Note 8 - Income Taxes

Income before income taxes and the provision for income taxes, for the three years ended December 31, 2013, were as follows:

(In millions)	2013		2012		2011
Income before income taxes:
U.S.	$	149.8	$	137.4	$	106.3
International	112.8		100.3		69.2
Total income before income taxes	$	262.6	$	237.7	$	175.5

Provision for income taxes:
Current:
U.S.	$	30.5	$	36.9	$	10.6
International	29.2		20.7		7.6
Current provision for income taxes	59.7		57.6		18.2
Deferred:
U.S.	13.1		10.4		24.4
International	3.2		6.1		(1.0		)
Deferred provision for income taxes	16.3		16.5		23.4
Total provision for income taxes	$	76.0	$	74.1	$	41.6

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, 2013, is as follows:

(In millions)	2013			2012			2011
Provision for taxes at U.S. federal statutory rate	$	91.9		$	83.2		$	61.5
State and local taxes, net of federal benefit	2.0			2.2			2.2
Foreign effective rate differential	(12.5		)	(10.3		)	(8.4		)
Research and Development tax credits	(2.8		)	(0.7		)	(2.0		)
Other	(2.6		)	0.5			(0.2		)
Tax Settlement	—			0.2			(5.5		)
Change in valuation allowance	—			(1.0		)	(6.0		)
Total provision for income taxes	$	76.0		$	74.1		$	41.6

The 2013 tax provision includes a benefit for U.S. Research and Development (“R&D”) tax credits comprised of the current year R&D tax credit and a catch-up adjustment for the prior year R&D tax credit which was excluded from last years’ provision due to the expiration of the tax credit at December 31, 2011. The current R&D tax credit expired December 31, 2013.

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, 2013 and 2012, we did not have a 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 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, 2013 and 2012 are:

(In millions)	2013			2012
Assets
Net operating loss carryforwards	$	63.6		$	56.2
Unfunded pension liability and other postretirement obligations	16.0			15.3
Advanced payments from foreign affiliates	28.9			22.3
Tax credit carryforwards	11.2			35.4
Stock based compensation	14.4			12.6
Other comprehensive income	6.0			14.0
Reserves and other	18.9			14.7
Subtotal	159.0			170.5
Valuation allowance	(62.3		)	(49.4		)
Total assets	$	96.7		$	121.1
Liabilities
Accelerated depreciation	(63.4		)	(50.1		)
Accelerated amortization	(9.2		)	(8.2		)
Other	(0.8		)	(0.2		)
Total liabilities	$	(73.4	)	$	(58.5	)
Net deferred tax asset	$	23.3		$	62.6

Deferred tax assets and deferred tax liabilities as presented in the consolidated balance sheets as of December 31, 2013 and 2012 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)	2013			2012
Current deferred tax assets, net	$	63.3		$	62.5
Current deferred tax liability, net	(1.4		)	(0.2		)
Long-term deferred tax assets, net	10.3			15.4
Long-term deferred tax liability, net	(48.9		)	(15.1		)
Net deferred tax assets	$	23.3		$	62.6

In July 2013, the FASB issued ASU No. 2013-11, which requires an unrecognized tax benefit to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward on a jurisdictional basis. ASU 2013-11 was effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Early adoption is permitted and the Company has chosen to adopt ASU 2013-11 in the fourth quarter of 2013. The adoption of this standard resulted in a reduction of the Company’s long term deferred tax assets by $21.4 million.

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, 2013 and 2012 was an increase of $12.9 million and $10.0 million, respectively. The valuation allowance as of December 31, 2013 and 2012 relates primarily to net operating loss carryforwards of our foreign subsidiaries, and certain state net operating loss 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, 2013, we had tax credit carryforwards for U.S. tax purposes of $28.8 million available to offset future income taxes. These credits will begin to expire if not utilized in 2014.

We also had net operating loss carryforwards for foreign income tax purposes of $231.8 million, for which there are valuation allowances of $214.8 million as of December 31, 2013. Our foreign net operating losses can be carried forward without limitation in Belgium, Luxembourg and U.K. 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.

Uncertain Tax Positions

Our unrecognized tax benefits at December 31, 2013, relate to various Foreign and U.S. jurisdictions.

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

	Unrecognized Tax Benefits
(In millions)	2013			2012			2011
Balance as of January 1,	$	32.6		$	12.5		$	20.1
Additions based on tax positions related to the current year	5.2			1.7			1.5
Additions/(reductions) for tax positions of prior years	5.7			19.0			(1.1		)
Decreases relating to settlements with tax authorities	—			—			(6.7		)
Expiration of the statute of limitations for the assessment of taxes	(1.3		)	(0.8		)	(1.6		)
Other, including currency translation	0.5			0.2			0.3
Balance as of December 31,	$	42.7		$	32.6		$	12.5

Included in the unrecognized tax benefits of $42.7 million at December 31, 2013 was $39 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 $0.7 million, $0.1 million, ($0.1) million of interest expense (income) related to the above unrecognized tax benefits in 2013, 2012 and 2011, respectively. The Company had accrued interest of approximately $1.6 million and $0.9 million as of December 31, 2013 and 2012, respectively. During 2013 we did not reverse any interest and in 2012, we reversed $0.1 million related to the unrecognized tax benefits.

We are subject to taxation in the U.S. and various states and foreign jurisdictions. 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 (2007 onward), Belgium (2011 onward), France (2011 onward), Spain (2004 onward) and U.K. (2011 onward). We are currently under examination in certain of the foreign jurisdictions.

As of December 31, 2013, 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, 2013, 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. We are unable to make a reliable estimate of the eventual cash flows of the $42.7 million of unrecognized tax benefits.