Income Taxes

The components of loss from continuing operations before income taxes were as follows:



	Years Ended December 31,
	2013			2012			2011
	(In millions)
U.S.	$	(25.2	)	$	(266.1	)	$	(57.1	)
International	2.2			(57.3		)	26.9
Total	$	(23.0	)	$	(323.4	)	$	(30.2	)

The components of the income tax provision from continuing operations were as follows:



	Years Ended December 31,
	2013			2012			2011
	(In millions)
Current
Federal	$	(0.7	)	$	(11.5	)	$	2.2
State	—			—			—
International	5.9			6.3			6.0
Deferred
Federal	—			8.8			—
State	—			—			—
International	(3.8		)	(2.2		)	(3.2		)
Total	$	1.4		$	1.4		$	5.0

The income tax provision from continuing operations differs from the amount computed by applying the statutory United States income tax rate (35 percent) because of the following items:



	Years Ended December 31,
	2013			2012			2011
	(In millions)
Tax at statutory U.S. tax rate	$	(8.1	)	$	(113.2	)	$	(10.6	)
State income taxes, net of federal benefit	(0.2		)	(6.3		)	(1.9		)
Net effect of international operations	3.1			25.0			(0.8		)
Settlement of UK pension plan	(2.3		)	—			—
Valuation allowances	(3.2		)	89.2			11.6
U.S. tax on foreign earnings	6.2			3.9			4.8
Stock-based compensation	3.1			2.4			1.6
Uncertain tax positions	2.2			0.3			0.2
Other	0.6			0.1			0.1
Income tax provision	$	1.4		$	1.4		$	5.0

Our 2013 tax provision of $1.4 million primarily represents tax expense related to operations outside the United States and unrecognized tax benefits recorded during the year offset by the tax benefit related to the settlement of our UK pension plan during the year.

Our 2012 tax provision of $1.4 million primarily represents tax expense related to operations outside the United States, offset by tax benefit from settlements with taxing authorities concluded during 2012 and activity in other comprehensive income during 2012.

In 2013, 2012 and 2011 the net cash paid for income taxes, relating to both continuing and discontinued operations, was $4.6 million, $4.4 million and $4.9 million, respectively.

Tax laws require certain items to be included in our tax returns at different times than the items are reflected in our results of operations. Some of these items are temporary differences that will reverse over time. We record the tax effect of temporary differences as deferred tax assets and deferred tax liabilities in our Consolidated Balance Sheets.

The components of net deferred tax assets and liabilities were as follows:



	As of December 31,
	2013			2012
	(In millions)
Accounts receivable allowances	$	3.0		$	6.9
Inventories	9.1			12.9
Compensation and employee benefits	8.0			11.2
Tax credit carryforwards	35.8			39.2
Net operating loss carryforwards	115.2			83.5
Accrued liabilities and other reserves	9.0			9.3
Pension	6.0			9.4
Property, plant and equipment	8.9			—
Intangible assets, net	55.3			76.9
Other, net	1.8			2.7
Gross deferred tax assets	252.1			252.0
Valuation allowance	(239.4		)	(239.1		)
Deferred tax assets	12.7			12.9

Property, plant and equipment	—			(1.3		)
Deferred tax liabilities	—			(1.3		)
Net deferred tax assets	$	12.7		$	11.6

We regularly assess the likelihood that our deferred tax assets will be recovered in the future. A valuation allowance is recorded to the extent we conclude a deferred tax asset is not considered to be more-likely-than-not to be realized. We consider all positive and negative evidence related to the realization of the deferred tax assets in assessing the need for a valuation allowance.

Our accounting for deferred tax consequences represents our best estimate of future events. A valuation allowance established or revised as a result of our assessment is recorded through income tax provision (benefit) in our Consolidated Statements of Operations. Changes in our current estimates due to unanticipated events, or other factors, could have a material effect on our financial condition and results of operations.

We maintain a valuation allowance related to our U.S. deferred tax assets and certain foreign net operating losses. The valuation allowance was $239.4 million, $239.1 million and $141.1 million as of December 31, 2013, 2012 and 2011, respectively. The valuation allowance change in 2013 compared to 2012 was not significant. The valuation change in 2012 compared to 2011 was due primarily to operating losses and the impact of intangible asset impairments charges in 2012.

The accounting rules require the current and non-current components of the deferred tax balances to be netted by jurisdiction prior to disclosure in the balance sheet. The table below shows the components of our deferred tax balances after the results of that netting process as they are recorded on our Consolidated Balance Sheets:



	As of December 31
	2013			2012
	(In millions)
Deferred tax asset - current	$	4.6		$	4.7
Deferred tax asset - non-current	9.5			9.3
Deferred tax liability - current	(0.4		)	(0.3		)
Deferred tax liability - non-current	(1.0		)	(2.1		)
Total	$	12.7		$	11.6

Federal net operating loss carry forwards totaling $260.5 million will begin expiring in 2026. We have state income tax loss carryforwards of $313.4 million, $3.6 million of which will expire between 2014 and 2016 and the remaining will expire at various dates up to 2033. We have U.S. and foreign tax credit carryforwards of $35.8 million, $6.8 million of which will expire between 2014 and 2016, $26.6 million of which will expire between 2017 and 2032 and $2.4 million may be carried forward indefinitely. Of the aggregate foreign net operating loss carryforwards totaling $35.4 million, $0.3 million will expire between 2014 and 2016, $7.4 million will expire at various dates up to 2022 and $27.7 million may be carried forward indefinitely.

As of December 31, 2013, approximately $101.5 million of unremitted earnings attributable to our foreign subsidiaries were considered to be permanently invested in their operations and no additional deferred taxes have been recorded. Determination of the related tax liability is not practicable because of the complexities associated with the hypothetical calculation, however the amount would be limited primarily to required withholding taxes in foreign jurisdictions given that we have a full valuation allowance recorded in the U.S.

Our income tax returns are subject to review by various U.S. and foreign taxing authorities. As such, we record accruals for items that we believe may be challenged by these taxing authorities. The threshold for recognizing the benefit of a tax return position in the financial statements is that the position must be more-likely-than-not to be sustained by the taxing authorities based solely on the technical merits of the position. If the recognition threshold is met, the tax benefit is measured and recognized as the largest amount of tax benefit that, in our judgment, is greater than 50 percent likely to be realized.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



	Amount
	(In Millions)
Balance at December 31, 2010	$	14.9
Additions:
Tax positions of current years	0.3
Tax positions of prior years	0.1
Reductions:
Settlements with taxing authorities	—
Lapse of statute of limitations	(0.2		)
Balance at December 31, 2011	15.1
Additions:
Tax positions of current year	0.3
Tax positions of prior years	0.6
Reductions:
Tax positions of prior years	(11.3		)
Settlements with taxing authorities	(0.2		)
Lapse of statute of limitations	(0.1		)
Balance at December 31, 2012	4.4
Additions:
Tax positions of current year	0.3
Tax positions of prior years	1.1
Reductions:
Tax positions of prior years	(0.4		)
Settlements with taxing authorities	—
Lapse of statute of limitations	(0.1		)
Balance at December 31, 2013	$	5.3

The total amount of unrecognized tax benefits, which excludes accrued interest and penalties described below, as of December 31, 2013 was $5.3 million. The $11.3 million reduction made during 2012 related to prior year tax positions included $10.5 million of tax benefit that was offset by a corresponding increase in valuation allowance against deferred tax assets. If the unrecognized tax benefits remaining at December 31, 2013 were recognized in our consolidated financial statements, $5.3 million would ultimately affect income tax expense and our related effective tax rate.

It is reasonably possible that the amount of the unrecognized tax benefits could increase or decrease significantly during the next twelve months; however, it is not possible to reasonably estimate the effect on the unrecognized tax benefit at this time.

Interest and penalties recorded for uncertain tax positions are included in our income tax provision. During the years ended December 31, 2013, 2012 and 2011, we recognized approximately $0.8 million expense, $1.3 million benefit and $0.2 million expense, respectively, in interest and penalties. We had approximately $1.1 million, $0.3 million and $2.5 million accrued, excluding the tax benefit of deductible interest, for the payment of interest and penalties at December 31, 2013, 2012 and 2011, respectively. The reversal of accrued interest and penalties would affect income tax expense and our related effective tax rate.

Our federal income tax returns for 2010 through 2012 are subject to examination by the Internal Revenue Service (IRS). The IRS completed its field examination of our U.S. federal income tax returns for the years 2006 through 2008 in the second quarter of 2010. The IRS completed its field examination for the 2009 tax year in the fourth quarter of 2011. We protested certain IRS positions in both audit cycles and reached a final settlement through the IRS appeals process during the fourth quarter of 2012. We currently have foreign tax audits underway. Based on available information, the uncertain tax position associated with these foreign audits have been assessed and included in our income tax provision. For state and foreign tax purposes, the statutes of limitation vary by jurisdiction. With few exceptions, we are no longer subject to examination by foreign tax jurisdictions or state and city tax jurisdictions for years before 2006. In the event that we have determined not to file tax returns with a particular state or city, all years remain subject to examination by the tax jurisdiction.