Income Taxes

For financial reporting purposes, income before income taxes includes the following components (in millions):



	Year Ended
	Dec 31, 2011		Dec 31, 2010		Dec 31, 2009
United States	$	51.2	$	32.1	$	(34.3	)
Foreign	55.7		82.3		116.9
Total	$	106.9	$	114.4	$	82.6

The provision (benefit) for income taxes consisted of the following (in millions):



	Year Ended
	Dec 31, 2011			Dec 31, 2010			Dec 31, 2009
Current tax expense:
Federal	$	(8.6	)	$	(32.7	)	$	(0.3	)
State	(0.4		)	(2.1		)	1.2
Foreign	42.8			60.4			87.4
Deferred tax expense (benefit):
Federal	19.3			24.1			(16.7		)
State	1.7			0.3			(1.1		)
Foreign	(12.1		)	(3.3		)	(34.7		)
Total	$	42.7		$	46.7		$	35.8

The reconciliation of reported income tax expense (benefit) to the amount of income tax expense that would result from applying domestic federal statutory tax rates to pretax income is as follows (in millions):



	Year Ended
	Dec 31, 2011			Dec 31, 2010			Dec 31, 2009
Income tax expense (benefit) at Federal statutory tax rate	$	37.4		$	40.0		$	28.9
Foreign tax rate differential	(0.1		)	(4.0		)	(3.2		)
Foreign withholding taxes	3.4			4.9			3.4
Change in valuation allowance	5.4			9.5			10.5
Change in uncertain tax positions	(4.8		)	(11.4		)	12.7
Nondeductible / nontaxable items	0.7			5.1			(10.8		)
Other (net)	0.7			2.6			(5.7		)
Total	$	42.7		$	46.7		$	35.8

The components of deferred tax assets and liabilities were as follows (in millions):



	Dec 31, 2011			Dec 31, 2010
Deferred tax assets:
Net operating loss carryforwards	$	53.0		$	41.3
Pension and retiree benefits accruals	34.2			25.3
Inventory	16.2			17.6
Depreciation and fixed assets	6.7			7.9
Tax credit carryforwards	6.9			9.3
Other liabilities	52.8			43.6
Valuation allowance	(40.1		)	(38.9		)
Total deferred tax assets	129.7			106.1
Deferred tax liabilities:
Convertible debt discount	131.2			116.6
Inventory	1.9			5.1
Depreciation and fixed assets	83.4			78.8
Intangibles	44.0			55.5
Other	18.8			11.3
Total deferred tax liabilities	279.3			267.3
Net deferred tax assets (liabilities)	$	(149.6	)	$	(161.2	)

The valuation of deferred tax assets is dependent on, among other things, the ability of the Company to generate a sufficient level of future taxable income in relevant taxing jurisdictions. In estimating future taxable income, the Company has considered both positive and negative evidence and has considered the implementation of prudent and feasible tax planning strategies. The Company has and will continue to review on a quarterly basis its assumptions and tax planning strategies and, if the amount of the estimated realizable net deferred tax asset is less than the amount currently on the balance sheet, the Company will reduce its deferred tax asset, recognizing a non-cash charge against reported earnings.

As of December 31, 2011 the Company has recorded a valuation allowance of approximately $40.1 million to reduce deferred tax assets to the amount judged more likely than not to be realized. The valuation allowance is primarily attributable to certain foreign temporary differences and tax loss and tax credit carryforwards.

The Company has recognized deferred tax assets of approximately $19 million for tax loss carryforwards in various taxing jurisdictions as follows (in millions):



	Tax Loss
Jurisdiction	Carryforward		Expiration
Spain	$	46.9	2025 - 2026
Brazil	2.8		Indefinite
New Zealand	9.0		Indefinite
Others	7.4		Various
Total	$	66.1

The Company also has various foreign subsidiaries with approximately $113 million of tax loss carryforwards in various jurisdictions that are subject to a valuation allowance due to statutory limitations on utilization, uncertainty of future profitability, and other relevant factors.

The Company does not provide for deferred taxes on the excess of the financial reporting over the tax basis in investments in foreign subsidiaries that are essentially permanent in duration. That excess was approximately $734 million as of December 31, 2011. The determination of the additional tax expense that would be incurred upon repatriation of assets or disposition of foreign subsidiaries is not practical.

The Company applies ASC 740 - Income Taxes in determining unrecognized tax benefits. ASC 740 - Income Taxes prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the year:



(in millions)	Dec 31, 2011			Dec 31, 2010			Dec 31, 2009
Unrecognized Tax Benefit — Beginning balance	$	66.1		$	79.4		$	64.4
Gross Increases — Tax Positions in Prior Period	2.1			4.7			0.5
Gross Decreases — Tax Positions in Prior Period	(4.9		)	(10.3		)	(0.3		)
Gross Increases — Tax Positions in Current Period	8.0			14.2			11.8
Gross Increases — Business Combinations	—			—			3.0
Settlements	(0.3		)	—			(0.4		)
Lapse of Statute of Limitations	(11.4		)	(22.9		)	(1.8		)
Foreign Currency Translation	(0.8		)	1.0			2.2
Unrecognized Tax Benefit — Ending Balance	$	58.8		$	66.1		$	79.4

Included in the balance of unrecognized tax benefits at December 31, 2011, 2010 and 2009 are $54.3 million, $58.3 million and $71.3 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate. Also included in the balance of unrecognized tax benefits at December 31, 2011, 2010 and 2009 are $4.5 million, $7.8 million and $8.1 million of tax benefits that, if recognized, would result in adjustments to deferred taxes.

The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense. Related to the unrecognized tax benefits noted above, the Company accrued penalties of $(1.1) million and interest of $0.7 million during 2011 and in total, as of December 31, 2011, has recognized a liability for penalties of $6.5 million and interest of $11.4 million. During 2010 and 2009, the Company accrued penalties of $0.6 million and $3.5 million, respectively, and interest of $(3.7) million and $5.3 million, respectively, and in total, as of December 31, 2010 and 2009, had recognized liabilities for penalties of $7.8 million and $6.0 million, respectively and interest of $10.9 million and $14.4 million, respectively.

The Company files income tax returns in numerous tax jurisdictions around the world. Due to uncertainties regarding the timing and outcome of various tax audits, appeals and settlements, it is difficult to reliably estimate the amount of unrecognized tax benefits that could change within the next twelve months. The Company believes it is reasonably possible that approximately $10 million of unrecognized tax benefits could change within the next twelve months due to the resolution of tax audits and statute of limitations expirations.

The Company files income tax returns in the United States and numerous foreign, state, and local tax jurisdictions. Tax years that are open for examination and assessment by the Internal Revenue Service are 2007 — 2011. With limited exceptions, tax years prior to 2007 are no longer open in major foreign, state or local tax jurisdictions.