Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Schedule of Income before Income Tax, Domestic and Foreign

The components of earnings before income taxes and discontinued operations were:



	Years Ended December 31,
(in millions)	2018			2017			2016
Domestic	$	(34.1	)	$	402.7		$	(51.1	)
Foreign	95.2			(383.3		)	79.2
Total earnings before income taxes and discontinued operations	$	61.1		$	19.4		$	28.1

Schedule of Components of Income Tax Expense (Benefit)

Income tax (benefit) expense for the years ended December 31, 2018, 2017, and 2016 is comprised of the following:



	Years Ended December 31,
(in millions)	2018			2017			2016
Current:
U.S. Federal	$	(25.0	)	$	28.9		$	—
State and local	0.1			0.1			0.1
Foreign	11.6			11.7			6.8
Total current tax (benefit) expense	$	(13.3	)	$	40.7		$	6.9
Deferred:
U.S. Federal	$	7.8		$	(26.8	)	$	0.8
State and local	0.2			—			0.2
Foreign	0.8			(1.0		)	0.4
Total deferred tax expense (benefit)	8.8			(27.8		)	1.4
Total income tax (benefit) expense	$	(4.5	)	$	12.9		$	8.3

Schedule of Effective Income Tax Rate Reconciliation

The reconciliation of the U.S. Federal income tax rate to the Company’s effective income tax rate was as follows:



	Years Ended December 31,
	2018		2017		2016
U.S. Federal income tax rate	21.0	%	35.0	%	35.0	%
State and local taxes, net of Federal income tax benefit	0.4	%	(0.2	)%	1.1	%
Foreign operations tax effect	4.0	%	27.0	%	(22.5	)%
Research and experimentation tax credits	(5.0	)%	(11.6	)%	(6.6	)%
Valuation allowance	22.9	%	60.8	%	69.6	%
Tax contingencies	(4.3	)%	6.6	%	(0.6	)%
Tax holiday	(24.3	)%	(78.0	)%	(64.2	)%
Foreign taxes	0.9	%	(5.0	)%	2.8	%
Non-deductible and non-taxable interest	1.4	%	(0.8	)%	3.2	%
Stock-based compensation	3.1	%	9.3	%	9.6	%
Other, principally non-tax deductible items ⁽¹⁾	3.2	%	13.5	%	1.9	%
Transition tax	(28.9	)%	89.7	%	—	%
Tax reform	(1.7	)%	(85.3	)%	—	%
Prior period items	(0.1	)%	5.5	%	0.2	%
Effective income tax rate	(7.4	)%	66.5	%	29.5	%

Schedule of Deferred Tax Assets and Liabilities

The components of the Company’s deferred tax assets and liabilities included the following:



(in millions)	December 31, 2018			December 31, 2017
Deferred tax assets:
Accrued compensation, principally post-retirement, and other employee benefits	$	15.1		$	13.7
Accrued expenses, principally for state income taxes, interest, and warranty	4.6			5.9
Net operating loss and other carryforwards	155.9			115.6
Inventories, principally due to reserves for financial reporting purposes and capitalization for tax purposes	3.9			3.6
Convertible Note Hedges	5.7			7.3
Plant and equipment, principally due to differences in depreciation	9.4			9.6
Total gross deferred tax assets	194.6			155.7
Valuation allowance	(131.2		)	(99.7		)
Total deferred tax assets	$	63.4		$	56.0

Deferred tax liabilities:
Intangible assets, principally due to different tax and financial reporting bases and amortization lives	$	(8.7	)	$	(10.3	)
Debt discount on convertible notes	(4.4		)	(5.7		)
Other liabilities	(37.2		)	(17.6		)
Total gross deferred tax liabilities	(50.3		)	(33.6		)
Net deferred tax asset	$	13.1		$	22.4

Classified as follows in the Consolidated Balance Sheets:
Other assets and deferred charges (non-current deferred tax assets)	$	15.2		$	22.4
Deferred income taxes (non-current deferred tax liabilities)	(2.1		)	—
Net deferred tax asset	$	13.1		$	22.4

Schedule of Unrecognized Tax Benefits Roll Forward

Unrecognized Tax Benefits

The Company records interest and penalties associated with unrecognized tax benefits as a component of income tax expense. During the years ended December 31, 2018 and 2017, the Company recorded a potential interest benefit of $0.3 million and $1.1 million, respectively. The Company recorded $0.3 million of potential interest expense during the year ended December 31, 2016. There was no accrued interest at December 31, 2018. Total accrued interest at December 31, 2017 and 2016 of $0.4 million and $1.4 million, respectively, was included in Other liabilities on the Consolidated Balance Sheets. During the years ended December 31, 2018 and 2017, the Company recorded potential penalty expense of $0.1 million and $0.2 million, respectively. Total accrued penalties at December 31, 2018 and 2017 of $0.3 million and $0.2 million, respectively, were included in Other liabilities on the Consolidated Balance Sheets. There was no recorded potential penalty expense or accrued penalties at December 31, 2016.

The Company's tax returns are routinely audited by the tax authorities in the relevant jurisdictions. For tax years before 2017, the Company is no longer subject to U.S. federal income tax examination. For tax years before 2013, the Company’s Malaysian subsidiaries are no longer subject to examination. It is reasonably possible that the gross amount of unrecognized tax benefits will decrease by $0.1 million during the next twelve months. Included in the balance of total unrecognized tax benefits at December 31, 2018 are potential benefits of $3.5 million, which if recognized, would affect the effective rate on earnings from continuing operations. Given the Company's current valuation allowance position, no benefit is expected to result from the reversal of any uncertain tax position associated with the acquired attributes.



Unrecognized tax benefits at January 1, 2016	$	12.8
Reductions for tax positions due to lapsed statutes of limitations	(0.5		)
Foreign exchange fluctuations	(0.5		)
Unrecognized tax benefits at December 31, 2016	$	11.8
Additions based on tax positions related to the current year	2.6
Additions for tax positions of prior years	0.6
Reductions for tax positions due to lapsed statutes of limitations	(1.3		)
Tax reform	(1.5		)
Foreign exchange fluctuations	0.3
Unrecognized tax benefits at December 31, 2017	$	12.5
Additions based on tax positions related to the current year	0.1
Additions for tax positions of prior years	0.3
Reductions for tax positions due to lapsed statutes of limitations	(2.5		)
Settlements	(0.3		)
Unrecognized tax benefits at December 31, 2018	$	10.1