Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

Note 5.  Income Taxes

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. Income tax expense (benefit) represented 29.1 percent, 28.2 percent and (73.5) percent of income (loss) from continuing operations before income taxes for the years ended December 31, 2011, 2010 and 2009, respectively. The following table presents the principal reasons for the difference between the effective income tax provision (benefit) rate and the U.S. federal statutory income tax provision (benefit) rate:

	Year Ended December 31,
	2011			2011			2010			2010			2009			2009
U.S. federal statutory income tax (benefit) rate		35.0	%	$	14.5			35.0	%	$	12.2			(35.0	)%	$	(2.4	)
U.S. state income taxes, net of federal income tax effect		1.8	%		0.7			1.9	%		0.7			(3.3	)%		(0.2	)
Uncertain income tax positions		0.1	%		0.1			(1.1	)%		(0.4	)		39.1	%		2.7
Foreign tax rate and structure differences		(9.3	)%		(3.9	)		(10.3	)%		(3.6	)		(47.2	)%		(3.2	)
Other differences — net		1.5	%		0.6			2.7	%		0.9			(27.1	)%		(1.9	)
Effective income tax (benefit) rate		29.1	%	$	12.0			28.2	%	$	9.8			(73.5	)%	$	(5.0	)

The Company's effective income tax (benefit) rate can be affected by many factors, including but not limited to, changes in the mix of earnings in taxing jurisdictions with differing statutory rates, changes in corporate structure as a result of business acquisitions and dispositions, changes in the valuation of deferred tax assets and liabilities, the results of audit examinations of previously filed tax returns and changes in tax laws.

The following table presents the U.S. and foreign components of income (loss) from continuing operations before income taxes:

	Year Ended December 31,
	2011		2010		2009
Income (loss) from continuing operations before income taxes:
U.S.	$	23.1	$	20.6	$	(13.3	)
Foreign		18.2		14.2		6.5
Total	$	41.3	$	34.8	$	(6.8	)

The following table presents the components of the provision (benefit) for income taxes:

	Year Ended December 31,
	2011			2010			2009
Provision (benefit) for income taxes:
Current:
Federal	$	0.2		$	(0.4	)	$	2.5
State		0.4			(0.1	)		1.0
Foreign		3.9			3.6			1.9
Total current tax provision		4.5			3.1			5.4
Deferred:
Federal		8.9			7.2			(7.5	)
State		1.2			1.2			(0.6	)
Foreign		(2.6	)		(1.7	)		(2.3	)
Total deferred tax provision (benefit)		7.5			6.7			(10.4	)
Total provision (benefit) for income taxes	$	12.0		$	9.8		$	(5.0	)

The Company has elected to treat its Canadian operations as a branch for U.S. income tax purposes. Therefore, the amount of income (loss) before income taxes from Canadian operations are included in the Company's consolidated U.S. income tax returns and such amounts are subject to U.S. income taxes.

The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. The components of deferred tax assets and liabilities are as follows:

	December 31,
	2011			2010
Net current deferred income tax assets
Net operating losses	$	9.8		$	14.3
Employee benefits		4.0			1.1
Accrued liabilities		2.2			2.4
Inventory		1.4			1.0
Other		0.7			1.0
Net current deferred income tax assets before valuation allowance		18.1			19.8
Valuation allowance		(0.5	)		(0.3	)
Net current deferred income tax assets		17.6			19.5
Net noncurrent deferred income tax assets
Net operating losses and credits		29.5			32.9
Employee benefits		36.9			32.5
Other long-term obligations		—			0.2
Accumulated depreciation		(19.7	)		(21.0	)
Other		—			(0.1	)
Net noncurrent deferred income tax assets before valuation allowance		46.7			44.5
Valuation allowance		(1.2	)		(1.4	)
Net noncurrent deferred income tax assets		45.5			43.1
Total deferred income tax assets	$	63.1		$	62.6
Net noncurrent deferred income tax liability
Accumulated depreciation	$	18.8		$	20.4
Intangibles		5.0			5.4
Interest limitation		(4.7	)		(4.0	)
Employee benefits		(2.7	)		(2.3	)
Net operating losses		(0.3	)		—
Other		(0.1	)		(0.1	)
Net noncurrent deferred income tax liabilities	$	16.0		$	19.4

As of December 31, 2011, a valuation allowance of $1.7 million has been provided against certain U.S. state deferred income tax assets in states where the Company no longer has operations. In determining the need for valuation allowances, the Company considers many factors, including specific taxing jurisdictions, sources of taxable income, income tax strategies and forecasted earnings for the entities in each jurisdiction. A valuation allowance is recognized if, based on the weight of available evidence, the Company concludes that it is more likely than not that some portion or all of the deferred income tax asset will not be realized.

As of December 31, 2011, the Company had $76.3 million of U.S. Federal and $81.8 million of U.S. state net operating losses ("NOLs"). If not used, substantially all of the NOLs will expire in various amounts between 2028 and 2030. The Company also has preacquisition and recognized built-in loss carryovers of approximately $14.2 million, net of expected limitations. In addition, the Company has $2.8 million of Alternative Minimum Tax carryovers, which can be carried forward indefinitely.

No provision for U.S. income taxes has been made for undistributed earnings of certain of the Company's foreign subsidiaries which have been indefinitely reinvested. The Company is unable to estimate the amount of U.S. income taxes that would be payable if such undistributed foreign earnings were repatriated.

The following is a tabular reconciliation of the total amounts of uncertain tax positions as of and for the years ended December 31, 2011, 2010 and 2009:

	Year Ended December 31,
	2011			2010			2009
Balance at January 1,	$	8.6		$	10.5		$	13.9
Increases in prior period tax positions		0.2			1.7			4.2
Decreases in prior period tax positions		(0.3	)		(3.5	)		(0.1	)
Increases in current period tax positions		—			—			0.5
Decreases due to settlements with tax authorities		(0.1	)		(0.1	)		(8.0	)
Balance at December 31,	$	8.4		$	8.6		$	10.5

If recognized, approximately $3.9 million of the benefit for uncertain tax positions at December 31, 2011 would favorably affect the Company's effective tax rate in future periods. While the timing is uncertain, the Company expects the settlement of audits in the next 12 months will result in the elimination of substantially all of the liabilities for uncertain income tax positions that were accrued as of December 31, 2011.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and foreign jurisdictions. The Company is no longer subject to U.S. federal examination for years before 2007 and state and local examinations for years before 2004 and non-U.S. income tax examinations for years before 2005. As of December 31, 2011, audit findings related to the 2007 and 2008 tax years were in the process of being appealed to the U.S. Internal Revenue Service ("IRS") and audit findings related to the 2005 through 2007 tax years were in the process of being appealed to the German tax authorities. For a discussion of uncertainties related to tax matters see Note 11, "Contingencies and Legal Matters"

The Company recognizes accrued interest and penalties related to uncertain income tax positions in the Provision (benefit) for income taxes on the consolidated statements of operations. As of December 31, 2011 and 2010, the Company had $0.9 million and $0.7 million, respectively, accrued for interest related to uncertain income tax positions.