Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

Note 9 - Income Taxes

Income before income taxes and the provision for income taxes, for the three years ended December 31, 2011, were as follows:

(In millions)	2011			2010		2009
Income before income taxes:
U.S.	$	106.3		$	54.3	$	63.6
International	69.2			45.5		14.0
Total income before income taxes	$	175.5		$	99.8	$	77.6
Provision for income taxes:
Current:
U.S.	$	10.6		$	1.1	$	1.5
International	7.6			5.7		0.9
Current provision for income taxes	18.2			6.8		2.4
Deferred:
U.S.	24.4			15.1		23.8
International	(1.0		)	1.0		(4.2		)
Deferred provision for income taxes	23.4			16.1		19.6
Total provision for income taxes	$	41.6		$	22.9	$	22.0

A reconciliation of the provision for income taxes at the U.S. federal statutory income tax rate of 35% to the effective income tax rate, for the three years ended December 31, 2011, is as follows:

(In millions)	2011			2010			2009
Provision for taxes at U.S. federal statutory rate	$	61.5		$	34.9		$	27.1
State and local taxes, net of federal benefit	2.2			1.8			1.6
Foreign effective rate differential	(8.4		)	(7.3		)	(7.4		)
Other	1.3			1.4			(0.7		)
Foreign Tax Credit Carryforwards	(2.4		)	(3.2		)	1.4
U.S. Research & Development Tax Credits	(1.0		)	(1.3		)	(2.0		)
Tax Settlement	(5.5		)	—			—
Wind Energy Tax Credit	(0.1		)	(3.5		)	—
Change in valuation allowance on net operating losses	(6.0		)	0.1			2.0
Total provision for income taxes	$	41.6		$	22.9		$	22.0

Included in the 2011 provision were certain tax benefits relating to the reversal of valuation allowances on net operating losses in certain foreign jurisdictions and U.S. foreign tax credit carryforwards as it became more likely than not that these deferred tax assets would be realized. The 2011 provision also reflects the favorable impact of a tax audit settlement in one of the foreign jurisdictions.

As of December 31, 2011 and 2010, we have no U.S. income tax provision for undistributed earnings of international subsidiaries.  We do not currently have any specific plans to repatriate funds from our international subsidiaries, however we may do so in the future if the distribution is a return of capital with no tax consequences or when a dividend can be remitted with no material tax impact.  Such earnings are considered to be permanently reinvested.  Estimating the tax liability that would result if these earnings were repatriated is not practicable at this time.

Deferred Income Taxes

Deferred income taxes result from tax attributes including foreign tax credits, net operating loss carryforwards and temporary differences between the recognition of items for income tax purposes and financial reporting purposes. Principal components of deferred income taxes as of December 31, 2011 and 2010 are:

(In millions)	2011			2010
Assets
Net operating loss carryforwards	$	64.2		$	61.8
Unfunded pension liability and other postretirement obligations	13.8			14.5
Accelerated amortization	—			7.4
Advanced payments from foreign affiliates	18.8			—
Tax credit carryforwards	21.0			34.4
Stock based compensation	11.3			9.0
Other comprehensive income	13.4			8.8
Reserves and other	14.7			15.4
Subtotal	157.2			151.3
Valuation allowance	(39.4		)	(36.5		)
Total assets	$	117.8		$	114.8
Liabilities
Accelerated depreciation	(39.4		)	(29.0		)
Accelerated amortization	(1.2		)	—
Other	(0.4		)	(0.8		)
Total liabilities	(41.0		)	(29.8		)
Net deferred tax asset	$	76.8		$	85.0

Deferred tax assets and deferred tax liabilities as presented in the consolidated balance sheets as of December 31, 2011 and 2010 are as follows and are recorded in prepaid expenses and other current assets, deferred tax assets, other accrued liabilities and other non-current liabilities in the consolidated balance sheets:

(In millions)	2011			2010
Current deferred tax assets, net	$	45.1		$	23.3
Current deferred tax liability, net	(0.1		)	(0.1		)
Long-term deferred tax assets, net	33.0			63.6
Long-term deferred tax liability, net	(1.2		)	(1.8		)
Net deferred tax assets	$	76.8		$	85.0

The deferred tax assets for the respective periods were assessed for recoverability and, where applicable, a valuation allowance was recorded to reduce the total deferred tax asset to an amount that will, more likely than not, be realized in the future. The net change in the total valuation allowance for the years ended December 31, 2011 and 2010 was an increase of $2.9 million and $5.7 million, respectively. The valuation allowance as of December 31, 2011 and 2010 relates primarily to net operating loss carryforwards of our foreign subsidiaries, certain state temporary differences, state net operating loss carryforwards, and foreign tax credit carryforwards for which we have determined, based upon historical results and projected future book and taxable income levels, that a valuation allowance should continue to be maintained.

Although realization is not assured, we have concluded that it is more-likely-than-not that the deferred tax assets, for which a valuation allowance was determined to be unnecessary, will be realized in the ordinary course of operations based on the available positive and negative evidence, including scheduling of deferred tax liabilities and projected income from operating activities. The amount of the net deferred tax assets considered realizable, however, could be reduced in the near term if actual future income or income tax rates are lower than estimated, or if there are differences in the timing or amount of future reversals of existing taxable or deductible temporary differences.

Net Operating Loss & Tax Credit Carryforwards

At December 31, 2011, we had tax credit carryforwards for U.S. tax purposes of $21.0 million available to offset future income taxes, of which $1.5 million are available to carryforward indefinitely while the remaining $19.5 million will begin to expire, if not utilized, in 2012. We also have net operating loss carryforwards for U.S. and foreign income tax purposes of $37.8 million and $168.8 million, respectively. The use of our U.S. net operating losses generated prior to 2003 are limited because we had an “ownership change” pursuant to IRC Section 382 resulting from a refinancing of our capital structure.  We believe we will utilize all of the U.S. net operating losses prior to their expiration.

Our foreign net operating losses can be carried forward without limitation in Belgium, Luxembourg and UK. The carryforward period in Spain and China is limited to 18 and 5 years, respectively.  We have a full valuation allowance against certain foreign net operating losses for which the Company believes it is not more likely than not that the net operating losses will be utilized. The valuation allowance on the foreign net operating losses is $132.2 million as of December 31, 2011.

Uncertain Tax Positions

Our unrecognized tax benefits at December 31, 2011, relate to various Foreign and U.S. jurisdictions.

The following table summarizes the activity related to our unrecognized tax benefits:

(In millions)	Unrecognized Tax Benefits 2011			Unrecognized Tax Benefits 2010			Unrecognized Tax Benefits 2009
Balance as of January1	$	20.1		$	19.4		$	18.2
Additions based on tax positions related to the current year	1.5			2.6			3.2
Reductions for tax positions of prior years	(1.1		)	—			(1.8		)
Decreases relating to settlements with tax authorities	(6.7		)	—			(0.1		)
Expiration of the statute of limitations for the assessment of taxes	(1.6		)	(0.5		)	(0.5		)
Other, including currency translation	0.3			(1.4		)	0.4
Balance as of December 31	$	12.5		$	20.1		$	19.4

Included in the unrecognized tax benefits of $12.5 million at December 31, 2011 was $12.2 million of tax benefits that, if recognized, would impact our annual effective tax rate.  In addition, we recognize interest accrued related to unrecognized tax benefits as a component of interest expense and penalties as a component of income tax expense in the consolidated statements of operations. The Company recognized ($0.1) million, ($1.4) million, $0.2 million of interest expense (income) related to the above unrecognized tax benefits in 2011, 2010 and 2009, respectively.  The Company had accrued interest of approximately $0.8 million and $0.9 million as of December 31, 2011 and 2010, respectively.  During 2011 and 2010, we reversed interest of $0.2 million and $1.4 million respectively related to the unrecognized tax benefits.

We are subject to taxation in the U.S. and various states and foreign jurisdictions.  The U.S. federal statute of limitations remains open for prior years; however the U.S. tax returns have been audited through 2007.  Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from 3 to 5 years. Years still open to examination by foreign tax authorities in major jurisdictions include Austria (2006 onward), Belgium (2009 onward), France (2009 onward), Spain (2004 onward) and UK (2009 onward).  We are currently under examination in various foreign jurisdictions.

As of December 31, 2011, we had uncertain tax positions for which it is reasonably possible that amounts of unrecognized tax benefits could significantly change over the next year.  These uncertain tax positions relate to our tax returns from 2004 onward, some of which are currently under examination by certain European tax authorities.  During 2011, the Company settled an audit with foreign tax authorities in one of the jurisdictions under examination. The favorable settlement resulted in a reduction of uncertain tax benefits of approximately $5.5 million which was recognized in 2011.  As of December 31, 2011, the Company has not classified any of the unrecognized tax benefits as a current liability as it does not expect to settle any of the tax positions under examinations in various jurisdictions within the next twelve months.

We expect that the amount of unrecognized tax benefits will continue to change in the next twelve months as a result of ongoing tax deductions, the resolution of audits and the passing of the statute of limitations.