Income Taxes

12 Months Ended

Jan. 01, 2012

Income Taxes [Abstract]

Income Taxes

13. Income Taxes

Earnings (loss) from continuing operations before taxes for the years 2011, 2010 and 2009 were taxed under the following jurisdictions:

	2011		2010		2009
	(in million of dollars)
Domestic	$	36.7	$	27.3	$	(56.8	)
Foreign		20.9		5.4		(91.5	)
Total	$	57.6	$	32.7	$	(148.3	)

The provision for income taxes from continuing operations was as follows:

	2011			2010			2009
	(in millions of dollars)
Current tax expense:
U.S. federal	$	5.2		$	6.2		$	(14.0	)
U.S. state and local		1.8			0.6			0.9
Foreign		13.0			9.1			0.9
Total current		20.0			15.9			(12.2	)
Deferred tax expense:
U.S. federal		(33.3	)		(11.3	)		(21.6	)
U.S. state and local		1.1			(0.3	)		(3.3	)
Foreign		4.9			2.3			(6.1	)
Total deferred		(27.3	)		(9.3	)		(31.0	)
Total provision	$	(7.3	)	$	6.6		$	(43.2	)

Deferred taxes are comprised of the following:

	2011			2010
	(in millions of dollars)
Depreciation and amortization	$	(10.4	)	$	(8.9	)
Employee compensation and benefit plans		48.4			49.4
Workers’ compensation		26.7			26.9
Unrealized loss on securities		8.3			7.7
Loss carryforwards		53.5			46.7
Credit Carryforwards		68.6			39.5
Other, net		(1.4	)		(6.6	)
Valuation allowance		(65.4	)		(52.5	)
Net deferred tax assets	$	128.3		$	102.2

The deferred tax balance is classified in the consolidated balance sheet as:

	2011			2010
	(in millions of dollars)
Current assets, deferred tax	$	38.2		$	22.4
Noncurrent deferred tax asset		94.1			84.0
Current liabilities, income and other taxes		(1.8	)		(1.5	)
Noncurrent liabilities, other long-term liabilities		(2.2	)		(2.7	)
	$	128.3		$	102.2

The differences between income taxes from continuing operations for financial reporting purposes and the U.S. statutory rate of 35% are as follows:

	2011			2010			2009
	(in millions of dollars)
Income tax based on statutory rate	$	20.2		$	11.4		$	(51.9	)
State income taxes, net of federal benefit		1.9			0.2			(1.6	)
General business credits		(28.5	)		(11.7	)		(11.8	)
Life insurance cash surrender value		0.9			(3.3	)		(4.6	)
Impairment		—			0.2			15.6
Restructuring		1.0			0.8			4.9
Foreign items		(1.5	)		0.8			5.7
Foreign business taxes		4.7			4.5			0.4
Worthless stock		(7.7	)		(0.9	)		(3.6	)
Non-deductible compensation		1.5			1.1			1.2
Change in deferred tax realizability		(0.6	)		3.0			—
Other, net		0.8			0.5			2.5
Total	$	(7.3	)	$	6.6		$	(43.2	)

General business credits primarily represent U.S. work opportunity credits and, in 2011 only, HIRE Act retention credits of $11.3 million. Foreign business taxes are taxes based on revenue less certain expenses and are classified as income taxes under ASC Topic 740 (“ASC 740”), Income Taxes. The lower 2009 amount is primarily due to the French business tax, which had been classified as a component of SG&A expenses prior to 2010. The French government changed the business tax from an asset-based tax to an income-based tax, thereby requiring the classification of this tax as an income tax beginning in 2010.

The Company has U.S. general business credit carryforwards of $66.9 million which will expire from 2028 to 2031 and foreign tax credit carryforwards of $1.7 million which will expire from 2019 to 2021. The net tax effect of state and foreign loss carryforwards at January 1, 2012 totaled $53.5 million, which expire as follows (in millions of dollars):

Year	Amount
2012-2014	$	1.2
2015-2017		2.9
2018-2021		3.3
2022-2026		5.6
2027-2031		1.7
No expiration		38.8
Total	$	53.5

The Company has established a valuation allowance for loss carryforwards and future deductible items in certain foreign jurisdictions. The valuation allowance is determined in accordance with the provisions of ASC 740, which requires an assessment of both negative and positive evidence when measuring the need for a valuation allowance. The Company’s foreign losses in recent periods in these jurisdictions represented sufficient negative evidence to require a valuation allowance under ASC 740. The Company intends to maintain a valuation allowance until sufficient positive evidence exists to support realization of the foreign deferred tax assets.

Provision has not been made for U.S. or additional foreign income taxes on an estimated $30.5 million of undistributed earnings of foreign subsidiaries, which are permanently reinvested. If these earnings were to be repatriated, the Company would be subject to additional U.S. income taxes, adjusted for foreign credits. It is not practical to determine the income tax liability that might be incurred if these earnings were repatriated.

Deferred income taxes recorded in other comprehensive income include:

	2011		2010			2009
	(in millions of dollars)
Cumulative translation adjustments	$	1.8	$	(0.3	)	$	(3.5	)
Pension liability		0.1		(0.3	)		0.1
Total	$	1.9	$	(0.6	)	$	(3.4	)

In the fourth quarter of 2009, an adjustment was made to deferred taxes to correct an immaterial error related to years prior to 2007. This caused the income tax benefit to be reduced by $1.7 million, and other comprehensive income to be reduced by $1.5 million.

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

	2011			2010			2009
	(in millions of dollars)
Balance at beginning of the year	$	8.5		$	8.9		$	4.6
Additions based on tax positions related to the current year		—			—			4.8
Additions for prior years’ tax positions		0.2			0.1			0.4
Reductions for prior years’ tax positions		(0.8	)		(0.3	)		(0.4	)
Additions for settlements		0.2			—			—
Reductions for settlements		(0.2	)		—			(0.2	)
Reductions for expiration of statutes		(0.1	)		(0.2	)		(0.3	)
Balance at end of the year	$	7.8		$	8.5		$	8.9

If the $7.8 million in 2011, $8.5 million in 2010 and $8.9 million in 2009 of unrecognized tax benefits were recognized, they would have a favorable effect of $6.7 million in 2011, $7.3 million in 2010 and $7.6 million in 2009 on the effective tax rate.

The Company recognizes both interest and penalties as part of the income tax provision. The Company recognized expense of $0.1 million in 2011 and $0.1 million in 2010 and a benefit of $0.2 million in 2009 for interest and penalties. At year end, accrued interest and penalties were $0.5 million in 2011 and $0.6 million in 2010.

The Company files income tax returns in the U.S. and in various states and foreign countries. The tax periods open to examination by the major taxing jurisdictions to which the Company is subject include the U.S. for fiscal years 2006 through 2011, Canada for fiscal years 2004 through 2011 and France for fiscal years 2009 through 2011.

The Company and its subsidiaries have various other income tax returns in the process of examination, administrative appeals or litigation. The unrecognized tax benefit and related interest and penalty balances include approximately $1.0 million for 2011 and $1.6 million for 2010 related to tax positions which are reasonably possible to change within the next twelve months due to income tax audits, settlements and statute expirations.