INCOME TAXES

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Income before income taxes and non-controlling interests was as follows:

	Year Ended December 31,
(dollars in millions)	2024		2023		2022
Domestic	$	48.7	$	2.6	$	125.0
Foreign	239.0		126.5		147.0
Total	$	287.7	$	129.1	$	272.0

Income tax expense consisted of the following:

	Year Ended December 31,
(dollars in millions)	2024		2023		2022
Current:
U.S.:
Federal	$	(1.6)	$	7.9	$	0.6
State and local	2.5		2.7		1.8
Foreign	83.1		72.3		68.3
Total current	84.0		82.9		70.7
Deferred:
U.S.:
Federal	1.9		(57.2)		17.5
State and local	1.5		(0.6)		8.3
Foreign	(42.6)		(12.1)		(10.7)
Total deferred	(39.2)		(69.9)		15.1
Income tax expense	$	44.8	$	13.0	$	85.8

Income tax expense differed from the amounts computed by applying the U.S. federal statutory tax rate to pre-tax income, as a result of the following:

	Year Ended December 31,
(dollars in millions)	2024			2023			2022
U.S. federal statutory tax rate	21		%	21		%	21		%
Taxes computed at U.S. statutory rate	$	60.4		$	27.1		$	57.1
State income taxes, net of federal benefit	3.5			1.8			4.6
U.S. tax on foreign operations	4.2			1.8			3.2
Section 250 deduction	(10.5)			(10.8)			—
Foreign tax credits	(13.2)			(8.2)			—
Foreign tax on foreign operations	20.8			13.0			13.0
Change in valuation allowances	(67.3)			(0.1)			6.4
Tax on undistributed foreign earnings	0.8			5.1			5.9
Changes in uncertain tax positions	6.5			1.9			0.2
Non-deductible goodwill impairment and Kuprion Acquisition research and development charge	0.9			20.6			—
Impact of amended U.S. tax returns	12.1			(37.3)			—
Outside basis difference - Graphics business	(22.5)			—			—
Gain on Graphics restructuring	43.6			—			—
Rate changes	6.3			—			—
Other, net	(0.8)			(1.9)			(4.6)
Income tax expense	$	44.8		$	13.0		$	85.8
Effective tax rate	16		%	10		%	32		%

The income tax expense of $44.8 million for the year ended December 31, 2024, is below the statutory U.S. rate primarily driven by a continued U.S. benefit related to claiming foreign tax credits consistent with our election in the fourth quarter of 2023, release of valuation allowances and deductions for FDII, with offsets from withholding taxes, tax attribute expirations and the impact of changes to the geographical mix of earnings.

The rate for 2024 also includes a benefit associated with the release of valuation allowances of $40.8 million previously recorded against certain U.K. tax attribute carryforwards, primarily consisting of net operating loss carryforwards and interest carryforwards. The valuation allowances were released as the Company expects improved profitability in its U.K. business and a shift to a three-year cumulative income position. The Company determined there was sufficient positive, objectively verifiable evidence to conclude that it is more likely than not that, as of December 31, 2024, select U.K. net deferred tax assets will be realized. These expectations are based on actual results, management's assessment of projected future taxable income, and expected utilization of net operating losses and tax carryforwards.

During the third quarter of 2024, an internal restructuring of the Graphics business was completed which resulted in the recognition of a capital gain of $208 million. This gain was offset by capital losses generated in 2024 totaling $10.1 million and capital loss carryforwards of $198 million. The capital gain provided income of the appropriate character to support the release of a valuation allowance on the amount of the capital loss carryforward utilized. The remaining unused capital loss carryforward with a full valuation allowance expired at the close of 2024. The capital gain also resulted in a higher interest expense deduction and consequentially a lower deduction for FDII and lower utilization of certain foreign tax credits carryforwards before expiration. In addition, the gain resulted in a step-up in tax basis and the Company recorded a deferred tax asset of $22.5 million on the excess of stock tax basis over book basis due to the subsequent held for sale classification. As of the balance sheet date, there is not sufficient objectively verifiable evidence supporting income of the appropriate character to realize this tax benefit; therefore, a valuation allowance has been recorded against this deferred tax asset. Due to status of the MGS Transaction it is reasonably possible the status of this deferred tax assets and related valuation allowance are subject to change due to one or more future confirming events.

During 2024, the Company finalized the 2023 consolidated U.S. federal income tax return along with prior years amended federal corporate income tax returns related to crediting foreign taxes including the return-to-provision true-up of foreign tax credits, valuation allowances and prior year one-time benefit.

The income tax expense of $13.0 million for the year ended December 31, 2023, included a discrete benefit of $34.2 million related to changing an election to credit foreign taxes from our previous position which was to deduct foreign taxes. This is comprised of a $37.3 million impact of amending prior U.S. tax returns offset by $3.1 million from the net increase of valuation allowances on foreign tax credit carryforwards. In addition, the election to credit foreign taxes for the 2023 fiscal year resulted in an incremental $8.2 million of tax expense reduction.

The rate for 2023 also includes an increase for non-deductible GAAP expenses related to a goodwill impairment charge of $80.0 million recognized in the third quarter of 2023 (see Note 8, Goodwill and Intangible Assets, Net, to the Consolidated Financial Statements for further information), as well as $15.7 million of research and development expenses related to the Kuprion transaction (see Note 4, Acquisitions, to the Consolidated Financial Statements for further information). Other activity in the 2023 tax rate includes a benefit from a U.S. tax deduction related to FDII, offset by current and deferred taxes based on jurisdictional mix of earnings and withholding taxes.

The income tax expense of $85.8 million for the year ended December 31, 2022, included current and deferred taxes based on jurisdictional earnings, withholding taxes, and the impact of GILTI and subpart F income regimes.

The components of deferred income taxes at December 31, 2024 and 2023 were as follows:

	December 31,
(dollars in millions)	2024		2023
Deferred tax assets:
Net operating losses	$	79.5	$	87.8
Interest carryforward	74.9		81.4
Capital loss carryforward	4.2		53.5
Tax credits	47.3		64.6
Employee benefits	14.4		17.9
Research and development costs	30.5		33.2
Accrued liabilities	5.3		6.4
Outside basis difference - Graphics business	22.5		—
Other	32.7		40.0
Total gross deferred tax assets	311.3		384.8
Valuation allowances	(69.5)		(143.6)
Total deferred tax assets	241.8		241.2
Deferred tax liabilities:
Intangible assets	130.6		154.5
Property, plant and equipment	26.7		33.2
Undistributed foreign earnings	32.9		32.3
Goodwill	12.2		9.6
Total deferred tax liabilities	202.4		229.6
Net deferred tax asset (liability)	$	39.4	$	11.6

The Company provides for income and withholding taxes on previously unremitted earnings of foreign subsidiaries. At December 31, 2024, the Company had accrued a deferred tax liability of $32.9 million of income and withholding taxes that would be due upon the distribution of such earnings from non-U.S. subsidiaries to the U.S.

During 2022, the Company’s plans and expectations around the use of cash in subsidiaries and indefinitely reinvested amounts changed and, as a result, the prior assertion was modified, and the Company is no longer asserting any of its available foreign earnings are permanently reinvested.

At December 31, 2024, the Company had federal, state and foreign net operating loss carryforwards of approximately $2.4 million, $511 million and $216 million, respectively. The U.S. federal net operating loss carryforwards expire between 2027 and 2037 or may be carried forward indefinitely. The majority of the state net operating loss carryforwards expire between 2025 and 2042. The foreign tax net operating loss carryforwards expire between 2025 through 2037 or may be carried forward indefinitely. In addition, at December 31, 2024, the Company had capital loss carryforwards, foreign tax credits, and other tax credits of approximately $16.9 million, $38.8 million and $7.7 million, respectively, available for carryforward. For the year ended December 31, 2023, the U.S. capital loss carryforwards of $226 million had a full valuation. However, due to the Graphics business restructuring, the Company was able to use $198 million and release the valuation allowance on such amount. The remainder of the capital loss with its full valuation allowance expired at the close of the year. The carryforward periods of the remaining tax credits range from ten years to an unlimited period of time. If certain changes in the Company's ownership occur, there could be an annual limitation on the amounts of utilizable carryforwards.

Uncertain Tax Positions

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

	Year Ended December 31,
(dollars in millions)	2024		2023		2022
Unrecognized tax benefits at beginning of period	$	111.6	$	99.8	$	106.6
Additions based upon prior year tax positions	14.9		19.6		1.0
Additions based on current year tax positions	13.8		9.6		5.3
Reductions for prior period positions	(3.4)		(15.1)		(5.7)
Reductions for settlements and payments	(3.3)		(1.6)		(1.7)
Reductions due to closed statutes	(8.4)		(1.3)		(1.9)
Currency translation adjustment	(2.7)		0.6		(3.8)
Total unrecognized tax benefits at end of period	$	122.5	$	111.6	$	99.8

At December 31, 2024, the Company had $123 million of total unrecognized tax benefits, all of which, if recognized, would impact the Company’s effective tax rate. Due to expected settlements and statute of limitations expirations, the Company estimates that $8.9 million of the total unrecognized benefits will reverse within the next twelve months.

The Company recognizes interest and/or penalties related to income tax matters as part of income tax expense, which totaled $2.6 million, $3.7 million and $1.1 million, for 2024, 2023 and 2022, respectively. The Company's liability for interest and penalties totaled $11.2 million and $13.0 million at December 31, 2024 and 2023, respectively.

At December 31, 2024, the following tax years remained subject to examination by the major tax jurisdictions indicated below:

Major Jurisdictions	Open Years
China	2018	through current
Germany	2018	through current
Taiwan	2023	through current
United Kingdom	2008, 2021	through current
United States	2021	through current

The Company is currently undergoing tax examinations in several jurisdictions. Although the Company believes it has appropriately accrued for the expected outcome of uncertain tax matters and made reasonable provisions for taxes ultimately expected to be paid, tax liabilities may need to be adjusted as tax examinations continue to progress.