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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Tax Disclosure Income Taxes
Income Before Income Taxes: The sources of income before income taxes are:

202320222021
U.S. $(329.7)$(467.2)$(553.3)
International(263.6)(72.2)(1.9)
Total (before equity earnings)$(593.3)$(539.4)$(555.2)
Income taxes are accounted for in accordance with FASB authoritative guidance on accounting for income taxes. Deferred income tax assets and liabilities are recognized for the future income tax consequences attributable to differences between the financial statement carrying amounts for existing assets and liabilities and their respective tax bases. Tax rate changes impacting these assets and liabilities are recognized in the period during which the rate change occurs.

The Company records an income tax expense or benefit based on the income earned or loss incurred in each tax jurisdiction and the tax rate applicable to that income or loss. In the ordinary course of business, there are transactions for which the ultimate tax outcome is uncertain. These uncertainties are accounted for in accordance with FASB authoritative guidance on accounting for the uncertainty in income taxes. The final tax outcome for these matters may be different than management’s original estimates made in determining the income tax provision. A change to these estimates could impact the effective tax rate and net income or loss in subsequent periods. The Company uses the flow-through accounting method for tax credits. Under this method, tax credits reduce income tax expense.

Provision for Income Tax Taxes: The income tax (benefit) expense contains the following components:

202320222021
Current   
Federal$1.4 $(4.5)$(11.4)
State— (0.7)(0.2)
Foreign2.7 1.7 0.9 
Total current$4.1 $(3.5)$(10.7)
Deferred 
Federal$11.1 $10.2 $(14.0)
State3.2 2.5 15.9 
Foreign4.1 (4.0)(8.4)
Total deferred18.4 8.7 (6.5)
Total income tax provision (benefit)$22.5 $5.2 $(17.2)

Reconciliation of Effective Income Tax Rate: The income tax provision from operations differs from the tax provision computed at the U.S. federal statutory income tax rate due to the following:

202320222021
Tax at U.S. Federal statutory rate$(124.6)21.0 %$(113.3)21.0 %$(116.5)21.0 %
State income taxes, net of Federal benefit(6.4)1.1 (9.6)1.8 (24.9)4.5 
State income tax credits, net of Federal benefit(8.6)1.4 (15.6)2.9 (7.4)1.3 
Foreign rate differences(12.1)2.0 (3.5)0.6 (5.2)0.9 
Research and experimentation(4.2)0.7 (5.2)1.0 (1.6)0.3 
Excess tax benefits0.9 (0.2)0.4 (0.1)0.8 (0.1)
Non-deductible expenses17.2 (2.9)4.2 (0.8)1.9 (0.3)
Re-measurement of Deferred Taxes(9.0)1.5 (7.1)1.3 (58.8)10.6 
Global Intangible Low-Taxed Income (GILTI) Tax— — (1.8)0.3 0.9 (0.2)
Valuation Allowance154.5 (26.0)170.6 (31.6)204.2 (36.9)
NOL Utilized at 35% vs 21%— — — — (5.3)1.0 
Previously unrecognized tax benefit(0.3)0.1 (10.6)2.0 — — 
Other15.1 (2.5)(3.3)0.6 (5.3)1.0 
Total income tax provision (benefit)$22.5 (3.8 %)$5.2 (1.0)%$(17.2)3.1 %
The income tax provision (benefit) for the twelve months ended December 31, 2023, was $22.5 compared to $5.2 for the prior year. The 2023 effective tax rate was (3.8%) as compared to (1.0%) for 2022.

The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI cost in the year the tax is incurred as a period expense only. The Company has elected to account for GILTI as a period cost in the year the tax is incurred. As of December 31, 2023, there was $0.0 of GILTI tax. As of December 31, 2022, there was $1.8 of GILTI tax benefit primarily due to the refundable U.K. research credits being credited against prior years' GILTI tax expense. As of December 31, 2021, there was $0.9 of GILTI tax expense due to the finalization of the 2020 U.K. NOL carryback to 2019 that resulted in an increase to U.S. GILTI tax.

The CARES Act allows net operating losses from 2018, 2019 and 2020 to be carried back to the previous five years, when the federal tax rate was 35%. As of December 31, 2020 the Company reported a net operating loss when it filed its fiscal year 2020 tax return. A preliminary net operating loss carryback claim was filed in March 2021 requesting a refund of $305 which was received in 2021. A second net operating loss carryback claim using the finalized 2020 U.S. Net Operating Loss was filed in December 2021 requesting an additional $11.6 federal refund, which was received in 2022. The Company had $5.3 and $3.9 of income tax receivable as of December 31, 2023 and December 31, 2022, respectively, which is reflected within Other current assets on the Consolidated Balance Sheets as well as $0.0 and $0.4 of income tax payable as of December 31, 2023 and December 31, 2022, respectively, which is reflected within Other current liabilities on the Consolidated Balance Sheets. The Company had $1.5 and $1.5 of non-current income tax payable as of December 31, 2023 and December 31, 2022, respectively, which is reflected within Other non-current liabilities on the Consolidated Balance Sheets.

Additionally, as allowed by the CARES Act, the Company had deferred $33.0 of employer payroll taxes as of December 31, 2020, of which 50% was deposited by December 2021 and the remaining 50% was credited against the outstanding pre-tax employee retention credit refund claim in 2022. The Company has filed a claim for a pre-tax employee retention credit of $18.8 for 2020 and $1.0 for 2021. The outstanding pre-tax employee retention credit refund claim as of December 31, 2023 and December 31, 2022 was $3.1 and $3.1, respectively. In addition, as of December 31, 2020, the Company had recorded a deferral of $31.5 of VAT payments with the option to pay in smaller payments through the end of March 31, 2022 interest free under the United Kingdom deferral scheme. There was no outstanding deferral of VAT payments as of December 31, 2022.
Oklahoma follows the CARES Act and also allows 2018, 2019 and 2020 net operating losses to be carried back to the previous five years. The 2020 Oklahoma Net Operating Loss was carried back to 2015 and 2016 resulting in a $3.1 refund claim that was received during 2022.
Deferred Income Taxes: Significant tax effected temporary differences comprising the net deferred tax asset, prior to valuation allowance, are as follows:

20232022
Depreciation and amortization$(87.7)$(116.6)
Long-term contracts125.3 113.3 
State income tax credits154.1 145.2 
Net operating loss carryforward489.7 438.1 
Accruals and reserves47.3 46.2 
Employee compensation accruals26.9 21.1 
Pension and other employee benefit plans(15.9)(32.8)
Interest expense limitation89.9 76.3 
Post-retirement benefits other than pensions
8.9 7.9 
Other19.7 18.4 
Inventory0.9 0.5 
Interest swap contracts(0.7)0.6 
Net deferred tax asset before valuation allowance858.4 718.2 
Valuation allowance(867.4)(714.7)
Net deferred tax asset (liability)
(9.0)3.5 

Deferred tax detail above is included in the balance sheet and supplemental information as follows:

20232022
Non-current deferred tax assets0.1 4.8 
Non-current deferred tax liabilities(9.1)(1.3)
Net non-current deferred tax asset (liability)$(9.0)$3.5 
Total deferred tax asset (liability)$(9.0)$3.5 

The following is a roll forward of the deferred tax valuation allowance at December 31, 2023, 2022, and 2021:

202320222021
Balance at January 1$714.7 $536.8 $340.9 
Bombardier Acquisition opening balance sheet— — 13.6 
Corporate rate remeasurement0.5 (0.2)63.0 
State income tax credits7.8 18.3 6.8 
Net operating losses141.5 155.3 135.4 
Depreciation and amortization0.2 0.2 0.2 
Other4.6 (3.0)(1.3)
Other comprehensive income adjustment(1.9)7.3 (21.8)
Balance at December 31$867.4 $714.7 $536.8 

Deferred tax assets are periodically evaluated to determine their recoverability and whether or not a valuation allowance is necessary. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, the Company assesses all available positive and negative evidence. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected
future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses.

Based on these criteria and the relative weighting of both the positive and negative evidence available, and in particular the activity surrounding the Company’s prior earnings history including the forward losses previously recognized in the U.S., Management determined that it was necessary to establish a valuation allowance against nearly all of its net U.S. deferred tax assets at December 31, 2023, 2022, and 2021. This determination was made as the Company entered into a U.S. cumulative loss position during 2021. Once a company enters a cumulative three year loss position, there is a presumption that a company should no longer rely solely on projected future income in determining whether the deferred tax asset is more likely than not to be realized. As of December 31, 2023, the total net U.S. deferred tax asset, prior to valuation allowance, was $505.4. The net U.S. deferred tax liability after recording valuation allowances is $2.6. Valuation allowances recorded against the consolidated net U.S. deferred tax asset in the current year were $72.9 for a total valuation allowance of $508.0 for the U.S.

The Company has determined a valuation allowance on certain U.K. deferred tax assets is needed based upon historic cumulative losses and current year losses generated in the U.K. The Company recorded a portion of the increase in the valuation allowance to income tax expense in continuing operations of $79.0, and a portion to OCI of $0.9. Valuation allowances recorded against U.K. deferred tax assets in the current year were $79.9 for a total valuation allowance of $359.2 for the U.K.

Included in the deferred tax assets at December 31, 2023 are $133.1 in Kansas High Performance Incentive Program (“HPIP”) Credit, $13.7 in Kansas Research & Development (“R&D”) Credit and $2.0 in Kansas Qualified Vendor (“QV”) Credit, totaling $148.8 in gross Kansas state income tax credit carryforwards, net of federal benefit. The HPIP Credit provides a 10% investment tax credit for qualified business facilities located in Kansas. This credit can be carried forward 16 years. The Kansas R&D Credit provides a credit for qualified research and development expenditures conducted within Kansas. This credit can be carried forward indefinitely. The QV Credit is equal to 15% of the amount for approved expenditures of goods and services purchased from a qualified vendor, not to exceed $0.5 per qualified vendor per tax year. The QV Credit can be carried forward 4 years.

The one-time transition tax and GILTI provisions within the TCJA effectively transitioned the U.S. to a territorial system and eliminated the deferral of U.S. taxation for certain amounts of income which is not taxed at a minimum level. To the extent a dividend is declared, the tax impact of repatriating earnings would not be significant as substantially all of the net prior unrepatriated earnings have been subject to U.S. tax. Additionally, any foreign tax withholding would not be significant.

During 2021, the Company made a one-time distribution from Malaysia to the U.S. resulting in an insignificant amount of U.S. income tax recorded to the financial statements, and, during 2023, the Company made a one-time distribution from Singapore to the U.S. resulting in no taxable income inclusion and no U.S. income tax recorded to the financial statements. The Company continues to maintain that the remaining earnings of all foreign operating subsidiaries are indefinitely invested outside the U.S. As a result, no additional income taxes have been provided on any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in these entities (i.e., basis difference in excess of that subject to the one-time transition tax) is not practicable at this time. Accordingly, no deferred taxes have been provided for withholding taxes or other taxes on permanently reinvested earnings.

Unrecognized Tax Benefits: The beginning and ending unrecognized tax benefits reconciliation is as follows:

202320222021
Beginning balance at January 1$8.1 $18.3 $16.5 
Remeasurement for tax rate change— — 2.0 
Gross increases (decreases) related to current period tax positions
(0.4)0.4 0.4 
Statute of limitations' expiration(0.6)(10.6)(0.6)
Ending balance at December 31$7.1 $8.1 $18.3 
Included in the December 31, 2023 balance was $7.1 in unrecognized tax benefits of which $6.0 would reduce the Company's effective tax rate if ultimately recognized.

The Company reports interest and penalties, if any, related to unrecognized tax benefits in the income tax provision. As of December 31, 2023, 2022, and 2021, there was no accrued interest on the unrecognized tax benefit liability included in the balance sheets and income statements during 2023, 2022, and 2021.

The Company files income tax returns in all jurisdictions in which it operates.

The Company’s federal audit is conducted under the Internal Revenue Service Compliance Assurance Process (“CAP”) program and is complete for the 2020 tax year. The Company will continue to participate in the CAP program for 2021 through 2023. The CAP program’s objective is to resolve issues in a timely, contemporaneous manner and eliminate the need for a lengthy post-filing examination. The Company has an open tax audit in the Kingdom of Morocco for tax years ending prior to the Company’s ownership of the Moroccan legal entity. There are ongoing audits in other jurisdictions that are not material to the financial statements and the Company believes appropriate provisions for all outstanding tax issues have been made for all jurisdictions and years.

The Company operates under a tax holiday in Malaysia which is effective through September 30, 2024. The tax holiday is conditional upon remaining in good standing with the Malaysia taxing authorities, having at least 20% value-add, and having at least 30% of employees with a diploma/degree in science/technical discipline. The tax impact of this tax holiday has been $3.4, $3.0, and $3.4 for the twelve months ended December 31, 2023, 2022, and 2021, respectively.
The Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of 15% intended to be effective on January 1, 2024. While the U.S. has not yet adopted the Pillar Two rules, various other governments around the world are enacting legislation. As currently designed, Pillar Two will ultimately apply to worldwide operations. Considering the Company does not have material operations in jurisdictions with tax rates lower than the Pillar Two minimum, these rules are not expected to materially increase our global tax costs. There remains uncertainty as to the final Pillar Two model rules. The U.S. and global legislative action will be monitored for potential Pillar Two impacts.