Annual report pursuant to Section 13 and 15(d)

Income Taxes (Tables)

v3.6.0.2
Income Taxes (Tables)
12 Months Ended
Dec. 31, 2016
Income Tax Disclosure [Abstract]  
Components of Income before Income Taxes

The components of income before income taxes are as follows (in millions):

 

 

 

Year Ended December 31,

 

 

 

2016

 

 

2015

 

 

2014

 

Domestic

 

$

(89.3

)

 

$

80.9

 

 

$

94.0

 

Foreign

 

 

454.0

 

 

 

405.5

 

 

 

327.3

 

Total

 

$

364.7

 

 

$

486.4

 

 

$

421.3

 

 

Components of Income Tax Expense

Income taxes are as follows (in millions):

 

 

 

Year Ended December 31,

 

 

 

2016

 

 

2015

 

 

2014

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign

 

$

127.9

 

 

$

147.0

 

 

$

141.7

 

Federal

 

 

12.4

 

 

 

35.4

 

 

 

47.4

 

State

 

 

0.8

 

 

 

3.1

 

 

 

8.3

 

 

 

 

141.1

 

 

 

185.5

 

 

 

197.4

 

Deferred:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign

 

 

12.5

 

 

 

(13.2

)

 

 

(6.0

)

Federal

 

 

(47.2

)

 

 

(23.8

)

 

 

(76.5

)

State

 

 

(1.7

)

 

 

(1.2

)

 

 

(2.3

)

 

 

 

(36.4

)

 

 

(38.2

)

 

 

(84.8

)

 

 

$

104.7

 

 

$

147.3

 

 

$

112.6

 

 

Deferred Tax Assets and Liabilities

The significant categories of temporary differences that gave rise to deferred tax assets and liabilities are as follows (tax effected in millions):

 

 

 

December 31,

 

 

 

2016

 

 

2015

 

Deferred income tax assets:

 

 

 

 

 

 

 

 

Accruals not currently deductible

 

$

85.2

 

 

$

84.6

 

Tax loss and credit carryforwards of certain foreign

   subsidiaries

 

 

115.1

 

 

 

121.4

 

Tax loss and domestic tax credit carryforwards

 

 

102.6

 

 

 

76.7

 

Unremitted foreign earnings

 

 

 

 

 

6.4

 

Deferred compensation plan

 

 

73.8

 

 

 

63.9

 

Accrued vacation

 

 

6.2

 

 

 

5.8

 

Inventory reserve

 

 

11.2

 

 

 

11.5

 

Other

 

 

2.5

 

 

 

3.4

 

Gross deferred income tax assets

 

 

396.6

 

 

 

373.7

 

Less: valuation allowance

 

 

(115.4

)

 

 

(121.3

)

Total deferred income tax assets

 

$

281.2

 

 

$

252.4

 

Deferred income tax liabilities:

 

 

 

 

 

 

 

 

Intangible assets

 

$

112.2

 

 

$

112.8

 

Depreciation/amortization

 

 

15.9

 

 

 

22.1

 

Unremitted foreign earnings

 

 

5.5

 

 

 

 

Other

 

 

7.7

 

 

 

0.9

 

Total deferred income tax liabilities

 

 

141.3

 

 

 

135.8

 

Total net deferred tax assets

 

$

139.9

 

 

$

116.6

 

 

Reconciliation between Provision for Income Taxes at Statutory Rate and Provision for Income Taxes at Effective Tax Rate

The applicable statutory income tax rate in the Cayman Islands was zero for Herbalife Ltd. for the years being reported. For purposes of the reconciliation between the provision for income taxes at the statutory rate and the provision for income taxes at the effective tax rate, a notional 35% tax rate is applied as follows:

 

 

 

Year Ended December 31,

 

 

 

2016

 

 

2015

 

 

2014

 

 

 

(In millions)

 

Tax expense at United States statutory rate

 

$

127.7

 

 

$

170.2

 

 

$

147.4

 

Increase (decrease) in tax resulting from:

 

 

 

 

 

 

 

 

 

 

 

 

Differences between U.S. and foreign tax rates on foreign

   income, including withholding taxes

 

 

(16.6

)

 

 

203.1

 

 

 

(60.0

)

U.S. tax (benefit) on foreign income net of foreign tax

   credits

 

 

(10.2

)

 

 

(23.9

)

 

 

(73.4

)

(Decrease) increase  in valuation allowances

 

 

(5.6

)

 

 

(205.6

)

 

 

85.7

 

State taxes, net of federal benefit

 

 

0.3

 

 

 

1.7

 

 

 

4.1

 

Unrecognized tax benefits

 

 

5.3

 

 

 

10.1

 

 

 

13.0

 

Other

 

 

3.8

 

 

 

(8.3

)

 

 

(4.2

)

Total

 

$

104.7

 

 

$

147.3

 

 

$

112.6

 

 

Changes Occurred in Amount of Unrecognized Tax Benefits

The following changes occurred in the amount of unrecognized tax benefits during the years ended December 31, 2016, 2015, and 2014 (in millions):

 

 

 

Year Ended

December 31

2016

 

 

Year Ended

December 31

2015

 

 

Year Ended

December 31

2014

 

Beginning balance of unrecognized tax benefits

 

$

49.4

 

 

$

40.5

 

 

$

29.9

 

Additions for current year tax positions

 

 

9.3

 

 

 

11.3

 

 

 

9.4

 

Additions for prior year tax positions

 

 

2.0

 

 

 

2.5

 

 

 

6.1

 

Reductions for prior year tax positions

 

 

(4.7

)

 

 

(0.6

)

 

 

(1.0

)

Reductions for audit settlements

 

 

 

 

 

(0.1

)

 

 

(0.1

)

Reductions for the expiration of statutes of limitation

 

 

(4.2

)

 

 

(2.8

)

 

 

(2.5

)

Changes due to foreign currency translation adjustments

 

 

(1.3

)

 

 

(1.4

)

 

 

(1.3

)

Ending balance of unrecognized tax benefits (excluding

   interest and penalties)

 

$

50.5

 

 

$

49.4

 

 

$

40.5

 

Interest and penalties associated with unrecognized tax

   benefits

 

 

11.5

 

 

 

8.6

 

 

 

6.7

 

Ending balance of unrecognized tax benefits (including

   interest and penalties)

 

$

62.0

 

 

$

58.0

 

 

$

47.2