Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

Note 14:    Income Taxes

	Years Ended December 31,
	2011			2010			2009
				(In thousands)
Income (loss) from continuing operations before taxes:
United States operations	$	49,640		$	26,162		$	(161	)
Foreign operations		90,251			55,850			(5,929	)
	$	139,891		$	82,012		$	(6,090	)
Income tax expense (benefit):
Currently payable:
United States federal	$	586		$	—		$	9,316
United States state and local		2,636			1,135			2,932
Foreign		18,421			17,719			5,881
		21,643			18,854			18,129
Deferred:
United States federal		124			(5,882	)		(7,308	)
United States state and local		(790	)		(341	)		(558	)
Foreign		3,661			83			(9,088	)
		2,995			(6,140	)		(16,954	)
Total income tax expense	$	24,638		$	12,714		$	1,175

In addition to the above income tax expense associated with continuing operations, we also recorded income tax expense (benefit) associated with discontinued operations of $(0.2) million, $37.8 million, and $(12.8) million in 2011, 2010, and 2009, respectively.

	Years Ended December 31,
	2011			2010			2009
Effective income tax rate reconciliation from continuing operations:
United States federal statutory rate		35.0	%		35.0	%		35.0	%
State and local income taxes		0.7	%		0.9	%		(22.3	)%
Impact of change in deferred tax asset valuation allowance		(5.7	)%		(1.1	)%		(81.1	)%
Impact of change in tax contingencies		(1.0	)%		0.7	%		(33.9	)%
Foreign income tax rate differences		(5.7	)%		(15.6	)%		138.3	%
Domestic permanent differences and tax credits		(5.7	)%		(4.4	)%		(55.3	)%
		17.6	%		15.5	%		(19.3	)%

Deferred income taxes have been established for differences in the basis of assets and liabilities for financial statement and tax reporting purposes as adjusted for a tax sharing agreement with Cooper Industries (Cooper). This agreement requires us to pay Cooper the majority of the tax benefits resulting from basis adjustments arising from the initial public offering of our stock on October 6, 1993. The effect of the Cooper tax agreement is to put us in the same financial position we would have been in had there been no increase in the tax basis of our intangible assets (except for a retained 10% benefit). The retained 10% benefit had no impact on our consolidated income tax expense for 2011, 2010, and 2009, and we did not pay any taxes to Cooper in accordance with the tax agreement during those years. Cooper has sued us in Texas state court for $11.9 million, an amount allegedly owed by us under the tax sharing agreement related to 2008. We plan to vigorously contest Cooper’s claim. In our opinion, this matter should not have a material adverse effect on our financial condition, operating results, or cash flows.

	December 31,
	2011			2010
	(In thousands)
Components of deferred income tax balances:
Deferred income tax liabilities:
Plant, equipment and intangibles	$	(63,524	)	$	(49,394	)
Deferred income tax assets:
Postretirement, pensions, and stock compensation		38,715			24,311
Reserves and accruals		19,594			11,463
Net operating loss and tax credit carryforwards		62,039			83,435
Valuation allowances		(24,945	)		(32,777	)
		95,403			86,432
Net deferred income tax asset	$	31,879		$	37,038

In 2011, the change in deferred income tax assets stems primarily from the utilization of net operating losses and foreign tax credits.

As of December 31, 2011, we had $256.9 million of net operating loss carryforwards and $55.2 million of tax credit carryforwards. Unless otherwise utilized, net operating loss carryforwards will expire as follows: $0.9 million in 2012, $6.6 million in 2013, $94.8 million between 2014 and 2016, and $88.3 million between 2017 and 2030. Net operating losses with an indefinite carryforward period total $66.3 million. The net operating loss carryforwards expiring in 2012 and 2013 will not have a significant impact on the effective tax rate primarily because of deferred tax asset valuation allowances recorded for those loss carryforwards. Of the remaining $249.4 million in net operating loss carryforwards, we have determined, based on the weight of all available evidence, both positive and negative, that we will utilize $131.2 million of these net operating loss carryforwards within their respective expiration periods.

Unless otherwise utilized, tax credit carryforwards of $52.6 million will expire between 2014 and 2020. Tax credit carryforwards with an indefinite carryforward period total $2.6 million. We have determined, based on the weight of all available evidence, both positive and negative, that we will utilize all of these tax credit carryforwards within their respective expiration periods.

In general, it is our practice and intention to reinvest the earnings of our non-U.S. subsidiaries in those operations. As a result, as of December 31, 2011, we have not made a provision for U.S. or additional foreign withholding taxes on approximately $350.0 million of the undistributed earnings of foreign subsidiaries that are essentially permanent in duration. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances. It is not practical to estimate the amount of the deferred tax liability related to investments in these foreign subsidiaries.

In 2011, we recognized a net $0.9 million decrease to reserves for uncertain tax positions. A reconciliation of the beginning and ending gross amount of unrecognized tax benefits is as follows:

	December 31,
	2011			2010
	(In thousands)
Balance at beginning of year	$	24,122		$	27,778
Additions based on tax positions related to the current year		240			78
Additions for tax positions of prior years		2,186			4,119
Reductions for tax positions of prior years — settlement		(2,547	)		(6,486	)
Reductions for tax positions of prior years — statute of limitations		(802	)		(1,367	)
Balance at end of year	$	23,199		$	24,122

The balance of $23.2 million at December 31, 2011, reflects tax positions that, if recognized, would impact our effective tax rate.

As of December 31, 2011, we believe it is reasonably possible that the total amount of unrecognized tax benefits will significantly change within the next twelve months, primarily attributable to the expiration of several statutes of limitations. We estimate the range of reasonably possible changes to our uncertain tax positions to be a reduction of up to $15.5 million.

Our practice is to recognize interest accrued related to uncertain tax positions in interest expense and penalties in operating expenses. During 2011, 2010, and 2009, we recognized approximately $1.0 million, $(0.6) million, and $2.8 million, respectively, in interest expense (income) and penalties. We have approximately $5.2 million and $4.1 million accrued for the payment of interest and penalties as of December 31, 2011 and 2010, respectively.

Our federal, state, and foreign income tax returns for the tax years 2004 and later remain subject to examination by the Internal Revenue Service and by various state and foreign taxing authorities.