INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The following table presents components of (loss) income from operations before taxes:

	Successor		Predecessor
	Period from 08/12/2023 through 12/31/2023		Period from 01/01/2023 through 08/11/2023		Years ended December 31,
					2022		2021
Domestic	$	(62.7)	$	792.7	$	(413.2)	$	(168.3)
Foreign	62.6		655.7		(25.4)		117.6
Total	$	(0.1)	$	1,448.4	$	(438.6)	$	(50.7)

The following table presents the components of income tax expense (benefit):

	Successor		Predecessor
	Period from 08/12/2023 through 12/31/2023		Period from 01/01/2023 through 08/11/2023		Years ended December 31,
					2022		2021
Current
U.S. federal	$	(1.5)	$	(3.7)	$	8.5	$	3.5
Foreign	33.0		14.4		43.3		38.2
State and local	(0.4)		—		4.0		(1.2)
Total current	31.1		10.7		55.8		40.5
Deferred
U.S. federal	(27.1)		29.5		62.5		(1.7)
Foreign	(11.7)		42.0		22.4		(11.4)
State and local	(7.0)		8.2		8.5		0.3
Total deferred	(45.8)		79.7		93.4		(12.8)
Income tax expense (benefit)	$	(14.7)	$	90.4	$	149.2	$	27.7

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:

	Successor		Predecessor
	Period from 08/12/2023 through 12/31/2023		Period from 01/01/2023 through 08/11/2023		Years ended December 31,
					2022		2021
Statutory tax benefit	$	—	$	304.2	$	(92.1)	$	(10.6)
State and local taxes (net of federal tax benefit)	(5.1)		8.4		(17.6)		(0.6)
Brazil non-taxable incentive	(3.3)		(0.6)		(4.6)		(4.3)
Valuation allowances	0.2		(193.1)		209.8		33.8
Goodwill impairment	—		—		9.3		—
Foreign tax rate differential	1.5		47.3		(4.6)		2.2
Tax on unremitted foreign earnings	1.5		6.8		4.2		0.7
Change to uncertain tax positions	—		(1.8)		1.8		(9.2)
U.S. taxed foreign income	(9.2)		23.6		17.1		6.9
Non-deductible (non-taxable) items	16.2		65.8		15.5		0.7
Reorganization/Fresh Start reporting	(21.5)		(170.9)		—		—
Prior year deferred true up	1.0		(6.1)		—		—
Return to provision	(1.2)		8.4		3.3		(0.8)
Withholding tax and other taxes	5.1		0.6		5.4		8.7
Other	0.1		(2.2)		1.7		0.2
Income tax expense (benefit)	$	(14.7)	$	90.4	$	149.2	$	27.7

The effective tax rate for the period from August 12, 2023 through December 31, 2023 was 14700.0 percent. Significant differences from the U.S. federal statutory rate included non-deductible expenses, U.S. tax on foreign income, withholding taxes, and impact of the reorganization, all of which have a significant impact on the effective tax rate due to the minimal pre-tax income.

The effective tax rate from January 1 to August 11, 2023 was 6.2 percent. The effective tax rate differed compared to the U.S. federal statutory rate for the tax impacts of reorganization and fresh-start adjustments, including adjustments to the Company's valuation allowance and permanent differences.

The effective tax rate for 2022 was (34.0) percent. Tax expense items contributing to the difference from the U.S. federal income tax rate included valuation allowances, U.S. tax on foreign income, non-deductible expenses, goodwill impairments, withholding taxes, changes to uncertain tax position accruals and other items. These items were partially offset by benefits of utilization of U.S. foreign tax credits, nontaxable incentives, and foreign rate differential.

The effective tax rate for 2021 was (54.6) percent. Tax expense items contributing to the differences 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 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:

	Successor		Predecessor
	Period from 08/12/2023 through 12/31/2023		Period from 01/01/2023 through 08/11/2023		Years ended December 31,
					2022		2021
Balance at beginning of the period	$	52.7	$	52.1	$	55.1	$	36.8
Increases (decreases) related to prior year tax positions, net	—		0.6		(1.7)		42.1
Increases related to current year tax positions	—		—		—		—
Settlements	—		—		(0.7)		(23.3)
Reductions due to lapse of applicable statute of limitations	(0.1)		—		(0.6)		(0.5)
Balance the end of the period	$	52.6	$	52.7	$	52.1	$	55.1

Of the Company's $52.6 unrecognized tax benefits, if recognized, $12.6 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, 2023 and 2022, accrued interest and penalties related to unrecognized tax benefits totaled $1.4 and $1.3, respectively.

Within the next 12 months, no material changes to our unrecognized tax benefits are expected for currently reserved positions. Tax years prior to 2018 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 2012 to the present. In addition, the Company is subject to a German tax audit for tax years 2018-2020, and other various foreign jurisdictions for tax years 2013 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:

	Successor		Predecessor
	2023		2022
Deferred tax assets
Accrued expenses	$	96.8	$	51.9
Warranty accrual	7.5		12.3
Deferred compensation	—		3.0
Allowances for doubtful accounts	2.0		5.0
Inventories	22.6		18.5
Deferred revenue	31.3		28.1
Pensions, post-retirement and other benefits	50.7		48.6
Deferred finance charges	—		108.3
Tax credits	7.3		—
Net operating loss carryforwards	127.9		179.4
Capital loss carryforwards	1.2		1.3
State deferred taxes	6.3		28.0
Lease liability	21.8		28.9
Other	28.5		22.8
	403.9		536.1
Valuation allowances	(233.6)		(468.3)
Net deferred tax assets	$	170.3	$	67.8
Deferred tax liabilities
Property, plant and equipment, net	$	33.5	$	10.3
Goodwill and intangible assets	203.9		88.2
Undistributed earnings	43.4		34.4
Right-of-use assets	22.7		31.5
Other	0.3		—
Net deferred tax liabilities	303.8		164.4
Net deferred tax (liability) asset	$	(133.5)	$	(96.6)

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

	Successor		Predecessor
	2023		2022
Deferred income taxes - assets	$	71.4	$	—
Deferred income taxes - liabilities	(204.9)		(96.6)
Net deferred tax (liabilities) assets	$	(133.5)	$	(96.6)

As of December 31, 2023, the Company had domestic and international net operating loss (NOL) carryforwards of $483.3, resulting in an NOL deferred tax asset of $129.1. Of these NOL carryforwards, $133.9 expire at various times between 2023 and 2043 and $349.4 does not expire.

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, 2023 and 2022 was a decrease of $234.7 and an increase $206.5, respectively. The 2023 valuation allowance decrease was driven primarily by the Company's emergence from Restructuring Proceedings and Fresh Start Accounting. Of the

total 2023 net decrease of $234.7, the Company recorded $245.3 to tax expense, approximately ($10.6) was recorded to shareholder’s equity.

For the years ended December 31, 2023 and 2022, 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 $532.3 of undistributed earnings at December 31, 2023 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.