Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

Note 4: Income Taxes

Because we are a global organization, we and our subsidiaries file income tax returns in the U.S. Federal jurisdiction and various state and foreign jurisdictions. During 2011, the statute of limitations for the 2007 U.S. Federal tax year lapsed, leaving tax years 2008 through 2011 open to examination. For U.S. state and local jurisdictions, tax years 2007 through 2011 are open to examination. We are also subject to examination in various foreign jurisdictions for tax years 2005 through 2011.

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

($ in millions)	2011			2010
Balance at January 1	$	5.0		$	5.6
Additions for tax positions taken in the current year		1.3			0.6
Additions for tax positions of prior years		0.7			1.1
Reduction for expiration of statute of limitations/audits		(0.7	)		(2.3	)
Balance at December 31	$	6.3		$	5.0

In addition, we had balances in accrued liabilities for interest and penalties of $0.4 million and $0.4 million at December 31, 2011 and 2010, respectively. During 2011, we recognized less than $0.1 million in tax-related interest expense and in 2010 we recognized $0.1 million in tax-related interest income. As of December 31, 2011, we had $6.3 million of total gross unrecognized tax benefits, of which $5.9 million, if recognized, would favorably impact the effective income tax rate. It is reasonably possible that, due to the expiration of statutes and the closing of tax audits, the liability for unrecognized tax benefits may be reduced by approximately $0.3 million during the next twelve months, which would favorably impact our effective tax rate.

The components of income before income taxes are:

($ in millions)	2011		2010		2009
U.S. operations	$	15.8	$	7.2	$	6.5
International operations		76.9		67.3		76.6
Total income before income taxes	$	92.7	$	74.5	$	83.1

The related provision for income taxes consists of:

($ in millions)	2011		2010			2009
Current:
Federal	$	-	$	0.6		$	0.3
State		-		0.2			0.1
International		20.6		14.6			17.9
Current income tax provision		20.6		15.4			18.3
Deferred:
Federal and state		2.7		(0.5	)		(5.1	)
International		0.2		(1.3	)		0.3
Deferred income tax provision		2.9		(1.8	)		(4.8	)
Income tax expense	$	23.5	$	13.6		$	13.5

Deferred income taxes result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes.

The significant components of our deferred tax assets and liabilities at December 31 are:

($ in millions)	2011			2010
Deferred tax assets
Net operating loss carryforwards	$	21.7		$	28.1
Tax credit carryforwards		42.5			33.3
Restructuring and impairment charges		1.7			5.5
Capital loss carryforwards		-			1.4
Pension and deferred compensation		62.3			48.6
Other		9.3			8.7
Valuation allowance		(19.3	)		(24.9	)
Total deferred tax assets		118.2			100.7
Deferred tax liabilities:
Accelerated depreciation		41.2			39.5
Other		6.5			7.1
Total deferred tax liabilities		47.7			46.6
Net deferred tax asset	$	70.5		$	54.1

A reconciliation of the U.S. federal corporate tax rate to our effective consolidated tax rate on income before income taxes follows:

	2011			2010			2009
U.S. federal corporate tax rate		35.0	%		35.0	%		35.0	%
Tax on international operations less than U.S. tax rate		(8.9	)		(11.0	)		(7.6	)
Non-benefited losses		-			1.4			2.0
Reversal of prior valuation allowance		(0.1	)		(0.2	)		(1.2	)
Reversal of reserves for unrecognized tax benefits		-			(3.0	)		(3.4	)
U.S. tax on international earnings, net of foreign tax credits		(1.5	)		(2.2	)		(3.2	)
State income taxes, net of federal tax effect		0.7			(1.6	)		(1.1	)
General business credits and Section 199 Deduction		(2.4	)		(1.5	)		(5.4	)
Other		2.5			1.4			1.1
Effective tax rate		25.3	%		18.3	%		16.2	%

At December 31, 2011, we have fully utilized all of our U.S. federal net operating loss carryforwards. State operating loss carryforwards of $255.4 million, created a deferred tax asset of $15.1 million, while foreign operating loss carryforwards of $26.3 million, created a deferred tax asset of $6.6 million. Management estimates that certain state and foreign operating loss carryforwards are unlikely to be utilized and the associated deferred tax assets have been fully reserved. State loss carryforwards expire as follows: $0.1 million in 2013 and $255.3 million thereafter. Foreign loss carryforwards will begin to expire in 2013, while $15.7 million of the total $26.3 million will not expire.

As of December 31, 2011, we had available foreign tax credit carryforwards of $27.5 million expiring as follows: $2.6 million in 2012, $0.4 million in 2014, $3.5 million in 2015, $1.8 million in 2016, $2.4 million in 2017, $1.9 million in 2018, $3.1 million in 2019, $3.2 million in 2020 and $8.6 million in 2021. We have U.S. federal and state research and development credit carryforwards of $9.2 million and $3.5 million, respectively. The $9.2 million of U.S. federal research and development credits expire as follows: $0.1 million expire in 2021, $0.5 million expire in 2022 and $8.6 million expire after 2022. The $3.5 million of state research and development credits expire as follows: $0.8 million expire in 2021, $0.8 million expire in 2022 and $1.9 million expire after 2022.

Undistributed earnings of foreign subsidiaries amounted to $568.2 million at December 31, 2011, on which deferred income taxes have not been provided because such earnings are intended to be reinvested indefinitely outside of the United States.