Provision for Income Taxes Components of Provision for Income Tax (Tables)

12 Months Ended

Dec. 31, 2016

Components of Provision for Income Tax [Abstract]

Income Tax Disclosure [Table Text Block]

The provision for income taxes consisted of:

	Year Ended December 31,
(in thousands)	2016			2015			2014
Current:
United States – federal	$	284		$	24,084		$	1,834
United States – state and local	(415		)	3,458			1,544
Other than in the United States	4,504			8,250			13,917
Total current	4,373			35,792			17,295
Deferred:
United States – Federal	11,512			(35,888		)	(32,910		)
United States – state and local	6,365			(111		)	(572		)
Other than in the United States	(15,307		)	3,878			(8,541		)
Total deferred (benefit) provision	2,570			(32,121		)	(42,023		)
Provision for income taxes	$	6,943		$	3,671		$	(24,728	)

Income Tax Disclosure [Text Block]

We operate in numerous countries that have statutory tax rates below that of the United States federal statutory rate of 35%. The most significant of these foreign operations are located in Canada, Denmark, Germany, Italy, Mexico, Sweden and the United Kingdom with effective tax rates ranging between 20% and approximately 30%. Income before the provision for income taxes was as follows:

	Year Ended December 31,
(in thousands)	2016			2015			2014
United States	$	1,280		$	(20,748	)	$	(64,084	)
Other than the United States	(109,419		)	40,953			27,466
Income before provision for income taxes	$	(108,139	)	$	20,205		$	(36,618	)

We have foreign net operating loss benefits after tax of $23.8 million available to offset future taxable income in foreign jurisdictions. Of the foreign net operating loss benefits, $0.5 million is scheduled to expire in 2017 to 2027. The remaining net operating loss benefits have unlimited lives. We are carrying a valuation allowance of $17.6 million against the deferred tax asset related to the foreign loss carryforwards.

In 2016, we generated a U.S. federal net operating loss resulting in an after tax benefit of $9.4 million. We expect to fully utilize this net operating loss either through carryback to our former Parent company's tax return or through carryover to future periods. The U.S. federal operating loss will not expire until 2037. We have foreign tax credit carryovers of $3.9 million. Of this $3.9 million, $1.2 million will expire between 2022 and 2024. The remaining amount of the foreign tax credit carryover was generated in the current year and will expire in 2027. We have state net operating loss benefits after tax of $15.4 million available to offset future taxable income in various states. Our state net operating loss carryforwards begin to expire in the year 2017. We are carrying a valuation allowance of $12.4 million against the deferred tax asset related to the state loss carryforwards.

We would be subject to withholding taxes as well as U.S. income tax if we were to distribute earnings from certain foreign subsidiaries. For the year ended December 31, 2016, the undistributed earnings of these subsidiaries were $278.7 million. Unrecognized deferred income tax liabilities, including withholding taxes, of approximately $33.6 million would be payable upon distribution of these earnings after taking into account any related foreign tax credits. We have provided tax of $0.5 million on earnings we intend to remit. All other earnings are considered permanently reinvested.

The following is a reconciliation of the U.S. statutory federal tax rate (35%) to the consolidated effective tax rate:

	Year Ended December 31,
	2016		2015		2014
U.S. federal statutory (benefit) rate	35.0	%	35.0	%	35.0	%
State and local income taxes	(3.5	)	13.8		4.1
Foreign rate differential	(12.8	)	(13.1	)	16.6
Tax credits	3.0		(14.7	)	7.5
Dividends and deemed dividends from affiliates	(0.2	)	1.7		5.7
Valuation allowances	(28.1	)	4.3		(6.1	)
Uncertain tax positions	0.3		(6.6	)	(6.7	)
Non-deductible expenses	(1.8	)	2.4		(2.4	)
Manufacturing deduction	—		(2.5	)	11.6
Other	1.7		(2.1	)	2.2
Effective tax rate	(6.4	)%	18.2	%	67.5	%

PROVISION FOR INCOME TAXES

We are subject to federal income tax in the United States and income tax of multiple state and international jurisdictions. We provide for income taxes based on the tax laws and rates in the jurisdictions in which we conduct our operations. These jurisdictions may have regimes of taxation that vary with respect to both nominal rates and the basis on which these rates are applied. This variation, along with the changes in our mix of income within these jurisdictions, can contribute to shifts in our effective tax rate from period to period.

We are currently under audit by various state and international authorities. With few exceptions, we do not have any returns under examination for years prior to 2010. The United States Internal Revenue Service has completed its examination of the 2010 through 2012 federal tax returns of BWC, and all matters arising from such examination have been resolved.

We apply the provisions of FASB Topic Income Taxes regarding the treatment of uncertain tax positions. A reconciliation of unrecognized tax benefits follows:

	Year Ended December 31,
(in thousands)	2016			2015			2014
Balance at beginning of period	$	1,141		$	3,321		$	1,190
Increases based on tax positions taken in the current year	178			88			213
Increases based on tax positions taken in the prior years	230			248			2,268
Decreases based on tax positions taken in the prior years	—			(1,161		)	—
Decreases due to settlements with tax authorities	(665		)	(1,355		)	(350		)
Decreases due to lapse of applicable statute of limitation	—			—			—
Balance at end of period	$	884		$	1,141		$	3,321

Of the $0.9 million balance of unrecognized tax benefits at December 31, 2016, $0.8 million would reduce our effective tax rate if recognized.

We recognize interest and penalties related to unrecognized tax benefits in our provision for income taxes. During the year ended December 31, 2016, we recorded a decrease in our accruals of less than $0.2 million, resulting in recorded liabilities of approximately $0.1 million for the payment of tax-related interest and penalties. At December 31, 2015 and 2014, our recorded liabilities for the payment of tax-related interest and penalties totaled approximately $0.3 million for both years.

It is unlikely that our previously unrecognized tax benefits will change significantly in the next twelve months.

Deferred income taxes reflect the net tax effects of temporary differences between the financial and tax bases of assets and liabilities. Significant components of deferred tax assets and liabilities as of December 31, 2016 and 2015 were as follows:

	December 31,
(in thousands)	2016			2015
Deferred tax assets:
Pension liability	$	105,426		$	107,748
Accrued warranty expense	11,628			12,589
Accrued vacation pay	4,792			4,482
Accrued liabilities for self-insurance (including postretirement health care benefits)	6,596			14,280
Accrued liabilities for executive and employee incentive compensation	8,334			14,255
Investments in joint ventures and affiliated companies	10,742			14,100
Long-term contracts	10,318			6,963
Accrued Legal Fees	2,110			—
Inventory Reserve	2,445			2,621
Property, plant and equipment	1,587			—
Net operating loss carryforward	33,187			13,544
State tax net operating loss carryforward	15,372			14,409
Foreign tax credit carryforward	3,870			2,378
Other	8,589			6,585
Total deferred tax assets	224,996			213,954
Valuation allowance for deferred tax assets	(40,484		)	(10,077		)
Net, total deferred tax assets	184,512			203,877
Deferred tax liabilities:
Long-term contracts	3,601			9,084
Intangibles	21,892			13,158
Property, plant and equipment	—			3,379
Undistributed foreign earnings	500			1,000
Goodwill	1,125			1,167
Other	2,885			1,317
Total deferred tax liabilities	30,003			29,105
Net deferred tax assets	$	154,509		$	174,772

At December 31, 2016, we had a valuation allowance of $40.5 million for deferred tax assets, which we expect may not be realized through carrybacks, future reversals of existing taxable temporary differences and estimates of future taxable income. We believe that our remaining deferred tax assets are more likely than not realizable through carrybacks, future reversals of existing taxable temporary differences and estimates of future taxable income. Any changes to our estimated valuation allowance could be material to our consolidated and combined financial statements. The following is an analysis of our valuation allowance for deferred tax assets:

(in thousands)	Beginning balance			Charges to costs and expenses			Charged to other accounts			Ending balance
Year Ended December 31, 2016	$	(10,077	)	$	(29,307	)	$	(1,100	)	$	(40,484	)
Year Ended December 31, 2015	(9,216		)	(861		)	—			(10,077		)
Year Ended December 31, 2014	(6,980		)	(2,236		)	—			(9,216		)

We operate in numerous countries that have statutory tax rates below that of the United States federal statutory rate of 35%. The most significant of these foreign operations are located in Canada, Denmark, Germany, Italy, Mexico, Sweden and the United Kingdom with effective tax rates ranging between 20% and approximately 30%. Income before the provision for income taxes was as follows:

	Year Ended December 31,
(in thousands)	2016			2015			2014
United States	$	1,280		$	(20,748	)	$	(64,084	)
Other than the United States	(109,419		)	40,953			27,466
Income before provision for income taxes	$	(108,139	)	$	20,205		$	(36,618	)

The provision for income taxes consisted of:

	Year Ended December 31,
(in thousands)	2016			2015			2014
Current:
United States – federal	$	284		$	24,084		$	1,834
United States – state and local	(415		)	3,458			1,544
Other than in the United States	4,504			8,250			13,917
Total current	4,373			35,792			17,295
Deferred:
United States – Federal	11,512			(35,888		)	(32,910		)
United States – state and local	6,365			(111		)	(572		)
Other than in the United States	(15,307		)	3,878			(8,541		)
Total deferred (benefit) provision	2,570			(32,121		)	(42,023		)
Provision for income taxes	$	6,943		$	3,671		$	(24,728	)

The following is a reconciliation of the U.S. statutory federal tax rate (35%) to the consolidated effective tax rate:

	Year Ended December 31,
	2016		2015		2014
U.S. federal statutory (benefit) rate	35.0	%	35.0	%	35.0	%
State and local income taxes	(3.5	)	13.8		4.1
Foreign rate differential	(12.8	)	(13.1	)	16.6
Tax credits	3.0		(14.7	)	7.5
Dividends and deemed dividends from affiliates	(0.2	)	1.7		5.7
Valuation allowances	(28.1	)	4.3		(6.1	)
Uncertain tax positions	0.3		(6.6	)	(6.7	)
Non-deductible expenses	(1.8	)	2.4		(2.4	)
Manufacturing deduction	—		(2.5	)	11.6
Other	1.7		(2.1	)	2.2
Effective tax rate	(6.4	)%	18.2	%	67.5	%

We have foreign net operating loss benefits after tax of $23.8 million available to offset future taxable income in foreign jurisdictions. Of the foreign net operating loss benefits, $0.5 million is scheduled to expire in 2017 to 2027. The remaining net operating loss benefits have unlimited lives. We are carrying a valuation allowance of $17.6 million against the deferred tax asset related to the foreign loss carryforwards.

In 2016, we generated a U.S. federal net operating loss resulting in an after tax benefit of $9.4 million. We expect to fully utilize this net operating loss either through carryback to our former Parent company's tax return or through carryover to future periods. The U.S. federal operating loss will not expire until 2037. We have foreign tax credit carryovers of $3.9 million. Of this $3.9 million, $1.2 million will expire between 2022 and 2024. The remaining amount of the foreign tax credit carryover was generated in the current year and will expire in 2027. We have state net operating loss benefits after tax of $15.4 million available to offset future taxable income in various states. Our state net operating loss carryforwards begin to expire in the year 2017. We are carrying a valuation allowance of $12.4 million against the deferred tax asset related to the state loss carryforwards.

We would be subject to withholding taxes as well as U.S. income tax if we were to distribute earnings from certain foreign subsidiaries. For the year ended December 31, 2016, the undistributed earnings of these subsidiaries were $278.7 million. Unrecognized deferred income tax liabilities, including withholding taxes, of approximately $33.6 million would be payable upon distribution of these earnings after taking into account any related foreign tax credits. We have provided tax of $0.5 million on earnings we intend to remit. All other earnings are considered permanently reinvested.