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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Schedule of Earnings before Income Taxes

Earnings before income taxes consisted of the following:


	December 31,
(DOLLARS IN THOUSANDS)	2012			2011			2010
U.S. loss before taxes	$	(21,308	)	$	(5,854	)	$	(82,112	)
Foreign income before taxes		464,723			379,400			441,705

Total income before taxes	$	443,415		$	373,546		$	359,593

Schedule of Income Tax Provision

The income tax provision consisted of the following:


	December 31,
(DOLLARS IN THOUSANDS)	2012			2011		2010
Current
Federal	$	8,280		$	2,386	$	5,379
State and local		(456	)		15		507
Foreign⁽¹⁾		197,335			78,922		103,451

		205,159			81,323		109,337

Deferred
Federal		(4,650	)		11,088		(22,423	)
State and local		(74	)		5,996		2,868
Foreign⁽¹⁾		(11,154	)		8,273		6,254

		(15,878	)		25,357		(13,301	)

Total income taxes	$	189,281		$	106,680	$	96,036

(1)

For year ended December 31, 2012, the foreign current income tax provision includes $72 million of Spanish tax charges and $12 million of charges related to the Spanish dividend withholding cases. The foreign deferred income tax provision includes a $11 million tax benefit from the corporate restructuring of certain foreign subsidiaries.

Schedule of Reconciliation between U.S. Federal Statutory Income Tax Rate to Actual Effective Tax Rate

A reconciliation between the U.S. federal statutory income tax rate to our actual effective tax rate is as follows:


	December 31,
	2012			2011			2010
Statutory tax rate		35.0	%		35.0	%		35.0	%
Difference in effective tax rate on foreign earnings and remittances		(10.6	)		(10.0	)		(9.5	)
Unrecognized tax benefit, net of reversals		0.9			1.8			1.4
Corporate restructuring of certain foreign subsidiaries		(2.4	)		—			—
Spanish tax charges		16.3			—			—
Spanish dividend withholdings		2.6			—			—
State and local taxes		(0.1	)		1.5			0.8
Other, net		1.0			0.3			(1.0	)

Effective tax rate		42.7	%		28.6	%		26.7	%

Schedule of Deferred Tax Assets and Liabilities

The deferred tax assets consist of the following amounts:


	December 31,
(DOLLARS IN THOUSANDS)	2012			2011
ASSETS
Employee and retiree benefits	$	156,399		$	132,210
Credit and net operating loss carryforwards⁽¹⁾		308,900			210,886
Property, plant and equipment, net		2,643			5,015
Trademarks and other⁽¹⁾		141,248			87,911
Amortizable R&D expenses		30,590			23,571
Other, net		25,148			18,729

Gross deferred tax assets		664,928			478,322
Valuation allowance⁽¹⁾		(450,733	)		(290,879	)

Total net deferred tax assets	$	214,195		$	187,443

(1)

During 2012, the Company increased its deferred tax assets by $129 million. The 2012 amount includes a revision to the 2011 foreign net operating loss carryforwards in the amount of $74 million and a $55 million increase related to current year internally generated intangible assets. The revision is not considered material to the previously issued financial statements. This entire increase of $129 million was offset by a corresponding increase in valuation allowances.

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:


	December 31,
(DOLLARS IN THOUSANDS)	2012			2011			2010
Balance of unrecognized tax benefits at beginning of year	$	67,615		$	63,928		$	64,673
Gross amount of increases in unrecognized tax benefits as a result of positions taken during a prior year		22,031			118			2
Gross amount of decreases in unrecognized tax benefits as a result of positions taken during a prior year		(1,853	)		(50	)		—
Gross amount of increases in unrecognized tax benefits as a result of positions taken during the current year		3,854			8,300			4,706
The amounts of decreases in unrecognized benefits relating to settlements with taxing authorities		(48,355	)		(2,960	)		(4,945	)
Reduction in unrecognized tax benefits due to the lapse of applicable statute of limitation		(2,139	)		(1,721	)		(508	)

Balance of unrecognized tax benefits at end of year	$	41,153		$	67,615		$	63,928

- 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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