XML 98 R16.htm IDEA: XBRL DOCUMENT v2.4.0.6
Income Taxes
 12 Months Ended
Dec. 31, 2012
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES

The following is a summary of the components of earnings (loss) before provision (benefit) for income taxes for the periods presented:
 
 
 
For the year ended December 31,
 
 
2012
 
2011
 
2010
 
 
(Dollar amounts in millions)
Domestic
 
$
0.2

 
$
(68.8
)
 
$
(28.8
)
Foreign
 
24.6

 
(7.4
)
 
3.8

 
 
$
24.8

 
$
(76.2
)
 
$
(25.0
)

 
The following is a summary of the provision (benefit) for income taxes included in the accompanying consolidated statements of operations for the periods presented:
 
 
 
For the year ended December 31,
 
 
2012
 
2011
 
2010
 
 
(Dollar amounts in millions)
Federal income taxes:
 
 

 
 

 
 

Current
 
$
0.6

 
$
0.3

 
$
0.3

Deferred
 
3.3

 
(20.8
)
 
(18.8
)
 
 
3.9

 
(20.5
)
 
(18.5
)
Foreign
 
8.2

 
6.4

 
6.5

State
 
3.2

 
(6.2
)
 
0.4

 
 
$
15.3

 
$
(20.3
)
 
$
(11.6
)

 
Income tax payments, net of refunds, for 2012 and 2010 were approximately $5.9 million and $18.4 million, respectively. Net income taxes refunded during 2011 were approximately $4.6 million.

The following table reconciles the federal statutory income tax provision (benefit) and rate to the actual income tax provision (benefit) and related effective tax rate for the periods presented:

 
 
For the year ended December 31,
 
 
2012
 
2011
 
2010
 
 
$
 
%
 
$
 
%
 
$
 
%
 
 
(Dollar amounts in millions)
Income tax at the federal statutory rate
 
$
8.7

 
35.0
 %
 
$
(26.7
)
 
35.0
 %
 
$
(8.8
)
 
35.0
 %
Net change from federal statutory rate:
 
 
 
 

 
 
 
 

 
 
 
 
Change in valuation allowance related to deferred tax assets
 
6.2

 
24.9

 
14.8

 
(19.4
)
 
5.1

 
(20.2
)
Change in uncertain tax positions, including interest
 
0.3

 
1.1

 
0.3

 
(0.4
)
 
(1.8
)
 
7.1

State income tax, net of federal income tax effect
 
2.1

 
8.4

 
(4.0
)
 
5.3

 
0.3

 
(1.0
)
Tax effect resulting from foreign activities and foreign dividends
 
(3.3
)
 
(13.4
)
 
(4.2
)
 
5.5

 
0.2

 
(0.9
)
Non-deductible expenses
 
2.3

 
9.4

 
1.5

 
(1.9
)
 
2.8

 
(11.2
)
Research credits
 
(1.7
)
 
(6.7
)
 
(1.7
)
 
2.2

 
—

 
—

Tax benefit for capitalized R&D costs
 
—

 
—

 
—

 
—

 
(9.9
)
 
39.7

Other, net
 
0.7

 
3.0

 
(0.3
)
 
0.3

 
0.5

 
(2.1
)
 
 
$
15.3

 
61.7
 %
 
$
(20.3
)
 
26.6
 %
 
$
(11.6
)
 
46.4
 %


The tax effect of temporary differences which give rise to significant portions of deferred income tax assets and liabilities as of December 31, 2012 and 2011 are as follows: 
 
 
December 31,
 
 
2012
 
2011
 
 
(Dollar amounts in millions)
Prepaid Income Tax Assets (Liabilities) (classified current)
 
 

 
 

Arising From:
 
 

 
 

Accounts receivable
 
$
4.0

 
$
4.9

Inventories
 
(0.9
)
 
(2.0
)
Insurance reserves
 
2.8

 
1.4

Warranty accruals
 
9.3

 
10.4

Valuation allowances
 
(5.8
)
 
(3.4
)
Net loss and credit carry forwards
 
5.9

 
9.9

Other reserves and assets, net
 
14.0

 
17.5

 
 
$
29.3

 
$
38.7

Deferred Income Tax Assets (Liabilities) (classified non-current)
 
 

 
 

Arising From:
 
 

 
 

Property and equipment, net
 
$
(19.3
)
 
$
(23.0
)
Intangible assets, net
 
(209.2
)
 
(222.3
)
Pension and other benefit accruals
 
20.2

 
20.8

Insurance reserves
 
14.2

 
19.4

Warranty accruals
 
10.3

 
9.9

Net loss and credit carry forwards
 
40.2

 
40.5

Other reserves and assets, net
 
12.1

 
13.6

Valuation allowance
 
(36.4
)
 
(37.2
)
Tax deductible goodwill
 
35.2

 
40.9

 
 
$
(132.7
)
 
$
(137.4
)

 
In connection with the filing of the Company’s United States federal tax return for the period ended December 17, 2009 in the third quarter of 2010, the Company made an election to capitalize for tax purposes research and development costs. This election resulted in the creation of a deferred tax asset that will be amortized over a 10 year period. As a result of this election, the Company recorded a deferred tax benefit of approximately $10.9 million, including a state tax benefit of approximately $1.0 million, in 2010.

 As of December 31, 2009, as a result of income and related deferred tax liabilities recognized through fresh-start accounting, the Company determined that a valuation allowance was no longer required for most of its domestic deferred tax assets. The Company has sufficient reversing deferred tax liabilities available so that it is more likely than not that its federal deferred tax assets will be realized. The Company continues to maintain a valuation allowance for certain foreign net operating loss carryforwards, certain state net operating loss carryforwards and deferred state tax assets and for certain federal deferred tax assets that, if recognized, would result in capital losses. The increase in valuation allowance for 2012 relates to losses of certain foreign subsidiaries and losses in certain domestic jurisdictions. The Company has determined that based on the history of losses at these subsidiaries, and expectations for the future, a valuation allowance is required for these loss carry-forwards since it is more likely than not that these loss carry-forwards will not be realized.

At December 31, 2012, the Company has not provided United States income taxes or foreign withholding taxes on unremitted foreign earnings of approximately $62.4 million, as those amounts are considered indefinitely invested. Due to the complexities of the U.S. tax law, including the effect of U.S. foreign tax credits, it is not practicable to estimate the amount of tax that might be payable on these earnings in the event they no longer are indefinitely reinvested. The Company has provided United States income taxes and foreign withholding taxes on approximately $9.7 million of unremitted foreign earnings which are not indefinitely invested.

The Company has a federal net operating loss carry forward generated in 2011 of approximately $26.0 million which will expire in 2031. Included as part of the net operating loss are deductions of approximately $9.6 million related to the deductions for share-based compensation in excess of the corresponding book expense. The tax benefits related to these deductions will be recognized as a credit to additional paid in capital when the benefits are realized on a tax return. The Company also has state net operating losses in various jurisdictions which will expire beginning in 2015.

 The Company has approximately $81.1 million of foreign net operating loss carry-forwards that, if utilized, would offset future foreign tax payments. Approximately $67.5 million of these foreign net operating losses have an indefinite carry-forward period and the remaining foreign net operating losses will expire at various times beginning in 2013. The Company has recorded a full valuation allowance against these losses.

 A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended December 31, 2012 and 2011 is as follows: 
 
 
December 31,
 
 
2012
 
2011
 
 
(Dollar amounts in millions)
 
 
 
 
 
Balance at January 1,
 
$
34.2

 
$
21.9

Gross increases related to positions taken in the current year
 
1.9

 
5.1

Gross increases related to positions taken in prior periods
 
—

 
10.4

Decreases due to lapse of statutes of limitation related to state tax and foreign items
 
(1.6
)
 
(3.2
)
Balance at December 31,
 
$
34.5

 
$
34.2



As of January 1, 2012, the Company had a liability of approximately $26.6 million for unrecognized tax benefits related to various federal, foreign and state income tax matters.  The liability for uncertain tax positions at December 31, 2012 was approximately $26.4 million. The liability for uncertain tax positions is included in other long-term liabilities on the accompanying consolidated balance sheet. The corresponding amount of gross uncertain tax benefits was approximately $34.5 million and $34.2 million at December 31, 2012 and December 31, 2011, respectively. During 2011, the Company increased the reserve for uncertain tax positions related to uncertainties surrounding the timing of deductions related to intercompany transactions with foreign affiliates. This item resulted in an increase of approximately $7.5 million in uncertain tax positions, with a corresponding increase in deferred tax assets of approximately $7.5 million.

As of December 31, 2012 and December 31, 2011, the amount of uncertain tax positions that will impact the Company's effective tax rate is approximately $14.6 million and $14.0 million, respectively. The difference between the total amount of uncertain tax positions and the amount that will impact the effective tax rate represents the federal tax effect of state tax items, items that offset temporary differences, and items that will result in a reduction of other tax assets.

As of December 31, 2012, the Company had approximately $2.2 million in unrecognized benefits relating to various state tax issues, for which the statute of limitations is expected to expire in 2013. In addition, the Company currently expects that it will resolve certain state tax disputes during 2013. The total amount of uncertain tax positions that is related to these disputes is approximately $2.4 million. The current period tax provision includes a reversal of approximately $1.6 million of state reserves as a result of the lapsing of the statute of limitations during the year.

As of December 31, 2012 and December 31, 2011, the total amount of accrued interest related to uncertain tax positions was approximately $2.8 million and $2.3 million, respectively.  The Company has included a provision of approximately $0.5 million as part of its 2012 tax provision related to an increase of interest on uncertain tax positions. The Company has included a benefit of approximately $0.6 million as part of its 2011 tax provision related to a reduction of interest on uncertain tax positions. The Company has included a benefit of approximately $0.7 million as part of its 2010 tax provision related to a reduction of interest on uncertain tax positions and also made interest payments of approximately $0.1 million.

In the third quarter of 2010, the Company reached a settlement related to an income tax and VAT audit related to one of its foreign subsidiaries.  The total amount that the Company paid in connection with this settlement was approximately $1.7 million, of which approximately $0.9 million related to income taxes and approximately $0.8 million related to VAT (which was recorded within SG&A).  The Company had previously established income tax reserves for these uncertain income tax positions totaling approximately $2.3 million, including interest. The income tax provision for the year ended December 31, 2010 includes a reduction in these reserves of approximately $1.4 million.

The Company's consolidated federal tax return has been audited through the period ended December 31, 2009. During the year, the Company completed an audit of its December 17 and December 31, 2009 tax returns. There were no material changes made to the returns. The Company's state and foreign tax filings generally remain open to examination by the relevant tax authority for the tax years 2008 through 2011.