Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Earnings before income taxes for the years ended December 31 were taxed within the following jurisdictions:

In millions	2020		2019		2018
U.S.	$	151.4	$	211.1	$	151.4
Non-U.S.	214.0		264.1		323.8
Total	$	365.4	$	475.2	$	475.2

The components of the Provision for income taxes for the years ended December 31 were as follows:

In millions	2020		2019		2018
Current tax expense:
U.S.	$	55.0	$	87.1	$	86.4
Non-U.S.	20.3		16.2		18.1
Total:	75.3		103.3		104.5
Deferred tax benefit:
U.S.	(13.4)		(25.2)		(56.1)
Non-U.S.	(11.0)		(5.0)		(8.6)
Total:	(24.4)		(30.2)		(64.7)
Total tax expense:
U.S.	41.6		61.9		30.3
Non-U.S.	9.3		11.2		9.5
Total	$	50.9	$	73.1	$	39.8

The Provision for income taxes differs from the amount of income taxes determined by applying the applicable U.S. statutory income tax rate to pretax income, as a result of the following differences:

	Percent of pretax income
	2020		2019		2018
Statutory U.S. rate	21.0	%	21.0	%	21.0	%
Increase (decrease) in rates resulting from:
Non-U.S. tax rate differential (1)	(17.5)		(10.6)		(11.9)
State and local income taxes (1)	2.4		3.0		2.1
Reserves for uncertain tax positions	1.1		0.5		2.1
Tax on unremitted earnings	(0.1)		0.1		(1.2)
Tax Reform Act	—		—		(4.6)
Trade incentives	—		0.2		0.6
Impairment of goodwill and intangible assets	7.3		—		—
Impact of divestitures	—		1.6		—
Other adjustments	(0.3)		(0.4)		0.3
Effective tax rate	13.9	%	15.4	%	8.4	%

(1)Net of changes in valuation allowances

On December 22, 2017, the Tax Reform Act became law, resulting in broad and complex changes to the U.S. tax code. The impact to the Company's Consolidated Financial Statements during the year ended December 31, 2017, included, but were not limited to, a (1) reduced U.S. federal corporate tax rate from 35.0% to 21.0%, effective January 1, 2018, (2) required a one-time transition tax on certain unrepatriated earnings of non-U.S. subsidiaries and (3) required review of the future realizability of deferred tax balances.

Shortly after the Tax Reform Act was enacted, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118) which provided guidance on accounting for the Tax Reform Act’s impact. SAB 118 provided a measurement period, which in no case was to extend beyond one year from the Tax Reform Act enactment date, during which a company acting in good faith could complete the accounting for the impacts of the Tax Reform Act under ASC Topic 740. In finalizing the net tax charge resulting from the Tax Reform Act, in accordance with the one-year SAB 118 measurement period, the Company reversed $22.8 million of previous charges and recorded an additional $0.9 million of transition tax in 2018.

The majority of the Company's earnings are considered permanently reinvested, and therefore, the Company has not recorded any incremental withholding or income tax liabilities on earnings of its non-U.S. subsidiaries.

At December 31, a summary of the deferred tax accounts was as follows:

In millions	2020		2019
Deferred tax assets:
Inventory and accounts receivable	$	6.5	$	5.3
Fixed assets and intangibles	2.6		2.3
Lease liabilities	22.0		19.0
Postemployment and other benefit liabilities	29.9		31.0
Other reserves and accruals	16.4		14.2
Net operating losses, tax credits and other carryforwards	386.1		346.3
Other	1.8		0.8
Gross deferred tax assets	465.3		418.9
Less: deferred tax valuation allowances	(259.7)		(241.0)
Deferred tax assets net of valuation allowances	$	205.6	$	177.9
Deferred tax liabilities:
Fixed assets and intangibles	$	(112.0)	$	(104.3)
Right of use assets	(21.7)		(19.0)
Postemployment and other benefit liabilities	(6.8)		(5.1)
Unremitted earnings of foreign subsidiaries	(1.4)		(2.4)
Other	(5.6)		(3.8)
Gross deferred tax liabilities	(147.5)		(134.6)
Net deferred tax assets	$	58.1	$	43.3

At December 31, 2020, $1.4 million of deferred taxes were recorded for certain undistributed earnings of non-U.S. subsidiaries. Historically, no deferred taxes have been provided for any portion of the remaining undistributed earnings of the Company's subsidiaries since these earnings have been, and will continue to be, permanently reinvested in these subsidiaries. For many reasons, including the number of legal entities and jurisdictions involved, the complexity of the Company's legal entity structure, the complexity of tax laws in the relevant jurisdictions and the impact of projections of income for future years to any calculations, the Company believes it is not practicable to estimate, within any reasonable range, the amount of additional taxes which may be payable upon the distribution of earnings.

At December 31, 2020, the Company had the following tax losses and tax credit carryforwards available to offset taxable income in prior and future years:

In millions	Amount		Expiration Period
U.S. Federal tax loss carryforwards	$	18.9	2027-2037
U.S. Federal and State credit carryforwards	22.5		2025-2037
U.S. State tax loss carryforwards	22.9		2021-Unlimited
Non-U.S. tax loss carryforwards	$	1,015.8	2021-Unlimited

The U.S. state loss carryforwards were incurred in various jurisdictions. The non-U.S. loss carryforwards were incurred in various jurisdictions, predominantly in China, Ireland, Italy, Luxembourg and the United Kingdom.

The Company evaluates its deferred income tax assets to determine if valuation allowances are required or should be adjusted. GAAP requires that companies assess whether valuation allowances should be established against their deferred tax assets based on consideration of all available evidence, both positive and negative, using a "more likely than not" standard. This assessment considers the nature, frequency and amount of recent losses, the duration of statutory carryforward periods and tax planning strategies. In making such judgments, significant weight is given to evidence that can be objectively verified.

Activity associated with the Company’s valuation allowance is as follows:

In millions	2020		2019		2018
Beginning balance	$	241.0	$	357.1	$	312.9
Increase to valuation allowance	21.1		2.8		70.9
Decrease to valuation allowance	(2.8)		(118.6)		(25.0)
Foreign exchange translation	0.4		(0.3)		(1.7)
Ending balance	$	259.7	$	241.0	$	357.1

During the year ended December 31, 2020, the valuation allowance increased by $18.7 million, while during the year ended December 31, 2019, the valuation allowance decreased by $116.1 million. The increase for the year ended December 31, 2020, and the decrease for the year ended December 31, 2019, are the result of changes in country specific tax laws, internal restructurings, jurisdictional profitability and changes in judgments and facts regarding the realizability of deferred tax assets.

The Company has total unrecognized tax benefits of $41.2 million and $37.3 million as of December 31, 2020 and 2019, respectively. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $41.2 million as of December 31, 2020. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

In millions	2020		2019		2018
Beginning balance	$	37.3	$	42.0	$	29.0
Additions based on tax positions related to the current year	6.0		5.7		9.5
Additions based on tax positions related to prior years	4.1		1.7		8.2
Reductions based on tax positions related to prior years	(1.5)		(7.0)		(1.4)
Reductions related to settlements with tax authorities	(0.3)		(4.0)		(1.5)
Reductions related to lapses of statute of limitations	(5.2)		(0.8)		(1.1)
Translation loss/(gain)	0.8		(0.3)		(0.7)
Ending balance	$	41.2	$	37.3	$	42.0

The Company records interest and penalties associated with the uncertain tax positions within its provision for income taxes. The Company had reserves associated with interest and penalties, net of tax, of $7.6 million and $6.2 million at December 31, 2020 and 2019, respectively. For the years ended December 31, 2020 and 2019, the Company recognized $1.9 million and $1.3 million in net interest and penalties, net of tax, related to these uncertain tax positions.

The total amount of unrecognized tax benefits relating to the Company's tax positions is subject to change based on future events including, but not limited to, the settlements of ongoing audits and/or the expiration of applicable statutes of limitations. Although the outcomes and timing of such events are highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits, excluding interest and penalties, could potentially be reduced by up to approximately $14.8 million during the next 12 months.

The provision for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts and laws in the jurisdictions in which the Company operates. Future changes in applicable laws, projected levels of taxable income and tax planning could change the effective tax rate and tax balances recorded by the Company. In addition, tax authorities periodically review income tax returns filed by the Company and can raise issues regarding its filing positions, timing and amount of income or deductions and the allocation of income among the jurisdictions in which the Company operates. A significant period of time may elapse between the filing of an income tax return and the ultimate resolution of an issue raised by a tax authority with respect to that return. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Australia, Canada, France, Germany, Italy, Mexico, the Netherlands and the U.S. In general, the examination of the material tax returns of subsidiaries of the Company is complete for the years prior to 2003, with certain matters being resolved through appeals and litigation.