INCOME TAXES

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Our quarterly income tax provision is calculated using an estimated annual effective income tax approach. The quarterly effective tax rate can differ from our estimated annual effective tax rate as the Company cannot apply an effective tax rate approach for all of its operations. For those entities that can apply an effective tax rate approach, as of September 30, 2021, our annual effective tax rate, excluding discrete items, is 32.1%, as compared to 25.9% as of September 30, 2020. 

The remaining entities, which are operations that generate pre-tax losses which cannot be tax benefited and/or have an effective tax rate which cannot be reliably estimated, have to account for their income taxes on a discrete year-to-date basis as of the end of each quarter and are excluded from the effective tax rate approach. The estimated annual effective tax rate for 2021 and 2020 also excludes the unfavorable impact of withholding taxes associated with certain intercompany payments, including royalties, service charges, interest and dividends, which in the aggregate are relatively consistent each year due to the need to repatriate

funds to cover U.S. and U.K. based costs, such as interest on debt and central expenses. Withholding taxes associated with the relatively consistent intercompany payments are accounted for discretely and accrued in the provision for income taxes as they become due.

The provision for income taxes for the three months ended September 30, 2021 and 2020 was $(10.4) and $11.8, respectively. Our effective tax rates for the three months ended September 30, 2021 and 2020 were 22.6% and (68.6)%, respectively. The provision for income taxes for the nine months ended September 30, 2021 and 2020 was $15.5 and $26.7, respectively. Our effective tax rates for the nine months ended September 30, 2021 and 2020 were (10.5)% and (10.4)%, respectively.

The effective tax rates for the three months ended September 30, 2021 and 2020 were impacted by CTI restructuring charges which could not all be benefited, country mix of earnings and withholding taxes. The effective tax rate in the third quarter of 2021 was favorably impacted by the accrual of net income tax benefits of $8.9 associated with the release of reserves for uncertain tax positions of $10.4, offset by the net recording of valuation allowances of $1.5 The effective tax rate in the third quarter of 2020 was favorably impacted by the accrual of net income tax benefits of $5.7 associated with the release of income tax reserves of $10.8 associated with our uncertain tax positions, and the recording of a valuation allowance of $4.3 and other miscellaneous income tax expense of $.8.

The effective tax rates for the nine months ended September 30, 2021 and 2020 were impacted by CTI restructuring charges which could not all be benefited, country mix of earnings and withholding taxes. The effective tax rate in the nine months ended September 30, 2021 was unfavorably impacted by the accrual of net tax expense of $.4 due to the net release of reserves for uncertain tax positions of $7.8, the net recording of valuation allowances of $7.5 and miscellaneous income tax expense of approximately $.7. The effective tax rate in the nine months ended September 30, 2020 was also favorably impacted by the accrual of net income tax benefits of $1.8 associated with the release of income tax reserves of $11.2 associated with our uncertain tax positions, net of recording a valuation allowance of $4.3 and other miscellaneous income tax expense of $5.1.

In prior years, we had previously recorded valuation allowances against certain deferred tax assets associated with the U.S. and various foreign jurisdictions. We intend to continue maintaining these valuation allowances on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that we are able to achieve. The Company continuously monitors its operational and capital structure changes, business performance, tax planning actions and tax planning strategies that could potentially allow for the recognition of deferred tax assets which are currently subject to a valuation allowance. There is the possibility that, in the foreseeable future, certain deferred tax assets could be recognized, which may be material, related to changes in business operations and associated financing of such operations.

Further, the Company continuously assesses available positive and negative evidence to estimate whether sufficient future taxable income will be generated to utilize our existing deferred tax assets that are not subject to a valuation allowance. As of September 30, 2021, the COVID-19 pandemic is negative evidence the Company must consider. As of September 30, 2021, the negative evidence associated with COVID-19 has not required the recording of additional valuation allowances against deferred tax assets that are expected to be realized in future periods. The Company will continue to monitor the COVID-19 pandemic and other effects that could impact the conclusions regarding the realizability of its remaining deferred tax assets. Potential negative evidence, including such things as the worsening of the economies in the markets we operate in and reduced profitability of our markets could give rise to a need for a valuation allowance to reduce our deferred tax assets in upcoming quarters.