Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 9. Income Taxes

Income taxes have been based on the following components of earnings (loss) before income taxes for the years ended December 31, 2022, 2021 and 2020:

	Year Ended December 31,
	2022		2021		2020
U.S.	$	131.8	$	173.6	$	(28.3	)
Foreign		7.5		24.2		10.8
Earnings (loss) before income taxes	$	139.3	$	197.8	$	(17.5	)

The components of income tax expense (benefit) for the years ended December 31, 2022, 2021 and 2020 were as follows:

	Year Ended December 31,
	2022			2021			2020
Current:
U.S. Federal	$	23.9		$	33.5		$	21.1
U.S. State and Local		10.8			14.7			10.0
Foreign		2.6			4.0			3.7
Current income tax expense		37.3			52.2			34.8
Deferred:
U.S. Federal		(0.6	)		1.2			(20.9	)
U.S. State and Local		0.3			0.4			(6.4	)
Foreign		(0.2	)		(1.9	)		0.9
Deferred income tax (benefit) expense		(0.5	)		(0.3	)		(26.4	)
Total income tax expense	$	36.8		$	51.9		$	8.4

The following table outlines the reconciliation of differences between the U.S. Federal statutory tax rate and the Company’s worldwide effective income tax rate:

	Year Ended December 31,
	2022			2021			2020
Federal statutory tax rate		21.0	%		21.0	%		21.0	%
State and local income taxes, net of U.S. federal income tax benefit		6.8			5.9			(8.7	)
Changes in valuation allowances		1.2			(1.5	)		(10.5	)
Non-deductible expenses		1.0			0.5			(17.0	)
Adjustment of uncertain tax positions and interest		0.4			0.4			(3.1	)
Foreign tax rate differential		0.2			—			(0.7	)
Provision to return		(1.9	)		0.1			0.7
Credits and incentives		(1.4	)		(0.5	)		4.7
Foreign-derived intangible income		(1.2	)		(0.6	)		10.2
Global intangible low-taxed income provision		—			0.8			—
Goodwill impairment		—			—			(45.3	)
Tax-exempt income and expense		—			—			0.6
Other		0.3			0.1			0.1
Effective income tax rate		26.4	%		26.2	%		(48.0	%)

The effective income tax rate was 26.4% for the year ended December 31, 2022 compared to 26.2% for the year ended December 31, 2021. The 2022 effective tax rate was impacted by an increase in valuation allowances and an increase in non-deductible expenses, partially offset by favorable return to provision adjustments and income tax credits.

The effective income tax rate was 26.2% for the year ended December 31, 2021 compared to (48.0%) for the year ended December 31, 2020. The change in the effective income tax rate was primarily driven by the nondeductible goodwill impairment charge recorded in 2020, increased earnings in 2021 and a reduction in the valuation allowances.

On August 16, 2022, President Biden signed the Inflation Reduction Act (“IRA”) into law, which included enactment of a 15% corporate minimum tax effective in 2023. The Company currently does not expect the corporate minimum tax to have a material impact on its financial results.

Deferred income taxes

The significant deferred tax assets and liabilities at December 31, 2022 and 2021 were as follows:

	December 31,
	2022			2021
Deferred tax assets:
Accrued liabilities and other reserves	$	15.2		$	28.6
Pension and other postretirement benefits plans liabilities		12.3			11.9
Lease liabilities		11.4			14.4
Net operating losses and other tax carryforwards		7.7			10.1
Capitalized research costs (a)		7.1			—
Share-based compensation		5.5			3.9
Allowance for doubtful accounts		5.5			3.4
Other		1.8			1.7
Total deferred tax assets		66.5			74.0
Valuation allowances		(5.4	)		(4.8	)
Total deferred tax assets	$	61.1		$	69.2
Deferred tax liabilities:
Other intangible assets	$	(9.6	)	$	(8.8	)
Accelerated depreciation		(7.4	)		(14.6	)
Right-of-use assets		(6.6	)		(8.5	)
Prepaid assets		(1.1	)		(1.0	)
Other		(3.0	)		(4.6	)
Total deferred tax liabilities		(27.7	)		(37.5	)
Net deferred tax assets	$	33.4		$	31.7

___________

(a)Beginning on January 1, 2022, for U.S. tax purposes, certain research and development costs are required to be capitalized and amortized, primarily over a 5-year period.

The amounts above are included in the audited Consolidated Balance Sheets as either a net asset or liability on a jurisdiction by jurisdiction basis.

Transactions affecting the valuation allowances on deferred tax assets during the years ended December 31, 2022, 2021 and 2020 were as follows:

	December 31,
	2022		2021			2020
Balance, beginning of year	$	4.8	$	7.5		$	5.2
Expense (income), net		0.6		(2.7	)		2.3
Balance, end of year	$	5.4	$	4.8		$	7.5

As of December 31, 2022, the Company had domestic and foreign net operating loss and other tax carryforward deferred tax assets of approximately $7.7 million, of which $4.6 million expires between 2023 and 2042. Limitations on the utilization of these deferred tax assets may apply. The Company has provided valuation allowances to reduce the carrying value of certain deferred tax assets as management has concluded that, based on the weight of available evidence, it is more likely than not that the deferred tax assets will not be fully realized.

Earnings generated by a foreign subsidiary are presumed to ultimately be transferred to the parent company. Therefore, the establishment of deferred taxes may be required with respect to the excess of the investment value for financial reporting over the tax basis of investments in those foreign subsidiaries (also referred to as book-over-tax outside basis differences). A company may overcome this presumption and forgo recording a deferred tax liability in its financial statements if it can assert that management has the intent and ability to indefinitely reinvest the earnings of its foreign subsidiaries. As a result of the transition tax incurred pursuant to the Tax Cuts and Jobs Act (H.R. 1) (the “Tax Act”), the Company has the ability to repatriate any previously taxed foreign cash associated with the foreign earnings subjected to U.S. tax to the U.S. parent with minimal additional tax consequences. Due to the changes under the Tax Act, the Company updated its assertion in 2018 related to indefinite reinvestment on all foreign earnings and other outside basis differences to indicate that the Company remains indefinitely reinvested in operations outside of the U.S. with the exception of the previously taxed foreign earnings already subject to U.S. tax. The Company did not make any repatriations in 2022 and 2020 and repatriated $30.0 million out of previously taxed earnings during 2021.

Uncertain tax positions

Changes in the Company’s unrecognized tax benefits at December 31, 2022, 2021 and 2020 were as follows:

	December 31,
	2022			2021			2020
Balance, beginning of year	$	2.2		$	1.3		$	0.5
Additions for tax positions of the current year		0.5			0.3			0.3
Additions for tax positions of prior years		0.3			0.7			0.5
Releases		(0.5	)		—			—
Settlements during the year		—			(0.1	)		—
Balance, end of year	$	2.5		$	2.2		$	1.3

As of December 31, 2022, 2021 and 2020, the Company had unrecognized tax benefits of $2.5 million, $2.2 million and $1.3 million, respectively. Unrecognized tax benefits of $2.5 million as of December 31, 2022, if recognized, would have decreased income taxes and the corresponding effective income tax rate and increased net earnings. This potential impact on net earnings reflects the reduction of these unrecognized tax benefits, net of certain deferred tax assets and the federal tax benefit of state income tax items.

As of December 31, 2022, it is reasonably possible that a portion of the total amount of unrecognized tax benefits is expected to decrease within twelve months due to the resolution of audits or expirations of statutes of limitations related to U.S. federal, state or international tax positions, but the amount is immaterial.

The Company classifies interest expense and any penalties related to income tax uncertainties as a component of income tax expense. The total interest expense, net of tax benefits, related to tax uncertainties recognized in the audited Consolidated Statements of Operations was de minimis for the years ended December 31, 2022, 2021 and 2020. There were no benefits from the reversal of accrued penalties for the years ended December 31, 2022, 2021 and 2020. There were no accrued penalties related to income tax uncertainties at December 31, 2022 and 2021.

As of December 31, 2022, the Company has tax years from 2015 and thereafter that remain open and subject to examination by certain U.S. state taxing authorities and/or certain foreign tax jurisdictions. There are no U.S. federal income tax years prior to the period ending December 31, 2019 subject to IRS examination. All U.S. federal income tax years including and subsequent to the period ending December 31, 2019 remain open and subject to IRS examination.