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Income Taxes
12 Months Ended
Dec. 31, 2012
Income Tax Disclosure [Abstract]  
Income taxes

Note 4 – Income Taxes

 

   Years Ended December 31, 
 (In millions)2012 2011 2010 
            
 Income (loss) from continuing operations before income taxes          
 U.S.$ (19.6)   (16.0)   (7.1)  
 Foreign 174.1  200.4  177.0  
 Income from continuing operations before income taxes$ 154.5   184.4   169.9  

 Provision (benefit) for income taxes from continuing operations          
 Current tax expense (benefit)          
 U.S. federal$ (0.1)   2.9   4.3  
 State  (0.3)   (0.1)   0.2  
 Foreign   71.2   92.3   69.6  
 Current tax expense  70.8   95.1   74.1  
            
 Deferred tax expense (benefit)          
 U.S. federal  (29.9)   (21.3)   (7.8)  
 State  (1.4)   (0.9)   -  
 Foreign   (12.6)   (9.0)   6.3  
 Deferred tax benefit  (43.9)   (31.2)   (1.5)  
 Provision (benefit) for income taxes of continuing operations$ 26.9   63.9   72.6  

   Years Ended December 31, 
 (In millions)2012 2011 2010 
            
 Comprehensive provision (benefit) for income taxes allocable to          
 Continuing operations$ 26.9   63.9   72.6  
 Discontinued operations  (0.9)   (3.8)   (8.9)  
 Other comprehensive income (loss)   9.3   (74.4)   (16.1)  
 Equity  2.7   (1.1)   (0.7)  
 Comprehensive provision (benefit) for income taxes$ 38.0   (15.4)   46.9  

Rate Reconciliation

The following table reconciles the difference between the actual tax rate on continuing operations and the statutory U.S. federal income tax rate of 35%.

    Years Ended December 31, 
 (In percentages) 2012 2011 2010 
             
 U.S. federal tax rate  35.0%  35.0%  35.0% 
 Increases (reductions) in taxes due to:          
  Adjustments to valuation allowances  1.7   (2.7)   4.3  
  Foreign income taxes   (1.8)   0.8   (4.8)  
  Medicare subsidy for retirement plans  (14.8)   -   8.1  
  Tax settlement  -   -   (4.1)  
  French business tax   2.8   2.4   2.3  
  Nontaxable acquisition-related (gains) losses  -   (0.4)   1.8  
  Taxes on undistributed earnings of foreign affiliates  (2.3)   0.2   0.9  
  State income taxes, net  (0.1)   (0.5)   (0.3)  
  Change in judgment about uncertain tax positions in Mexico   (4.9)   -   -  
  Other  1.8   (0.1)   (0.5)  
 Actual income tax rate on continuing operations  17.4%  34.7%  42.7% 

Components of Deferred Tax Assets and Liabilities

    December 31, 
 (In millions) 2012 2011 
          
 Deferred tax assets       
 Pension liabilities$ 136.4   138.3  
 Retirement benefits other than pensions  127.2   112.7  
 Workers’ compensation and other claims  38.3   42.8  
 Other assets and liabilities  115.3   107.0  
 Net operating loss carryforwards  63.5   44.9  
 Alternative minimum and other tax credits (a)  37.9   37.7  
 Subtotal  518.6   483.4  
 Valuation allowances  (47.4)   (43.9)  
 Total deferred tax assets  471.2   439.5  
          
 Deferred tax liabilities       
 Property and equipment, net   11.2   12.5  
 Other assets and miscellaneous  37.4   37.0  
 Deferred tax liabilities  48.6   49.5  
 Net deferred tax asset$ 422.6   390.0  
          
 Included in:       
  Current assets$ 59.4   66.4  
  Noncurrent assets  385.3   350.8  
  Current liabilities, included in accrued liabilities  (3.4)   (4.2)  
  Noncurrent liabilities   (18.7)   (23.0)  
 Net deferred tax asset$ 422.6   390.0  

(a)        U.S. alternative minimum tax credits of $37.3 million have an unlimited carryforward period and the remaining credits of $0.6 million have various carryforward periods.

 

Valuation Allowances

Valuation allowances relate to deferred tax assets in various federal, state and non-U.S. jurisdictions. Based on our historical and expected future taxable earnings, and a consideration of available tax-planning strategies, we believe it is more likely than not that we will realize the benefit of the existing deferred tax assets, net of valuation allowances, at December 31, 2012.

     Years Ended December 31, 
 (In millions) 2012 2011 2010 
              
 Valuation allowances:          
  Beginning of year$ 43.9   45.9   45.4  
  Expiring tax credits  (0.8)   (0.3)   (0.6)  
  Acquisitions and dispositions  (0.9)   0.3   (10.0)  
  Changes in judgment about deferred tax assets (a)   (1.0)   (8.2)   (0.9)  
  Other changes in deferred tax assets, charged to:          
   Income from continuing operations  3.4   7.6   14.9  
   Income from discontinued operations  1.9   -   (1.1)  
   Other comprehensive income (loss)   0.1   -   0.1  
  Foreign currency exchange effects  0.8   (1.4)   (1.9)  
  End of year$ 47.4   43.9   45.9  

  • Changes in judgment about valuation allowances are based on a recognition threshold of “more-likely-than-not.”Amounts are based on beginning-of-year balances of deferred tax assets that could potentially be realized in future years. Amounts are recognized in income from continuing operations.

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Undistributed Foreign Earnings

As of December 31, 2012, we have not recorded U.S. federal deferred income taxes on approximately $386 million of undistributed earnings of foreign subsidiaries and equity affiliates. It is expected that these earnings will be permanently reinvested in operations outside the U.S. It is not practical to compute the estimated deferred tax liability on these earnings.

 

Net Operating Losses

The gross amount of the net operating loss carryforwards as of December 31, 2012, was $331.7 million. The tax benefit of net operating loss carryforwards, before valuation allowances, as of December 31, 2012, was $63.5 million, and expires as follows:

 (In millions)Federal State Foreign  Total  
                
 Years of expiration             
  2013-2017$ -   0.6   5.4   6.0  
  2018-2022  -   0.1   5.8   5.9  
  2023 and thereafter  13.0   9.7   0.2   22.9  
  No expiration   -   -   28.7   28.7  
   $ 13.0   10.4   40.1   63.5  

Uncertain Tax Positions

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

    Years Ended December 31, 
 (In millions) 2012 2011 2010 
             
 Uncertain tax positions:          
  Beginning of year$ 17.2   19.4   19.0  
  Increases related to prior-year tax positions  1.4   0.8   0.1  
  Decreases related to prior-year tax positions  (6.9)   (1.6)   (1.3)  
  Increases related to current-year tax positions  1.6   1.3   1.9  
  Settlements   (0.7)   -   (7.0)  
  Effect of the expiration of statutes of limitation   (1.2)   (1.2)   (1.6)  
  Increases (decreases) related to business combinations and dispositions  -   (0.7)   8.3  
  Foreign currency exchange effects  0.4   (0.8)   -  
  End of year$ 11.8   17.2   19.4  

Included in the balance of unrecognized tax benefits at December 31, 2012, are potential benefits of approximately $9.5 million that, if recognized, will reduce the effective tax rate on income from continuing operations. Also included in the balance of unrecognized tax benefits at December 31, 2012, are benefits of approximately $0.7 million that, if recognized, will reduce the effective tax rate on income from discontinued operations.

 

We recognize accrued interest and penalties related to unrecognized tax benefits in provision (benefit) for income taxes. Interest and penalties included in provision (benefit) for income taxes amounted to ($2.1) million in 2012, $1.2 million in 2011, and $1.1 million in 2010. We had accrued penalties and interest of $3.7 million at December 31, 2012, and $5.9 million at December 31, 2011.

 

We file income tax returns in the U.S. federal and various state and foreign jurisdictions. With a few exceptions, as of December 31, 2012, we were no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2009. Additionally, due to statute of limitations expirations and audit settlements, it is reasonably possible that approximately $3.1 million of currently remaining unrecognized tax positions may be recognized by the end of 2013.