Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Reconciliation of statutory tax rate to effective tax rate

The Company’s effective income tax provision differs from the amount calculated using the statutory U.S. federal income tax rate, principally due to the following:



	Year Ended December 31,
	2013					2012					2011
(in millions)	Amount			Percentage of Income Before Income Taxes		Amount			Percentage of Income Before Income Taxes		Amount			Percentage of Income Before Income Taxes
Statutory U.S. federal income tax	$	44.8		35.0	%	$	80.2		35.0	%	$	114.9		35.0	%
State income taxes, net of federal benefit	1.7			1.3	%	4.5			2.0	%	7.9			2.4	%
Foreign repatriation, net of foreign tax credits	(16.0		)	(12.6	)%	48.1			21.0	%	—			—	%
Foreign tax differential	(12.3		)	(9.6	)%	(9.7		)	(4.2	)%	(9.4		)	(2.9	)%
Change in valuation allowances	20.4			15.9	%	(2.8		)	(1.2	)%	(5.9		)	(1.8	)%
Uncertain tax positions	4.7			3.7	%	2.6			1.1	%	4.1			1.2	%
Subpart F income	1.5			1.2	%	4.1			1.8	%	3.2			1.0	%
Manufacturing deduction	0.1			—	%	(3.8		)	(1.7	)%	(5.0		)	(1.5	)%
Permanent and other	4.2			3.5	%	(0.8		)	(0.4	)%	(1.0		)	(0.3	)%
Effective income tax provision	$	49.1		38.4	%	$	122.4		53.4	%	$	108.8		33.1	%

Pre-tax income attributable to operating segments

The following sets forth the amount of income or (loss) before income taxes attributable to each of the Company’s operating segments for the years ended December 31, 2013, 2012 and 2011:



	Year Ended December 31,
(in millions)	2013			2012		2011
Income before income taxes:
United States	$	(4.5	)	$	126.2	$	224.6
Rest of the world	132.5			103.0		103.8
	$	128.0		$	229.2	$	328.4

Reconciliation of beginning and ending amount of unrecognized tax benefits

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



(in millions)
Balance as of December 31, 2011	$	13.3
Additions based on tax positions related to 2011	1.1
Additions for tax positions of prior years	—
Settlements of uncertain tax positions with tax authorities	(1.5		)
Balance as of December 31, 2012	12.9
Additions attributable to Sealy on date of acquisition	9.2
Additions based on tax positions related to 2013	2.3
Additions for tax positions of prior years	7.2
Settlements of uncertain tax positions with tax authorities	(5.5		)
Balance as of December 31, 2013	$	26.1

Operating loss and tax credit carryforwards

The Company has the following gross income tax attributes available at December 31, 2013 and 2012 respectively (in millions):



	2013		2012
U.S. federal net operating loss (“FedNOLs”)	$	19.6	$	—
State net operating losses (“SNOLs”)	135.6		—
U.S. federal foreign tax credits (“FTCs”)	20.4		—
U.S. state income tax credits ("SITCs")	0.7		—
Foreign net operating losses (“FNOLs”)	67.1		37.0

Tax provision summary

The income tax provision consisted of the following:



	Year Ended December 31,
(in millions)	2013			2012			2011
Current provision
Federal	$	48.6		$	49.9		$	76.9
State	7.3			7.8			12.0
Foreign	42.3			26.3			28.4
Total current	$	98.2		$	84.0		$	117.3
Deferred provision
Federal	$	(47.0	)	$	37.1		$	(1.4	)
State	0.4			4.2			(0.2		)
Foreign	(2.5		)	(2.9		)	(6.9		)
Total deferred	(49.1		)	38.4			(8.5		)
Total income tax provision	$	49.1		$	122.4		$	108.8

Deferred tax assets and liabilities recognized in the Consolidated Balance Sheets

The net deferred tax assets and liabilities recognized in the accompanying Consolidated Balance Sheets consisted of the following:



	December 31,
(in millions)	2013			2012
Deferred tax assets:
Stock-based compensation	$	10.0		$	11.7
Accrued expenses and other	53.7			10.6
Net operating losses and foreign tax credits	55.3			9.6
Inventories	4.6			3.5
Intangible assets	9.0			2.4
Property, plant and equipment	3.9			1.5
Total deferred tax assets	136.5			39.3
Valuation allowances	(39.4		)	(0.1		)
Total net deferred tax assets	$	97.1		$	39.2
Deferred tax liabilities:
Foreign repatriation, net of foreign tax credits	$	—		$	(45.4	)
Intangible assets	(261.9		)	(21.8		)
Property, plant and equipment	(62.5		)	(13.1		)
Accrued expenses and other	(4.3		)	(3.7		)
Total deferred tax liabilities	(328.7		)	(84.0		)
Net deferred tax liabilities	$	(231.6	)	$	(44.8	)

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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