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Income Taxes
9 Months Ended
Sep. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes

Note 10. Income Taxes

 

The Company’s provision for income taxes for the three and nine months ended September 30, 2018 and 2017 is based on the estimated annual effective tax rate, plus discrete items. The following table presents the provision for income taxes and the effective income tax rates for the three and nine months ended September 30, 2018 and 2017:

 

 

Three Months Ended September 30,

 

 

 

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

 

(in millions, except percentages)

 

Earnings before income taxes

$

67.7

 

 

$

7.4

 

 

$

60.3

 

 

 

814.9

%

Income tax expense

 

19.7

 

 

 

2.1

 

 

 

17.6

 

 

 

838.1

%

Effective income tax rate

 

29.1

%

 

 

28.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

2018

 

 

2017

 

 

$ Change

 

 

% Change

 

 

(in millions, except percentages)

 

Earnings before income taxes

$

106.1

 

 

$

55.4

 

 

$

50.7

 

 

 

91.5

%

Income tax expense

 

31.5

 

 

 

22.0

 

 

 

9.5

 

 

 

43.2

%

Effective income tax rate

 

29.7

%

 

 

39.7

%

 

 

 

 

 

 

 

 

 

Cash payments (net of refunds) for U.S. federal, states and foreign income taxes were $1.5 million and $8.9 million for the three months ended September 30, 2018 and 2017, respectively, and $7.6 million and $21.8 million for the nine months ended September 30, 2018 and 2017, respectively.

The decrease in the effective income tax rate to 29.7% for the nine months ended September 30, 2018 compared to 39.7% for the nine months ended September 30, 2017 was primarily due to changes in U.S. corporate tax law pursuant to the enactment of the U.S. Federal Tax Cut and Jobs Act (“the Tax Act”) on December 22, 2017, and includes a reduction of the corporate income tax from 35% to 21%, partially offset by an increase in non-deductible expenses and the taxation of certain foreign earnings referred to in the Tax Act as global intangible low-taxed income. The effective income tax rate for the nine months ended September 30, 2018 also reflects the tax impact of the sale of the Language Solutions business.

 

Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, the Company made reasonable estimates of the tax effects and recorded provisional amounts in its consolidated financial statements for the year ended December 31, 2017. Staff Accounting Bulletin No. 118 (“SAB 118”) provided a measurement period of one year from the Tax Act enactment date for companies to complete their accounting for the enactment-date effects of the Tax Act that were considered provisional estimates at December 31, 2017. During the first quarter of 2018, the Company recognized a measurement-period adjustment of $0.4 million to decrease the income tax liability with a corresponding $0.4 million income tax benefit related to the one-time transition tax on foreign subsidiaries’ untaxed accumulated earnings. The Company is continuing to gather and review additional information needed to complete the accounting for the tax effects of the Tax Act. As a result, the Company has not made any additional measurement-period adjustments during the three months ended September 30, 2018 with respect to the one-time transition tax, re-measurement of deferred tax assets and liabilities and the Company’s indefinite reinvestment assertion. The Company will complete its accounting for these items within the prescribed measurement period.