2		)	0.2				0.3
Other permanent items	(0.1		)	(0.2		)		(0.1		)
State and local taxes	0.5			(0.1		)		(0.7		)
Foreign withholding tax	(0.3		)	(0.4		)	`	(1.0		)
Non-deductible restructuring costs	(0.5		)	—				—
Taxable intercompany gains	(0.6		)	—				—
Tax Credits	0.3			—				—
Liquidation recapture gain	(9.8		)	—				—
Foreign non-deductible interest	(0.4		)	(0.4		)		(0.7		)
French business tax	(0.5		)	(0.6		)		(0.5		)
French legislation change	(0.1		)	0.9				3.4
Non-taxable research and development	0.3			0.3				0.2
Tax equity adjustment	—			0.4				—
Other, net	0.2			0.2				(0.1		)
Effective Income Tax (Expense) Benefit	$	(3.4	)	$	6.2			$	(83.7	)

On December 22, 2017, U.S. federal tax legislation, commonly referred to as the Tax Cuts and Job Act (the “Tax Act”) was signed into law which, among other changes: reduced the U.S. corporate income tax rate effective January 1, 2018 from 35% to 21%; repealed the Alternative Minimum Tax (“AMT”); imposed a one-time transition tax on accumulated foreign earnings not previously subject to U.S. taxation; provides a U.S. federal tax exemption on future distributions of foreign earnings; and beginning in fiscal 2019, creates a new minimum tax on certain foreign-sourced earnings. The Tax Act subjects a U.S. shareholder to tax on global intangible low-taxed income ("GILTI") earned by certain foreign subsidiaries. In accordance with U.S. GAAP, any potential impacts of GILTI can either be treated as a period expense in the period incurred or considered in the determination of the Company's deferred tax balances. The Company will account for GILTI in the year the tax is incurred as a period cost.

The Securities and Exchange Commission Staff Accounting Bulletin No.118 (“SAB 118”), provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740, Income Taxes. At November 30, 2018, the Company had provisionally estimated minimal income inclusion for the transition tax related to foreign earnings on which U.S. income taxes were previously deferred. Under SAB 118 guidance, the Company adjusted the income inclusion related to transition tax to $27.7 million. The change is a result of additional analysis, changes in interpretation and assumptions, as well as additional regulatory guidance that was issued. As of February 28, 2019, the Company completed the analysis of the impact of the Tax Act in accordance with the SAB 118 and there were no further impacts. The Company utilized existing net operating loss carryforwards to offset the income inclusion, and therefore had no cash taxes related to the transition tax during 2019.

For fiscal 2019, the Company’s income tax expense was $3.4 million on global pretax loss of $19.0 million. The Company's income tax expense was different than the statutory income tax rate primarily due to income in foreign jurisdictions with corresponding tax expense which was not offset by losses in the U.S. jurisdiction in which no tax benefit was recognized. In addition, during fiscal 2019, the Company liquidated a Luxembourg entity which resulted in a recapture gain of $9.8 million as net operating loss carryforwards were recaptured. This generated tax expense which was fully offset by tax benefits resulting from the release of a valuation allowance previously established for the net operating loss carryforward.

Deferred Income Taxes



	November 30,
	2019					2018
	(Dollars in millions)
	Assets			Liabilities		Assets			Liabilities
Accrued estimated costs	$	5.5		$	—	$	5.7		$	—
Inventory	6.3			—		6.1			—
Goodwill and intangible assets	—			8.4		—			11.2
Depreciation	—			18.9		—			12.4
Pension	18.0			—		12.6			—
NOLC’s and other carryforwards	26.1			—		37.3			—
Post-retirement employee benefits	2.5			—		2.3			—
Other	1.9			—		—			0.4
Valuation allowance	(43.5		)	—		(53.2		)	—
Deferred Income Taxes	$	16.8		$	27.3	$	10.8		$	24.0

A reconciliation of the beginning and ending deferred tax valuation allowance is as follows:



	Years Ended November 30,
	2019			2018			2017
	(Dollars in millions)
Beginning balance December 1	$	53.2		$	88.8		$	14.1
Additions (Reductions) Charged to Expense	(16.8		)	(32.2		)	79.9
Additions (Reductions) Charged to Other Accounts	7.6			(2.9		)	(2.6		)
Reduction due to Entity Disposition	(0.2		)	—			(3.9		)
Foreign Currency Effects	(0.3		)	(0.5		)	1.3
Ending balance November 30	$	43.5		$	53.2		$	88.8

At November 30, 2019, the Company has $70.2 million of U.S. federal net operating loss carryforwards (NOLC's), $8.1 million of U.S. federal capital loss carryforwards, $18.4 million of deductible interest expense carryforwards, $0.1 million of foreign tax credit carryforwards, $0.1 million of AMT credit carryforwards, and $82.1 million of state net operating loss carryforwards. As a result, cash tax payments in the U.S. are expected to be minimal for the foreseeable future. The Company utilized $5.4 million of federal net operating loss carryforward for the year ended November 30, 2019. The Company utilized approximately $16.0 million and $7.8 million of federal net operating loss carryforward for the years ended November 30, 2018 and 2017, respectively. The majority of the federal, state, and local NOLCs will expire in tax years 2023 through 2034 while the foreign tax credit carryforwards will expire in the tax years 2020 through 2022, and the capital loss will expire beginning in tax year 2022. The Company has a valuation allowance against the U.S. federal and state NOLC's, the U.S. federal capital loss carryforward, and the interest expense carryforward.

As of November 30, 2019, the Company had approximately $2.1 million of foreign NOLC's. The Company has recognized a valuation allowance against $1.9 million of the foreign NOLC's as the Company does not anticipate utilizing these carryforwards. Cash paid for income taxes in 2019, 2018, and 2017 was $8.7 million, $6.8 million, and $4.5 million, respectively, and related primarily to foreign income taxes.

Total unrecognized tax benefits are $0.6 million at both November 30, 2019 and 2018. There were minimal interest and penalties recognized in the consolidated balance sheet as of November 30, 2019. The total amount of interest and penalties recognized in the consolidated balance sheet was $0.2 million at November 30, 2018. There were minimal interest and penalties recognized in the consolidated balance sheet as of November 30, 2017. Of the total $0.6 million of unrecognized tax benefits at November 30, 2019, $0.3 million would, if recognized, impact the Company's effective tax rate. There was minimal amount of unrecognized tax benefits that impacted the Company's effective tax rate in 2019. No amount of unrecognized tax benefits impacted the Company's effective tax rate in 2018 or 2017.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding interest and penalties is as follows:



	Years Ended November 30,
	2019			2018		2017
	(Dollars in millions)
Beginning balance, December 1	$	0.6		$	0.3	$	0.3
Increase based on tax positions related to current year	0.1			—		—
Increase due to acquisition	—			0.3		—
Reduction due to lapse of statute of limitations	(0.1		)	—		—
Ending balance, November 30	$	0.6		$	0.6	$	0.3

Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense. The Company recognized minimal income tax expense related to interest and penalties in 2019, 2018, and 2017.

With limited exceptions, the Company is no longer open to audit under the statutes of limitation by the Internal Revenue Service and various states and foreign taxing jurisdictions for years prior to 2014.

The Company has not provided for U.S. income taxes on undistributed earnings on certain of its non-U.S. subsidiaries as such amounts are considered permanently reinvested outside the U.S. As a result of the Tax Act, to the extent that foreign earnings previously treated as permanently reinvested are repatriated, the related U.S. tax liability primarily attributable to withholding taxes may be creditable. However, based on the Company's policy of permanent reinvestment, it is not practicable to determine the income tax liability, if any, which would be payable if such earnings were not permanently reinvested. As of November 30, 2019, the non-U.S. subsidiaries have cumulative foreign retained earnings of $50.2 million.