Income Taxes

Consolidated income (loss) from continuing operations before taxes consists of the following:



(in millions)	2012			2011			2010
U.S.	$	45.5		$	(22.4	)	$	(73.6	)
Foreign	(32.6		)	(49.8		)	(1.6		)
	$	12.9		$	(72.2	)	$	(75.2	)

Provision for (benefit from) income taxes from continuing operations consists of the following:



(in millions)	2012			2011			2010
Current:
U.S. federal	$	(4.6	)	$	(1.2	)	$	(1.2	)
State and local	(0.1		)	0.1			0.1
Foreign income and withholding taxes	(0.6		)	0.1			(0.3		)
	$	(5.3	)	$	(1.0	)	$	(1.4	)
Deferred:
U.S. federal	(4.8		)	—			(15.1		)
State and local	—			—			—
Foreign	(0.1		)	0.1			(0.1		)
	(4.9		)	0.1			(15.2		)
Benefit from income taxes from continuing operations	$	(10.2	)	$	(0.9	)	$	(16.6	)

A reconciliation between the actual income tax expense (benefit) provided and the income tax expense (benefit) computed by applying the statutory federal income tax rate of 35% to income before tax is as follows:



(in millions)	2012			2011			2010
Income taxes expense (benefit) at U.S. statutory rate	$	4.5		$	(25.3	)	$	(27.5	)
State and local income taxes	(0.1		)	0.1			0.1
Foreign tax rate differential	0.2			0.4			(0.1		)
Valuation allowance	(88.7		)	25.7			9.9
Capital loss expiration	68.5			—			—
Intraperiod allocation	(4.8		)	—			3.9
Release of uncertain tax positions	(4.5		)	—			—
Tax refunds	(1.0		)	(1.7		)	(1.2		)
Deemed foreign dividend	15.7			—			—
Other	—			(0.1		)	(1.7		)
	$	(10.2	)	$	(0.9	)	$	(16.6	)

Deferred income taxes reflect the effect of temporary differences between the tax basis of an asset or liability and its reported amount in the financial statements. Provisions are also made for estimated taxes which may be incurred on the remittance of subsidiaries’ undistributed earnings, none of which are deemed to be permanently reinvested.

Significant components of our deferred tax assets and liabilities as of December 31 were as follows:



(in millions)	2012			2011
Deferred tax assets:
Other postretirement liabilities	$	5.6		$	26.6
Product warranty and self-insured risks	2.7			2.8
Tax carry forwards	305.2			393.6
Other accruals and miscellaneous	26.9			14.1
Subtotal	340.4			437.1
Valuation allowance	(307.3		)	(395.8		)
Total deferred tax assets	$	33.1		$	41.3
Deferred tax liabilities:
Property, plant & equipment	$	14.0		$	21.0
Pension	13.9			15.5
Unrealized gains on securities	1.6			3.4
Other	3.5			1.3
Total deferred tax liabilities	33.0			41.2
Net deferred tax assets	$	0.1		$	0.1

Deferred tax detail included in the consolidated balance sheet at December 31, are as follows:



(in millions)	2012		2011
Deferred tax assets	$	0.3	$	0.1
Deferred tax liabilities	0.2		—
Total	$	0.1	$	0.1

At December 31, 2012, we had the following tax carry forwards:



(in millions)	Amounts		Expiration
U.S. Federal Net Operating Loss	$	183.8	2028 to 2032
U.S. State Net Operating Loss	14.8		2016 to 2031
Foreign Net Operating Losses	60.4		Unlimited
U.S. Tax Credits	45.9		2013 to 2030
U.S. Alternative Minimum Tax Credit	0.3		Unlimited
Total operating loss and tax credit carry forwards	$	305.2

Income taxes are allocated between continuing operations, discontinued operations and other comprehensive income because all items, including discontinued operations, should be considered for purposes of determining the amount of tax benefit that results from a loss from continuing operations and that could be allocated to continuing operations. We apply this concept by tax jurisdiction, and in periods in which there is a pre-tax loss from continuing operations and pre-tax income in another category, such as discontinued operations or other comprehensive income, the tax benefit allocated to continuing operations is determined by taking into account the pre-tax income of other categories.

The receipt of $54.5 million in gross proceeds from the reversion of the hourly retirement plan in 2010 generated a tax gain that was fully offset for federal tax purposes by our NOL carry forwards.

Deferred income tax assets are evaluated quarterly to determine if valuation allowances are required or should be adjusted. All available evidence, both positive and negative using a more likely than not standard, is considered to determine if valuation allowances should be established against deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carry forward periods, previous experience with tax attributes expiring unused and tax planning alternatives. In making such judgments, significant weight is given to evidence that can be objectively verified. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2012. This objective negative evidence limits the ability to consider other subjective evidence such as our projections for future growth.

Based on this assessment, full valuation allowances have been recorded against our net deferred tax assets for all tax jurisdictions in which we believe it is more likely than not that the deferred taxes will not be realized. Full valuation allowances were recorded for all of our tax jurisdictions except for Mexico and Malaysia. The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carry forward period are reduced or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.

At December 31, 2012 we did not have any unrecognized tax benefits. At December 31, 2011, the amount of gross unrecognized tax benefits before valuation allowances and the amount that would favorably affect the effective income tax rate in future periods after valuation allowances was $5.5 million.

We accrue interest and penalties related to unrecognized tax benefits in our provision for income taxes. At December 31, 2012 and 2011, we had no accrued interest and penalties.

The following reconciliation illustrates the unrecognized tax benefits for the years ended December 31:



(in millions)	2012			2011
Unrecognized tax benefits – beginning of period	$	5.5		$	5.5
Settlements	(5.5		)	—
Unrecognized tax benefits – end of period	$	—		$	5.5

We file U.S., state and foreign income tax returns in jurisdictions with varying statues of limitations. We have open tax years from 2005 to 2011 with various significant taxing jurisdictions including the U.S., Canada, France and Brazil. In the U.S., our federal income tax returns through 2005 have been examined by the Internal Revenue Service.

As a result of a U.S. income tax refund, a tax benefit was recognized in the second quarter of 2012. Management is not aware of any uncertain tax positions taken or expected to be taken that would require recognition of a liability or asset for disclosure in the financial statements.