Tax Receivable Agreement

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Tax Receivable Agreement

Tax Receivable Agreement

In connection with the Company's initial public offering ("IPO"), the Company entered into a tax receivable agreement ("TRA") with Parent 2 that provides for the payment by the Company to Parent 2 of 90% of the amount of cash savings, if any, in U.S. federal, state, local and non-U.S. income tax that the Company realizes (or in some circumstances is deemed to realize) as a result of the utilization of the Company's and the Company’s subsidiaries’ (a) depreciation and amortization deductions, and any offset to taxable income and gain or increase to taxable loss, resulting from the tax basis the Company has in its assets at the consummation of the IPO, (b) net operating losses, (c) tax credits and (d) certain other tax attributes. At the end of each reporting period, any changes in the Company's estimate of the liability will be recorded in the consolidated statement of operations as a component of other income (expense). The timing and amount of future tax benefits associated with the TRA are subject to change, and future payments may be required which could be materially different from the current estimated liability. The TRA will remain in effect until all tax benefits have been used or expired, unless the agreement is terminated early.

As of June 30, 2019 and December 31, 2018, the TRA liability balance was $117.9 million and $134.6 million, respectively. The first payment related to the TRA was made in January 2019 for $16.7 million.

Income Taxes

Income tax expense for the three and six months ended June 30, 2019, was $5.4 million and $7.5 million, respectively, compared to an income tax expense of $0.6 million and a benefit of $0.8 million for the three and six months ended June 30, 2018, respectively. For the three and six months ended June 30, 2019, the Company's effective tax rates were 27.0% and 27.7%, respectively. The variance from the statutory federal tax rate of 21.0% for the three and six months ended June 30, 2019, was primarily due to state taxes, foreign rate differential and non-deductible items. 

For the three and six months ended June 30, 2018, the Company's effective tax rates were 29.6% and 49.6%, respectively. The variance from the statutory federal tax rate of 21.0% for the three months ended June 30, 2018, was primarily due to state income taxes, foreign rate differential and non-deductible items.  The variance from the statutory federal rate of 21.0% for the six months ended June 30, 2018, was primarily due to state income taxes, foreign rate differential, non-deductible items and a refinement of the provisional estimate of the one-time repatriation tax under the 2017 Tax Cuts and Jobs Act ("Tax Act").