Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The following table presents components of loss from operations before taxes for the years ended December 31:

	2021		2020		2019
Domestic	$	(168.3)	$	(293.8)	$	(249.6)
Foreign	117.6		24.3		20.7
Total	$	(50.7)	$	(269.5)	$	(228.9)

The following table presents the components of income tax expense (benefit) for the years ended December 31:

	2021		2020		2019
Current
U.S. federal	$	3.5	$	3.5	$	0.7
Foreign	38.2		14.6		36.1
State and local	(1.2)		0.4		1.5
Total current	40.5		18.5		38.3
Deferred
U.S. federal	(1.7)		7.1		78.1
Foreign	(11.4)		(22.6)		(11.7)
State and local	0.3		(4.0)		12.0
Total deferred	(12.8)		(19.5)		78.4
Income tax expense (benefit)	$	27.7	$	(1.0)	$	116.7

Income tax expense (benefit) attributable to loss from operations before taxes differed from the amounts computed by applying the U.S. federal income tax rate of 21 percent to pre-tax loss from operations. The following table presents these differences for the years ended December 31:

	2021		2020		2019
Statutory tax benefit	$	(10.6)	$	(56.6)	$	(48.1)
State and local taxes (net of federal tax benefit)	(0.6)		(3.6)		(3.8)
Brazil non-taxable incentive	(4.3)		(5.2)		(5.8)
Valuation allowances	33.8		32.5		46.2
Barbados loan restructuring	—		—		83.1
Netherlands liquidation deferred tax	—		—		5.9
Foreign tax rate differential	2.2		(6.1)		(1.4)
Tax on unremitted foreign earnings	0.7		1.8		8.9
Change to uncertain tax positions	(9.2)		(23.9)		4.0
U.S. taxed foreign income	6.9		8.7		10.5
Non-deductible (non-taxable) items	0.7		12.2		18.0
Termination of company owned life insurance	—		35.1		—
Return to provision	(0.8)		(9.6)		(2.6)
Withholding tax and other taxes	8.7		4.6		6.8
Other	0.2		9.1		(5.0)
Income tax expense (benefit)	$	27.7	$	(1.0)	$	116.7

The effective tax rate for 2021 was (54.6) percent. Tax expense items contributing to the difference from the U.S. federal income tax rate included valuation allowances related to certain foreign and U.S. tax attributes for which realization does not meet the more likely than not criteria, U.S. tax on foreign income, withholding taxes, non-deductible expenses and other items. These items were partially offset by benefits related to settling certain open tax years in Germany and the U.S. and other changes to uncertain tax position accruals, non taxable incentives, and other items.

The effective tax rate for 2020 was 0.4 percent. Tax expense items contributing to the difference from the U.S. federal income tax rate included U.S. tax on foreign income, valuation allowances related to certain foreign and U.S. tax attributes for which realization does not meet the more likely than not criteria, non-deductible expenses, and the tax effects of terminating certain company-owned life insurance (COLI) policies. These items were partially offset by tax credits, benefits related to settling certain open tax years in Germany and the U.S., changes to uncertain tax position accruals, and benefit related to regulations issued in 2020 related to US tax reform.

The effective tax rate for 2019 was (51.0) percent and was primarily due to the U.S. taxed foreign income, including global intangible low-taxed income (GILTI), valuation allowances recorded on certain foreign and state jurisdictions, U.S. foreign tax credits that did not meet the more likely than not criteria for realization and the tax effects related to the Barbados structure collapse. The Company’s collapse of its Barbados structure to meet the covenant requirements under its credit agreement resulted in a net tax expense of $46.3 inclusive of the offsetting valuation allowance release relating to the Company’s nondeductible interest expense that was carried forward from December 31, 2018.

The Company recognizes the benefit of tax positions taken or expected to be taken in its tax returns in the consolidated financial statements when it is more likely than not that the position will be sustained upon examination by authorities. Recognized tax positions are measured at the largest amount of benefit that is more likely than not of being realized upon settlement.

Details of the unrecognized tax benefits are as follows:

	2021		2020		2019
Balance at January 1	$	36.8	$	50.9	$	49.5
Increases (decreases) related to prior year tax positions, net	42.1		0.9		5.1
Increases related to current year tax positions	—		—		4.4
Settlements	(23.3)		(7.7)		(5.5)
Reductions due to lapse of applicable statute of limitations	(0.5)		(7.3)		(2.6)
Balance at December 31	$	55.1	$	36.8	$	50.9

Of the Company's $55.1 unrecognized tax benefits, if recognized, $15.1 would affect the Company's effective tax rate. The remaining $40.0 relates to a prior year tax return position, which if recognized, would be offset by changes in valuation allowances and have no effect on the Company's effective tax rate.

The Company classifies interest expense and penalties related to the underpayment of income taxes in the consolidated financial statements as income tax expense. As of December 31, 2021 and 2020, accrued interest and penalties related to unrecognized tax benefits totaled $1.7 and $3.7, respectively.

Within the next 12 months, no material changes to our unrecognized tax benefits are expected for currently reserved positions. Tax years prior to 2017 are closed by statute for U.S. federal tax purposes. The Company is subject to tax examination in various U.S. state jurisdictions for tax years 2011 to the present. In addition, the Company is subject to a German tax audit for tax years 2018-2019, and other various foreign jurisdictions for tax years 2012 to the present.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities at December 31 are as follows:

	2021		2020
Deferred tax assets
Accrued expenses	$	50.8	$	40.7
Warranty accrual	12.4		6.5
Deferred compensation	3.9		6.8
Allowances for doubtful accounts	8.0		4.8
Inventories	19.6		17.6
Deferred revenue	19.8		14.0
Pensions, post-retirement and other benefits	48.8		71.2
Tax credits	67.2		66.0
Net operating loss carryforwards	150.7		175.6
Capital loss carryforwards	1.1		0.4
State deferred taxes	8.6		10.9
Lease liability	34.5		28.4
Other	18.8		5.0
	444.2		447.9
Valuation allowances	(261.8)		(229.5)
Net deferred tax assets	$	182.4	$	218.4
Deferred tax liabilities
Property, plant and equipment, net	$	12.9	$	15.9
Goodwill and intangible assets	112.6		145.9
Undistributed earnings	32.2		32.7
Right-of-use assets	34.5		29.8
Net deferred tax liabilities	192.2		224.3
Net deferred tax (liability) asset	$	(9.8)	$	(5.9)

Deferred income taxes reported in the consolidated balance sheets as of December 31 are as follows:

	2021		2020
Deferred income taxes - assets	$	95.7	$	97.5
Deferred income taxes - liabilities	(105.5)		(103.4)
Net deferred tax (liabilities) assets	$	(9.8)	$	(5.9)

As of December 31, 2021, the Company had domestic and international net operating loss (NOL) carryforwards of $984.3, resulting in an NOL deferred tax asset of $150.7. Of these NOL carryforwards, $591.4 expire at various times between 2022 and 2042 and $392.9 does not expire. At December 31, 2021, the Company had a domestic foreign tax credit carryforward resulting in a deferred tax asset of $59.8 that will expire between 2022 and 2030 and a general business credit carryforward resulting in a deferred tax asset of $8.5 that will expire between 2036 and 2040. The Company has a full valuation allowance on the domestic foreign tax credit carryforward.

The Company recorded a valuation allowance to reflect the estimated amount of certain U.S., foreign and state deferred tax assets that, more likely than not, will not be realized. The net change in total valuation allowance for the years ended December 31, 2021 and 2020 was an increase of $32.3 and $11.8, respectively. The 2021 valuation allowance increase was driven primarily by an increase to nondeductible business interest expense carryforwards in excess of amounts that are expected to be utilized on a more likely than not basis, as well as foreign net operating loss activity offset by utilization of U.S. foreign tax credits. Of the total 2021 net increase of $32.3, the Company recorded $40.3 to tax expense ($6.5 attributable to state taxes), ($6.7) was recorded to shareholder’s equity and ($1.3) was reversed against expired attributes.

For the years ended December 31, 2021 and 2020, provisions were made for foreign withholding taxes and estimated foreign income taxes which may be incurred upon the remittance of certain undistributed earnings in foreign subsidiaries and foreign unconsolidated affiliates. Provisions have not been made for income taxes on $547.7 of undistributed earnings at December 31, 2021 in foreign subsidiaries and corporate joint ventures that were deemed permanently reinvested. Determination of the amount of unrecognized deferred income tax liabilities on these earnings is not practicable because such liability, if any, depends on certain circumstances existing if and when remittance occurs. A deferred tax liability will be recognized if and when the Company no longer plans to permanently reinvest these undistributed earnings.

The Company’s undistributed earnings in foreign subsidiaries that are deemed permanently reinvested decreased compared to the prior-year amount and was primarily impacted by current year income.