Note 4 – Income Taxes | | | Years Ended December 31, | | | (In millions) | 2013 | | 2012 | | 2011 | | | | | | | | | | | | Income (loss) from continuing operations before income taxes | | | | | | | | | U.S. | $ | (51.8) | | (19.6) | | (16.0) | | | Foreign | | 200.0 | | 178.7 | | 204.3 | | | Income from continuing operations before income taxes | $ | 148.2 | | 159.1 | | 188.3 | |
| Provision (benefit) for income taxes from continuing operations | | | | | | | | | Current tax expense (benefit) | | | | | | | | | U.S. federal | $ | 0.5 | | (0.1) | | 2.9 | | | State | | 1.5 | | (0.3) | | (0.1) | | | Foreign | | 84.6 | | 70.9 | | 91.9 | | | Current tax expense | | 86.6 | | 70.5 | | 94.7 | | | | | | | | | | | | Deferred tax expense (benefit) | | | | | | | | | U.S. federal | | (20.6) | | (29.9) | | (21.3) | | | State | | (1.9) | | (1.4) | | (0.9) | | | Foreign | | (12.1) | | (12.1) | | (8.5) | | | Deferred tax benefit | | (34.6) | | (43.4) | | (30.7) | | | Provision (benefit) for income taxes of continuing operations | $ | 52.0 | | 27.1 | | 64.0 | |
| | | Years Ended December 31, | | | (In millions) | 2013 | | 2012 | | 2011 | | | | | | | | | | | | Comprehensive provision (benefit) for income taxes allocable to | | | | | | | | | Continuing operations | $ | 52.0 | | 27.1 | | 64.0 | | | Discontinued operations | | 4.7 | | (1.0) | | (3.9) | | | Other comprehensive income (loss) | | 141.0 | | 9.3 | | (74.4) | | | Equity | | 2.8 | | 2.7 | | (1.1) | | | Comprehensive provision (benefit) for income taxes | $ | 200.5 | | 38.1 | | (15.4) | |
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) | 2013 | | 2012 | | 2011 | | | | | | | | | | | | | | | U.S. federal tax rate | 35.0 | % | | 35.0 | % | | 35.0 | % | | | Increases (reductions) in taxes due to: | | | | | | | | | | | | Adjustments to valuation allowances | 4.0 | | | 1.2 | | | (2.9) | | | | | Foreign income taxes | (6.5) | | | (2.2) | | | 0.3 | | | | | Medicare subsidy for retirement plans | (1.1) | | | (14.4) | | | - | | | | | French business tax | 3.0 | | | 2.7 | | | 2.4 | | | | | Nontaxable acquisition-related (gains) losses | - | | | - | | | (0.4) | | | | | Taxes on undistributed earnings of foreign affiliates | (0.1) | | | (2.2) | | | 0.2 | | | | | State income taxes, net | (0.1) | | | (0.1) | | | (0.5) | | | | | Change in judgment about uncertain tax positions in Mexico | - | | | (4.7) | | | - | | | | | Other | 0.9 | | | 1.7 | | | (0.1) | | | | Actual income tax rate on continuing operations | 35.1 | % | | 17.0 | % | | 34.0 | % | |
Components of Deferred Tax Assets and Liabilities | | | | December 31, | | | (In millions) | | 2013 | | 2012 | | | | | | | | | | | Deferred tax assets | | | | | | | Pension liabilities | $ | 70.0 | | 136.4 | | | Retirement benefits other than pensions | | 60.7 | | 127.2 | | | Workers’ compensation and other claims | | 35.1 | | 38.3 | | | Other assets and liabilities | | 138.6 | | 115.3 | | | Net operating loss carryforwards | | 26.8 | | 63.5 | | | Alternative minimum and other tax credits(a) | | 44.7 | | 37.9 | | | Subtotal | | 375.9 | | 518.6 | | | Valuation allowances | | (32.4) | | (47.4) | | | Total deferred tax assets | | 343.5 | | 471.2 | | | | | | | | | | | Deferred tax liabilities | | | | | | | Property and equipment, net | | 9.9 | | 11.2 | | | Other assets and miscellaneous | | 31.0 | | 37.4 | | | Deferred tax liabilities | | 40.9 | | 48.6 | | | Net deferred tax asset | $ | 302.6 | | 422.6 | | | | | | | | | | | Included in: | | | | | | | | Current assets | $ | 72.0 | | 59.4 | | | | Noncurrent assets | | 251.7 | | 385.3 | | | | Current liabilities, included in accrued liabilities | | (3.1) | | (3.4) | | | | Noncurrent liabilities | | (18.0) | | (18.7) | | | Net deferred tax asset | $ | 302.6 | | 422.6 | |
(a) U.S. alternative minimum tax credits of $43.8 million have an unlimited carryforward period and the remaining credits of $0.9 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, 2013. | | | | | Years Ended December 31, | | | (In millions) | | 2013 | | 2012 | | 2011 | | | | | | | | | | | | | | Valuation allowances: | | | | | | | | | | Beginning of year | $ | 47.4 | | 43.9 | | 45.9 | | | | Expiring tax credits | | (1.8) | | (0.8) | | (0.3) | | | | Acquisitions and dispositions | | (32.7) | | (0.9) | | 0.3 | | | | Changes in judgment about deferred tax assets(a) | | (0.2) | | (1.0) | | (8.2) | | | | Other changes in deferred tax assets, charged to: | | | | | | | | | | | Income from continuing operations | | 6.2 | | 3.4 | | 7.6 | | | | | Income from discontinued operations | | 12.5 | | 1.9 | | - | | | | | Other comprehensive income (loss) | | - | | 0.1 | | - | | | | Foreign currency exchange effects | | 1.0 | | 0.8 | | (1.4) | | | | End of year | $ | 32.4 | | 47.4 | | 43.9 | |
- 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.
Undistributed Foreign Earnings As of December 31, 2013, we have not recorded U.S. federal deferred income taxes on approximately $259 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, 2013, was $214.5 million. The tax benefit of net operating loss carryforwards, before valuation allowances, as of December 31, 2013, was $26.8 million, and expires as follows: | (In millions) | Federal | | State | | Foreign | | Total | | | | | | | | | | | | | | | Years of expiration | | | | | | | | | | | | 2014-2018 | $ | - | | 0.3 | | 3.9 | | 4.2 | | | | 2019-2023 | | - | | 0.2 | | 5.3 | | 5.5 | | | | 2024 and thereafter | | - | | 10.3 | | 0.4 | | 10.7 | | | | No expiration | | - | | - | | 6.4 | | 6.4 | | | | | $ | - | | 10.8 | | 16.0 | | 26.8 | |
Uncertain Tax Positions A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: | | | | Years Ended December 31, | | | (In millions) | | 2013 | | 2012 | | 2011 | | | | | | | | | | | | | Uncertain tax positions: | | | | | | | | | | Beginning of year | $ | 11.8 | | 17.2 | | 19.4 | | | | Increases related to prior-year tax positions | | 0.1 | | 1.4 | | 0.8 | | | | Decreases related to prior-year tax positions | | - | | (6.9) | | (1.6) | | | | Increases related to current-year tax positions | | 2.3 | | 1.6 | | 1.3 | | | | Settlements | | (0.7) | | (0.7) | | - | | | | Effect of the expiration of statutes of limitation | | (3.4) | | (1.2) | | (1.2) | | | | Increases (decreases) related to business combinations and dispositions | | - | | - | | (0.7) | | | | Foreign currency exchange effects | | 0.7 | | 0.4 | | (0.8) | | | | End of year | $ | 10.8 | | 11.8 | | 17.2 | |
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