Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

10. Income Taxes

        Income from continuing operations before income taxes and equity income as reported in the Consolidated Statements of Income consists of the following:

(In thousands)	2011			2010			2009
United States	$	47,680		$	23,037		$	51,529
International		(6,015	)		(2,561	)		107,309
Total income before income taxes and equity income	$	41,665		$	20,476		$	158,838

        Income tax expense as reported in the Consolidated Statements of Income consists of the following:

(In thousands)	2011		2010			2009
Income tax expense (benefit):
Currently payable:
U.S. federal	$	4,249	$	(325	)	$	23,886
U.S. state		913		453			1,591
International		23,860		30,765			26,938
Total income taxes currently payable		29,022		30,893			52,415
Deferred U.S. federal and U.S. state		1,173		6,172			(28,018	)
Deferred international		19,653		(32,789	)		(5,888	)
Total income tax expense	$	49,848	$	4,276		$	18,509

        Cash payments for income taxes, including taxes on the gain or loss from discontinued business, were $42.3 million, $27.4 million and $57.1 million for 2011, 2010 and 2009, respectively.

        The following is a reconciliation of the normal expected statutory U.S. federal income tax rate to the effective income tax rate as a percentage of Income from continuing operations before income taxes and noncontrolling interest as reported in the Consolidated Statements of Income:

	2011			2010			2009
U.S. federal income tax rate		35.0	%		35.0	%		35.0	%
U.S. state income taxes, net of federal income tax benefit		2.9			5.1			1.0
U.S. domestic manufacturing deductions and credits		(9.6	)		(5.9	)		(2.7	)
Change in permanent reinvestment assertion		—			9.3			(5.0	)
Difference in effective tax rates on international earnings and remittances		(11.7	)		(34.4	)		(26.1	)
Uncertain tax position contingencies and settlements		(18.0	)		1.2			4.0
Changes in realization on beginning of the year deferred tax assets		89.1			8.4			1.7
Restructuring charges with no realizable tax benefits		23.0			11.2			—
U.S. nondeductible items		6.0			8.7			1.2
Deferred charges		—			(19.0	)		—
Cumulative effect of change in statutory tax rates/laws		3.5			3.4			2.8
Other, net		(0.6	)		(2.1	)		(0.3	)
Effective income tax rate		119.6	%		20.9	%		11.6	%

        The increase in the effective income tax rate for 2011 compared with 2010 is the result of certain discrete items, including a change in the realizability of beginning of the year deferred tax assets of $37.3 million primarily related to the Company's U.K. deferred tax assets on its U.K. pension obligations; the tax benefit of $3.5 million for deferred charges from historical intercompany sales of inventory recorded in 2010 and not repeated in 2011; and a change in the earnings mix of the Company for year 2011 compared with prior years primarily due to the jurisdictional impact of the Company's restructuring charges. These increases in the effective income tax rate for 2011 compared with 2010 were offset by the tax costs associated with the 2010 change in permanent reinvestment assertion of $1.9 million; and the lapse of several statutes of limitations for uncertain tax positions in 2011 that produced a tax benefit of $10.8 million.

        The tax effects of the temporary differences giving rise to the Company's deferred tax assets and liabilities at December 31, 2011 and 2010 are as follows:

	2011					2010
(In thousands)	Asset			Liability		Asset			Liability
Depreciation and amortization	$	—		$	119,701	$	—		$	144,361
Expense accruals		42,529			—		46,116			—
Inventories		2,588			—		3,582			—
Provision for receivables		2,205			—		2,871			—
Deferred revenue		—			2,065		—			1,979
Operating loss carryforwards		79,408			—		57,318			—
Deferred foreign tax credits		29,540			—		31,718			—
Pensions		95,657			—		60,626			—
Currency adjustments		30,813			—		28,721			—
Post-retirement benefits		1,079			—		1,117			—
Other		19,299			—		17,245			—
Subtotal		303,118			121,766		249,314			146,340
Valuation allowance		(99,617	)		—		(29,469	)		—
Total deferred income taxes	$	203,501		$	121,766	$	219,845		$	146,340

        The deferred tax asset and liability balances recognized on the Consolidated Balance Sheets at December 31, 2011 and 2010 are as follows:

(In thousands)	2011			2010
Other current assets	$	50,694		$	47,279
Other assets		59,200			64,672
Other current liabilities		(729	)		(2,804	)
Deferred income taxes		(27,430	)		(35,642	)

        At December 31, 2011, the tax-effected amount of net operating loss carryforwards ("NOLs") totaled $79.4 million. Tax-effected NOLs from international operations are $70.1 million. Of that amount, $56.8 million can be carried forward indefinitely, and $13.3 million will expire at various times between 2012 and 2030. Tax-effected U.S. federal NOLs are $0.1 million that relate to preacquisition NOLs that expire in 2022. Tax-effected U.S. state NOLs are $9.2 million. Of that amount, $0.2 million expire at various times between 2012 and 2016, $2.4 million expire at various times between 2017 and 2021, $3.5 million expire at various times between 2022 and 2026, and $3.1 million expire at various times between 2027 and 2031.

        The valuation allowances of $99.6 million and $29.5 million at December 31, 2011 and 2010, respectively, related principally to deferred tax assets for U.K. pension liabilities, NOLs, currency translation and foreign investment tax credits that are uncertain as to realizability. Due to the recent negative financial performance of the Company's U.K. operations and restructuring charges, the Company recorded a non-cash tax expense of approximately $35.4 million in the fourth quarter of 2011 to recognize a valuation allowance to fully offset the U.K. operations' net deferred tax assets primarily related to U.K. pension liabilities, as the Company determined it is more likely than not that these assets will not be realized. Additionally during the fourth quarter of 2011, the Company recorded an increase to the valuation allowance of approximately $22.9 million through Accumulated other comprehensive loss related to current year U.K. pension liability adjustments that were recorded through Accumulated other comprehensive loss. Excluding the valuation allowance activity related to the Company's U.K. operations, the remaining increase in valuation allowances resulted primarily from losses incurred in certain jurisdictions, as the Company determined it is more likely than not that these assets will not be realized.

        The Company has not provided U.S. income taxes on certain of its non-U.S. subsidiaries' undistributed earnings as such amounts are indefinitely reinvested outside the United States. At December 31, 2011 and 2010, such earnings were approximately $834 million and $857 million, respectively. If these earnings were repatriated at December 31, 2011, the one-time tax cost associated with the repatriation would be approximately $154 million. The Company has a tax holiday in Asia that expires in 2012. The Company no longer has tax holidays in Europe and the Middle East as they have all expired. During 2011, the tax holiday resulted in a reduction of $0.1 million in income tax expense, while during 2010 and 2009 these tax holidays resulted in no change to income tax expense.

        The Company recognizes accrued interest and penalty expense related to unrecognized income tax benefits ("UTB") in income tax expense. During 2011, 2010 and 2009, the Company recognized an income tax benefit of $1.0 million, $0.3 million and income tax expense of $3.3 million, respectively, for interest and penalties. The Company has accrued $9.7 million and $10.7 million for the payment of interest and penalties at December 31, 2011 and 2010, respectively.

        A reconciliation of the change in the UTB balance from January 1, 2009 to December 31, 2011 is as follows:

(In thousands)	Unrecognized Income Tax Benefits			Deferred Income Tax Benefits			Unrecognized Income Tax Benefits, Net of Deferred Income Tax Benefits
Balance at January 1, 2009	$	24,299		$	(1,179	)	$	23,120
Additions for tax positions related to the current year (includes currency translation adjustment)		7,868			(11	)		7,857
Additions for tax positions related to prior years (includes currency translation adjustment)		10,625			(49	)		10,576
Other reductions for tax positions related to prior years		(4,007	)		117			(3,890	)
Statutes of limitation expirations		(1,934	)		152			(1,782	)
Settlements		(60	)		21			(39	)
Balance at December 31, 2009	$	36,791		$	(949	)	$	35,842
Additions for tax positions related to the current year (includes currency translation adjustment)		1,846			—			1,846
Additions for tax positions related to prior years (includes currency translation adjustment)		313			(44	)		269
Other reductions for tax positions related to prior years		(429	)		—			(429	)
Statutes of limitation expirations		(2,348	)		156			(2,192	)
Settlements		(284	)		99			(185	)
Balance at December 31, 2010	$	35,889		$	(738	)	$	35,151
Additions for tax positions related to the current year (includes currency translation adjustment)		2,534			(10	)		2,524
Additions for tax positions related to prior years (includes currency translation adjustment)		4,014			(11	)		4,003
Other reductions for tax positions related to prior years		(147	)		—			(147	)
Statutes of limitation expirations		(8,521	)		224			(8,297	)
Settlements		(361	)		18			(343	)
Total unrecognized income tax benefits that, if recognized, would impact the effective income tax rate at December 31, 2011	$	33,408		$	(517	)	$	32,891

        Included in the additions for tax positions related to the current year for 2011 is approximately $0.2 million of unrecognized tax benefits that created additional operating losses in a foreign jurisdiction. To the extent the unrecognized tax benefit is recognized, a full valuation allowance would be recorded against these operating losses.

        Within the next twelve months, it is reasonably possible that up to $5.2 million of unrecognized income tax benefits will be recognized upon settlement of tax examinations and the expiration of various statutes of limitations.

        The Company files its income tax returns as prescribed by the tax laws of the jurisdictions in which it operates. With few exceptions, the Company is no longer subject to U.S. and international examinations by tax authorities for the years through 2005.