Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

On January 1, 2020, we completed an intra-entity transfer of certain intellectual property rights (the "IP") to our Swiss subsidiary, where our EMEA regional headquarters is located. The transfer of the IP did not result in a taxable gain; however, it did result in step-up of the Swiss tax-deductible basis in the transferred assets, and accordingly, created a temporary difference between the book basis and the tax basis of the IP, which was transferred at fair value. We applied significant judgment when determining the fair value of the IP, which serves as the tax basis of the deferred tax asset. Consequently, this transaction resulted in the recognition of a deferred tax asset at the applicable Swiss tax rate, resulting in a one-time tax benefit of $50.5 million. The Company expects to be able to realize the deferred tax assets resulting from these intra-entity asset transfers.

The Company's operations in Switzerland are subject to reduced tax rates through December 31, 2026, as long as certain conditions are met. The tax benefit and the tax effect on diluted net income per common share attributable to this tax holiday was $2.1 million and $0.01, respectively, for the year ended December 31, 2021. Due to a pre-tax loss and the step-up of tax-deductible IP noted above in our Swiss subsidiary, the reduced tax rate holiday in Switzerland had an unfavorable impact in 2020 and 2019. The tax expense attributable to this tax holiday was $13.2 million and $0.7 million for the years ended December 31, 2020 and 2019, respectively. The tax effect of the tax holiday on diluted net income per common share was $0.06 and $0.01 for the years ended December 31, 2020 and 2019, respectively.

Domestic and Foreign Components of Income Before Income Taxes

	Year Ended December 31,
	2021		2020		2019
Domestic	$	173.3	$	85.4	$	223.4
Foreign	167.2		36.8		106.6
Total	$	340.5	$	122.2	$	330.0

Provision (Benefit) for Income Taxes

	Year Ended December 31, 2021						Year Ended December 31, 2020						Year Ended December 31, 2019
	Current		Deferred		Total		Current		Deferred		Total		Current		Deferred		Total
U.S. federal	$	14.6	$	18.1	$	32.7	$	1.8	$	9.9	$	11.7	$	8.3	$	27.1	$	35.4
U.S. state and local	4.3		1.4		5.7		6.0		(1.9)		4.1		5.3		(9.2)		(3.9)
Foreign	42.2		(4.5)		37.7		47.8		(63.4)		(15.6)		48.1		(2.2)		45.9
Total	$	61.1	$	15.0	$	76.1	$	55.6	$	(55.4)	$	0.2	$	61.7	$	15.7	$	77.4

Reconciliation to U.S. Statutory Rate

	Year Ended December 31,
	2021				2020				2019
Statutory U.S. federal income tax rate (1)	$	71.5	21.0	%	$	25.7	21.0	%	$	69.3	21.0	%
Foreign income taxed at rates other than U.S. statutory rate	(16.9)		(5.0)		(13.9)		(11.3)		(16.3)		(4.9)
Changes in valuation allowances	18.1		5.3		10.0		8.2		18.8		5.7
Foreign exchange gain (loss), net	2.2		0.6		8.2		6.7		(2.8)		(0.8)
Unrecognized tax benefits (2)	(4.9)		(1.4)		54.9		44.9		11.2		3.4
Foreign taxes	8.7		2.5		7.0		5.7		21.4		6.5
Non-deductible expenses	5.7		1.7		4.6		3.7		4.1		1.3
Tax credits	(6.7)		(2.0)		(5.3)		(4.3)		(3.9)		(1.2)
Excess tax (benefits)/shortfalls relating to stock-based compensation	0.4		0.1		(0.3)		(0.2)		(11.4)		(3.5)
Base erosion and anti-tax abuse tax	—		—		—		—		4.3		1.3
U.S. state and local taxes, net	5.0		1.5		2.8		2.3		6.6		2.0
Intra-entity IP transfer step-up (3)	—		—		(50.8)		(41.6)		—		—
Other - net (4)	(7.0)		(1.9)		(42.7)		(34.9)		(23.9)		(7.3)
Total income tax provision / effective tax rate	$	76.1	22.4	%	$	0.2	0.2	%	$	77.4	23.5	%

(1)The U.S. statutory rate has been used as management believes it is more meaningful to the Company.

(2)In 2020, we recorded charges of $14.3 million in connection with the income tax audit in Germany and $27.3 million in the Netherlands related to realized exchange gain. The Netherlands item is fully offset by a tax benefit of $27.3 million recorded in 2020 to adjust to the prior year tax filing position.

(3)Related to the step-up of tax deductible basis upon transfer of certain intellectual property rights to our Swiss subsidiary.

(4)In 2021, the Company recorded a tax benefit of $2.9 million in the Netherlands, which is fully offset by a tax expense of $2.9 million for an increase to the valuation allowance. In 2020, the Company recorded a tax benefit of $41.8 million in the Netherlands, of which $27.3 million is related to realized exchange gain and $14.5 million related to rate change on deferred taxes, which are both fully offset by a tax expense of $27.3 million for the increase to unrecognized tax benefits and $14.5 million for an increase to the valuation allowance, respectively. In 2019, the Company recorded a tax benefit of $24.9 million in Luxembourg related to a local statutory impairment, which is fully offset by a tax expense of $24.9 million for the increase to the valuation allowance.

Deferred Tax Balances

	Year Ended December 31,
	2021		2020
Deferred tax asset
Tax loss, credit and interest carryforwards	$	256.4	$	259.2
Goodwill and intangibles	—		12.0
Compensation and employee benefits	65.0		90.4
Accruals and other reserves	42.2		18.0
Research and development capitalization	16.4		19.4
Equity investment and other securities	29.6		33.4
Leases	42.9		42.5
Other	1.8		5.9
Total deferred tax assets	454.3		480.8
Less: valuation allowance	(210.9)		(208.1)
Total deferred tax assets, net of valuation allowance	243.4		272.7
Deferred tax liabilities
Goodwill and intangibles	(70.1)		—
Property, plant and equipment	(148.5)		(156.0)
Unremitted earnings	(10.6)		(7.1)
Accounts Receivable & Other Assets	(7.4)		—
Total deferred tax liabilities	(236.6)		(163.1)
Net deferred tax asset	$	6.8	$	109.6
Non-current assets	$	181.5	$	223.6
Non-current liability	(174.7)		(114.0)
Net deferred tax asset	$	6.8	$	109.6

The December 31, 2020 balances for Leases and Property, plant and equipment in the table above were each increased by $22.5 million compared to the previously disclosed amounts to appropriately reflect the gross deferred tax balances related to our operating and finance leases.

Tax loss, tax credit and interest carryforwards	Year Ended December 31,
	2021		2020
Tax loss carryforwards (tax effected) (1)
Expire within 10 years	$	23.0	$	78.7
Expire after 10 years or indefinite carryforward	172.1		115.8
Tax credit carryforwards
Expire within 10 years	0.6		1.6
Expire after 10 years or indefinite carryforward	9.2		17.3
Interest carryforwards
Expire within 10 years	2.0		2.9
Expire after 10 years or indefinite carryforward	49.5		42.9
Total tax loss, tax credit and interest carryforwards	$	256.4	$	259.2

(1)Net of unrecognized tax benefits

Utilization of our tax loss, tax credit and interest carryforwards may be subject to annual limitations due to the ownership change limitations provided by the Internal Revenue Code and similar state and foreign provisions. Such annual limitations could result in the expiration of the tax loss, tax credit and interest carryforwards before their utilization.

Valuation allowance

	Year Ended December 31,
	2021		2020
Non-U.S.	$	207.4	$	205.0
U.S.	3.5		3.1
Total valuation allowance	$	210.9	$	208.1

Valuation allowances relate primarily to the tax loss and tax credit carryforwards, as well as equity investment in foreign jurisdictions, where the Company does not believe the associated net deferred tax assets will be realized, due to expiration, limitation or insufficient future taxable income. The non-U.S. valuation allowance primarily relates to tax loss carryforwards from operations in Luxembourg and Netherlands, of $173.6 million and $176.2 million at December 31, 2021 and 2020, respectively. The U.S. valuation allowance relates to state net deferred tax assets.

Total Gross Unrecognized Tax Benefits

	Year Ended December 31,
	2021		2020		2019
Total gross unrecognized tax benefits at January 1	$	99.6	$	45.3	$	37.0
Increases related to acquisitions	1.8		—		—
Increases related to positions taken on items from prior years	2.3		50.9		3.9
Decreases related to positions taken on items from prior years	(16.5)		—		(1.0)
Increases related to positions taken in the current year	3.9		3.7		5.5
Settlement of uncertain tax positions with tax authorities	0.4		—		(0.1)
Decrease due to expiration of statues of limitations	(0.1)		(0.3)		—
Total gross unrecognized tax benefits at December 31	91.4		99.6		45.3
Total accrual for interest and penalties associated with unrecognized tax benefits (1)	8.7		10.9		5.0
Total gross unrecognized tax benefits at December 31, including interest and penalties	$	100.1	$	110.5	$	50.3
Total unrecognized tax benefits that, if recognized, would impact the effective tax rate	$	44.5	$	57.6	$	31.7
Interest and penalties included as components of the Provision for income taxes	$	(3.4)	$	5.9	$	1.9

(1)Accrued interest and penalties are included within the related tax liability line in the balance sheet.

The Company is subject to income tax in approximately 46 jurisdictions outside the U.S. The Company's significant operations outside the U.S. are located in Brazil, China, Germany, Mexico and Switzerland. The statute of limitations varies by jurisdiction with 2011 being the oldest tax year still open in the material jurisdictions. Certain of our German subsidiaries are under tax examination for calendar years 2014 to 2017. The Company is also under audit in other jurisdictions outside of Germany. The result of all open examinations may lead to ordinary course adjustments or proposed adjustments to our taxes or our net operating losses with respect to years under examination as well as subsequent periods that could be material.

In connection with the income tax audit in Germany for the tax period 2010-2013, the Germany Tax Authority ("GTA") indicated that it believed that certain positions taken on the 2010-2013 corporate income tax returns were not in compliance with German tax law. While the Company disagreed with the conclusions of the GTA based on the technical merits of our positions, after extensive discussions with the GTA and to avoid a potentially long and costly litigation process, in March 2020 the Company expressed a willingness to settle with the GTA on certain matters. As a result of these changes, the Company recorded a charge to income tax expense of $14.3 million in 2020. A final agreement with the GTA was signed in 2021 and the Company is awaiting final assessments. The Company is also currently under audit in Germany for tax years 2014-2017 and is prepared to vigorously defend itself on these matters.

The Company anticipates that it is reasonably possible it will settle up to $12.8 million, exclusive of interest and penalties, of its current unrecognized tax benefits within 2022 mainly due to the conclusion of the 2010-2013 German income tax audit.