Income Taxes

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income Taxes

11. INCOME TAXES

Income (loss) before income taxes includes the results from domestic and international operations as follows:

	Year Ended December 31
	2015			2014		2013
U.S. companies	$	(243,796	)	$	33,089	$	(149,688	)
Non-U.S. companies		181,795			283,974		225,873
Income (loss) before income taxes	$	(62,001	)	$	317,063	$	76,185

The components of income tax expense were as follows:

	Year Ended December 31,
	2015			2014			2013
Current:
Federal	$	23,940		$	15,182		$	19,646
Foreign		81,123			86,135			73,123
State		5,637			12,252			4,742
Current income tax expense		110,700			113,569			97,511
Deferred:
Federal		(81,913	)		(26,609	)		(41,428	)
Foreign		(18,627	)		(2,187	)		1,410
State		(1,286	)		(4,482	)		(704	)
Deferred income tax benefit		(101,826	)		(33,278	)		(40,722	)
Total income tax expense	$	8,874		$	80,291		$	56,789

The reconciliation of income taxes calculated at the statutory U.S. federal income tax rate to the Company’s provision for income taxes was as follows:

	Year Ended December 31,
	2015			2014			2013
Provision for income taxes at federal statutory rate	$	(21,700	)	$	110,972		$	26,665
State income taxes, net of federal tax effect (1)		(608	)		1,772			215
Other permanent items		1,086			(2,131	)		2,668
Goodwill related items		25,518			1,668			14,623
Federal tax credits		(1,940	)		(2,538	)		(3,533	)
Change in unrecognized tax benefits		(2,484	)		(22,206	)		2,076
Foreign dividends and Subpart F income, net of foreign tax credits		256			25,152			33,145
Foreign earnings taxed at other than federal rate		(21,210	)		(33,965	)		(28,910	)
Tax provision adjustments and revisions to prior years’ returns		(4,796	)		(1,973	)		(4,596	)
Change in valuation allowance		33,505			3,218			14,269
Other		1,247			322			167
Total provision for income taxes	$	8,874		$	80,291		$	56,789

(1) Presented net of federal tax benefit and does not include tax expense related to valuation allowances.

On January 2, 2013, the American Taxpayer Relief Act of 2012 retroactively extended the tax credit for research and experimentation expenses through December 31, 2013. The Company has reflected the 2012 credit in its 2013 tax provision, resulting in a benefit of $1.8 million.

The components of deferred income tax assets and liabilities and the classification of deferred tax balances on the balance sheet were as follows (1):

	December 31,
	2015			2014
Deferred tax assets:
Accounts receivable, inventory and warranty reserves	$	63,374		$	30,253
Employee benefits		10,173			12,198
Postretirement benefits		10,039			16,006
Restructuring accruals		9,761			3,956
Foreign net operating loss carryforwards		53,009			40,424
Federal net operating loss carryforwards		3,498			3,934
Federal tax credit carryforwards		95,623			79,842
State net operating loss and tax credit carryforwards		17,070			17,007
Transaction costs		13,958			5,361
Equity-based compensation		14,885			15,741
Unrecognized tax benefits		21,527			18,726
Other		35,791			33,410
Total deferred tax assets		348,708			276,858
Valuation allowance		(101,549	)		(66,556	)
Total deferred tax assets, net of valuation allowance		247,159			210,302
Deferred tax liabilities:
Intangible assets		(354,434	)		(419,402	)
Property, plant and equipment		(38,146	)		(27,501	)
Undistributed foreign earnings		(7,851	)		(23,133	)
Other		(10,360	)		(22,613	)
Total deferred tax liabilities		(410,791	)		(492,649	)
Net deferred tax liability	$	(163,632	)	$	(282,347	)
Deferred taxes as recorded on the balance sheet:
Current deferred tax asset	$	—		$	51,230
Current deferred tax liability (included with Other current liabilities)		—			(1,404	)
Noncurrent deferred tax asset (included with Other noncurrent assets)		38,855			7,772
Noncurrent deferred tax liability		(202,487	)		(339,945	)
Net deferred tax liability	$	(163,632	)	$	(282,347	)

(1) Amounts reflected in the 2014 column have been reclassified to conform with current year presentation.

The deferred tax asset for federal tax credit carryforwards as of December 31, 2015 relates to foreign tax credit carryforwards that expire between 2018 and 2025. A valuation allowance of $28.9 million has been established against these deferred tax assets.

The deferred tax asset for state net operating loss and tax credit carryforwards as of December 31, 2015 includes state net operating loss carryforwards (net of federal tax impact) of $16.2 million, which begin to expire in 2016, and state tax credit carryforwards (net of federal tax impact) of $0.9 million which begin to expire in 2016. A valuation allowance of $11.4 million has been established against these state income tax related deferred tax assets.

The deferred tax assets as of December 31, 2015 include foreign net operating loss carryforwards (net of federal tax impacts) of $53.0 million, which will begin to expire in 2016. Certain of these foreign net operating loss carryforwards are subject to local restrictions limiting their utilization. Valuation allowances of $45.5 million have been established related to these foreign net operating loss carryforwards.

In addition to the valuation allowances detailed above, the Company has also established a valuation allowance of $15.8 million against other deferred tax assets.

As of December 31, 2015, a deferred tax liability of $7.9 million has been established to reflect the U.S. federal and state tax cost associated with the planned repatriation of that portion of the Company’s undistributed foreign earnings that are not considered to be permanently reinvested in foreign operations. The remaining amount of undistributed earnings from foreign subsidiaries for which no incremental U.S. income taxes have been provided was $546.6 million as of December 31, 2015 as these earnings are considered to be permanently reinvested in foreign operations. Determination of the amount of unrecognized deferred income tax liability related to these earnings is not practicable.

The following table reflects a reconciliation of the beginning and end of period amounts of gross unrecognized tax benefits, excluding interest and penalties:

	Year Ended December 31,
	2015			2014			2013
Balance at beginning of period	$	68,223		$	91,410		$	92,523
Increase related to prior periods		1,677			223			150
Decrease related to prior periods		(2,094	)		(1,275	)		(311	)
Increase related to current periods		914			—			7
Decrease related to lapse in statutes of limitations		(4,635	)		(22,135	)		(959	)
Balance at end of period	$	64,085		$	68,223		$	91,410

The Company’s liability for unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate in future periods was $47.2 million as of December 31, 2015. The Company operates in numerous jurisdictions worldwide and is subject to routine tax audits on a regular basis. The determination of the Company’s unrecognized tax benefits involves significant management judgment regarding interpretation of relevant facts and tax laws in each of these jurisdictions.

Unrecognized tax benefits are reviewed and evaluated on an ongoing basis and may be adjusted for changing facts and circumstances including the lapse of applicable statutes of limitation and closure of tax examinations. Although the timing and outcome of such events are difficult to predict, the Company reasonably estimates that the balance of unrecognized tax benefits, excluding the impact of accrued interest and penalties, may be reduced by up to $16.0 million within the next twelve months.

The Company provides for interest and penalties related to unrecognized tax benefits as income tax expense. As of December 31, 2015 and 2014, the Company had accrued $7.9 million and $8.3 million, respectively, for interest and penalties. During the years ended December 31, 2015, 2014 and 2013, the net expense (credit) for interest and penalties recognized through income tax expense was $(0.5) million, $(4.6) million and $1.9 million, respectively.

During 2014, the Company concluded an examination by the Internal Revenue Service of the Company’s U.S. federal income tax return for 2010, as well as amended returns for 2007 and 2008. The Company files state and local tax returns in multiple jurisdictions with statutes of limitation generally ranging from 3 to 4 years. The Company is generally no longer subject to state and local tax examinations for years prior to 2010. Tax returns filed by the Company’s significant foreign subsidiaries are generally subject to statutes of limitations of 3 to 7 years and are generally no longer subject to examination for years prior to 2010. In many jurisdictions, tax authorities retain the ability to review prior years’ tax returns and to adjust any net operating loss or tax credit carryforwards from these years that are available to be utilized in subsequent periods. During 2015, the Company recognized $4.6 million related to the lapse of applicable statutes of limitations and the conclusion of various domestic and foreign examinations.

The following table presents income tax expense (benefit) related to amounts presented in other comprehensive income (loss):

	Year Ended December 31,
	2015			2014			2013
Foreign currency translation	$	(5,438	)	$	(7,942	)	$	1,946
Available-for-sale securities		(3,174	)		7,351			—
Defined benefit plans		(3,714	)		(8,008	)		(296	)
Total	$	(12,326	)	$	(8,599	)	$	1,650