Herbalife Ltd. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes (Tables)

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2022

Components of Income before Income Taxes

The components of income before income taxes were as follows:


	Year Ended December 31,
	2022			2021		2020
	(in millions)
Domestic	$	(72.0	)	$	53.4	$	152.5
Foreign		496.8			507.4		363.9
Total	$	424.8		$	560.8	$	516.4

Components of Income Tax Expense

Income taxes were as follows:


	Year Ended December 31,
	2022			2021			2020
	(in millions)
Current:
Foreign	$	100.1		$	121.8		$	122.0
Federal		26.3			20.1			13.7
State		7.0			5.0			6.1
		133.4			146.9			141.8
Deferred:
Foreign		(2.0	)		(17.0	)		(2.7	)
Federal		(25.1	)		(16.0	)		3.9
State		(2.8	)		(0.3	)		0.8
		(29.9	)		(33.3	)		2.0
	$	103.5		$	113.6		$	143.8

Deferred Tax Assets and Liabilities

The significant categories of temporary differences that gave rise to deferred tax assets and liabilities were as follows:


	December 31,
	2022			2021
	(in millions)
Deferred income tax assets:
Accruals not currently deductible	$	72.9		$	94.9
Tax loss and credit carryforwards of certain foreign subsidiaries		131.8			122.7
Domestic tax credit carryforwards		195.4			204.5
Deferred compensation plan		35.8			40.0
Deferred interest expense		161.1			115.5
Inventory reserve		9.6			9.3
Operating lease liabilities		42.1			39.1
Depreciation and amortization		22.5			—
Other		8.6			6.5
Gross deferred income tax assets		679.8			632.5
Less: valuation allowance		(436.6	)		(411.9	)
Total deferred income tax assets	$	243.2		$	220.6
Deferred income tax liabilities:
Intangible assets	$	73.0		$	72.4
Unremitted foreign earnings		13.7			20.9
Operating lease assets		37.2			34.3
Other		6.7			5.6
Total deferred income tax liabilities		130.6			133.2
Total net deferred tax assets	$	112.6		$	87.4

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 Nutrition 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 21% tax rate is applied for the years ended December 31, 2022, 2021, and 2020 as follows:


	Year Ended December 31,
	2022			2021			2020
	(in millions)
Tax expense at United States statutory rate	$	89.2		$	117.8		$	108.4
Increase (decrease) in tax resulting from:
Differences between U.S. and foreign tax rates on foreign income, including withholding taxes		(21.5	)		(15.1	)		(19.5	)
U.S. tax (benefit) on foreign income, net of foreign tax credits		(4.7	)		(21.9	)		(20.5	)
Increase in valuation allowances		24.7			21.1			60.6
State taxes, net of federal benefit		3.9			3.0			5.2
Unrecognized tax benefits		7.5			9.3			3.9
Excess tax expense (benefits) on equity awards		0.6			(3.5	)		(3.1	)
Other		3.8			2.9			8.8
Total	$	103.5		$	113.6		$	143.8

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, 2022, 2021, and 2020:


	Year Ended December 31,
	2022			2021			2020
	(in millions)
Beginning balance of unrecognized tax benefits	$	54.1		$	52.7		$	48.9
Additions for current year tax positions		8.8			9.2			9.7
Additions for prior year tax positions		2.2			5.1			1.3
Reductions for prior year tax positions		(3.7	)		(2.3	)		(0.6	)
Reductions for audit settlements		(1.8	)		(5.2	)		(4.7	)
Reductions for the expiration of statutes of limitations		(6.2	)		(4.1	)		(2.1	)
Changes due to foreign currency translation adjustments		(3.7	)		(1.3	)		0.2
Ending balance of unrecognized tax benefits (excluding interest and penalties)		49.7			54.1			52.7
Interest and penalties associated with unrecognized tax benefits		22.8			18.4			13.2
Ending balance of unrecognized tax benefits (including interest and penalties)	$	72.5		$	72.5		$	65.9