Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v3.19.3.a.u2
Income Taxes
3 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
 
The effective tax rates for the three months ended December 31, 2019 and 2018 were 93.9% and 33.3%, respectively. Due to the current quarter net loss position, the tax benefit recognized from the revaluation of current and deferred tax balances in connection with enacted statutory tax rate reductions in certain foreign jurisdictions significantly increased the tax rate, partially offset by the impact of nondeductible expenses associated with the Milacron acquisition. The change in the effective tax rate compared to the prior year was also impacted by the prior year increase in the reserve for unrecognized tax benefits that did not recur in the current year.

The acquisition of Milacron was completed as a taxable acquisition of the outstanding common stock of Milacron. In connection with the acquisition, the Company recorded a net deferred tax liability of $110.9 associated with the difference between the financial accounting basis and the tax basis in the acquired assets and liabilities assumed. Included in the acquired deferred taxes were deferred tax assets for the carryforward of Milacron’s tax net operating losses from federal, state, and foreign tax jurisdictions of $62.7, which were partially offset by the recognition of preliminary valuation allowances of $26.7 related to the estimated realizability of these items. The utilization of the acquired U.S. federal and state net operating losses to reduce Hillenbrand’s taxable income will be limited annually under Section 382 of the Internal Revenue Code. The Section 382 limitation analysis is in process as part of purchase accounting finalization and was not completed as of December 31, 2019. Additionally, Hillenbrand incurred transaction costs of $53.8, inclusive of the settlement of share-based equity awards, associated with the acquisition of Milacron. A preliminary estimate of the nondeductible portion of these costs has been determined to be approximately $24.7 and recognized as an adjustment to the forecasted tax rate for the year. As the Company continues to analyze the tax attributes of the acquisition, it will revise these preliminary estimates and appropriately record the impact of any changes in estimates.