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Income Taxes | 12 Months Ended
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Dec. 31, 2011
Income Taxes [Abstract] |
Income Taxes | NOTE 7 Income Taxes NOTE 7 Income Taxes For each of the three years ended December 31, 2011, the tax data related to the loss from continuing operations is as follows:
|  | 2011 |  | 2010 |  | 2009
Income components: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
United States |  |  | $ | (466 | ) |  |  | $ | (395 | ) |  |  | $ | (306 | )
International |  |  |  | 148 |  |  |  |  | 119 |  |  |  |  | 98 |
Total pre-tax loss from continuing operations |  |  | $ | (318 | ) |  |  | $ | (276 | ) |  |  | $ | (208 | )
Income tax expense (benefit) components: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current income tax expense (benefit): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
United States – federal |  |  | $ | (80 | ) |  |  | $ | (61 | ) |  |  | $ | 9 |
United States – state and local |  |  |  | (12 | ) |  |  |  | – |  |  |  |  | (2 | )
International |  |  |  | 49 |  |  |  |  | 28 |  |  |  |  | 18 |
Total current income tax (benefit) expense |  |  |  | (43 | ) |  |  |  | (33 | ) |  |  |  | 25 |
Deferred income tax expense (benefit): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
United States – federal |  |  |  | 319 |  |  |  |  | (100 | ) |  |  |  | (115 | )
United States – state and local |  |  |  | (15 | ) |  |  |  | (15 | ) |  |  |  | (9 | )
International |  |  |  | (1 | ) |  |  |  | 4 |  |  |  |  | 2 |
Total deferred income tax expense (benefit) |  |  |  | 303 |  |  |  |  | (111 | ) |  |  |  | (122 | )
Total income tax expense (benefit) |  |  | $ | 260 |  |  |  | $ | (144 | ) |  |  | $ | (97 | )
Effective income tax rate |  |  |  | (81.8 | )% |  |  |  | 52.2 | % |  |  |  | 46.6 | %
A reconciliation of the tax expense (benefit) for continuing operations from the U.S. statutory income tax rate to the effective income tax rate as reported is as follows for each of the three years ended December 31, 2011:
|  | 2011 |  | 2010 |  | 2009
Tax provision at U.S. statutory rate |  |  |  | 35.0 | % |  |  |  | 35.0 | % |  |  |  | 35.0 | %
Foreign tax rate differential |  |  |  | 4.2 |  |  |  |  | 2.2 |  |  |  |  | 1.9 |
State and local income tax |  |  |  | 0.5 |  |  |  |  | 5.6 |  |  |  |  | 5.8 |
Tax on undistributed foreign earnings |  |  |  | (21.8 | ) |  |  |  | – |  |  |  |  | – |
Change in state tax rate |  |  |  | 9.7 |  |  |  |  | – |  |  |  |  | – |
Valuation allowance on realizability of deferred tax assets |  |  |  | (106.7 | ) |  |  |  | 14.6 |  |  |  |  | 6.6 |
U.S. permanent items |  |  |  | – |  |  |  |  | – |  |  |  |  | (6.5 | )
Audit settlements |  |  |  | – |  |  |  |  | – |  |  |  |  | (1.0 | )
Medicare |  |  |  | 0.4 |  |  |  |  | (4.2 | ) |  |  |  | – |
U.S. tax on foreign earnings |  |  |  | (6.8 | ) |  |  |  | (16.0 | ) |  |  |  | – |
Tax credits |  |  |  | 7.2 |  |  |  |  | 12.6 |  |  |  |  | 5.3 |
Other adjustments |  |  |  | (3.5 | ) |  |  |  | 2.4 |  |  |  |  | (0.5 | )
Effective income tax rate |  |  |  | (81.8 | )% |  |  |  | 52.2 | % |  |  |  | 46.6 | %
We recorded the valuation allowance in 2011 primarily because 2011 operating results produced a cumulative three-year loss, which is considered a significant factor that is difficult to overcome when determining whether a valuation allowance is required. Since the Company was in a three-year cumulative loss position at the end of 2011, management determined that the size and frequency of the losses from continuing operations in recent years and the uncertainty associated with projecting future taxable income supported the conclusion that a valuation allowance was required to reduce its deferred tax assets. As a result of the Distribution and its impacts on the Company’s expected liquidity, investment opportunities and other factors, the Company determined that certain earnings generated in Luxemburg, Japan, and South Korea were no longer considered to be indefinitely reinvested. As a result of the change in intent, the Company recorded $69 of income tax expense on these undistributed foreign earnings. However, as of December 31, 2011, we have not provided for deferred taxes on the remaining excess of financial reporting over tax basis of investments in foreign subsidiaries in the amount of $370 because we plan to reinvest such earnings indefinitely outside the United States. While the amount of federal income taxes, if such earnings are distributed in the future, cannot be determined, such taxes may be reduced by tax credits and other deductions. As a consequence of the Distribution, certain state deferred tax assets were revalued based on enacted tax rates using different state apportionment factors, effectively increasing the future state tax rates at which these deferred tax assets will be benefitted resulting in a $31 income tax benefit. Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted tax rates in effect for the year in which we expect the differences will reverse. Deferred tax assets and liabilities include the following:
|  | 2011 |  | 2010
Deferred Tax Assets: |  |  |  |  |  |  |  |  |  |
Accruals |  |  | $ | 355 |  |  |  | $ | 303 |
Employee benefits |  |  |  | 135 |  |  |  |  | 69 |
Credit carryforwards |  |  |  | 35 |  |  |  |  | 7 |
Loss carryforwards |  |  |  | 65 |  |  |  |  | 57 |
Other |  |  |  | 40 |  |  |  |  | 60 |
Subtotal |  |  |  | 630 |  |  |  |  | 496 |
Valuation allowance |  |  |  | (438 | ) |  |  |  | (28 | )
Net deferred tax assets |  |  | $ | 192 |  |  |  | $ | 468 |
Deferred Tax Liabilities: |  |  |  |  |  |  |  |  |  |
Undistributed earnings |  |  | $ | (69 | ) |  |  | $ | – |
Intangibles |  |  |  | (51 | ) |  |  |  | (50 | )
Accelerated depreciation |  |  |  | (21 | ) |  |  |  | (23 | )
Investment |  |  |  | (1 | ) |  |  |  | (1 | )
Total deferred tax liabilities |  |  | $ | (142 | ) |  |  | $ | (74 | )
Deferred taxes in the Consolidated Balance Sheets consist of the following:
|  | 2011 |  | 2010
Current assets |  |  | $ | 25 |  |  |  | $ | 85 |
Non-current assets |  |  |  | 45 |  |  |  |  | 320 |
Current liabilities |  |  |  | (2 | ) |  |  |  | – |
Other non-current liabilities |  |  |  | (18 | ) |  |  |  | (11 | )
Net deferred taxes |  |  | $ | 50 |  |  |  | $ | 394 |
We have the following attributes available for utilization:
ATTRIBUTE |  | AMOUNT |  | FIRST YEAR OF EXPIRATION
U.S. federal net operating losses |  |  | $ | 85 |  |  |  |  | 2031 |
U.S. state net operating losses |  |  |  | 2,519 |  |  |  |  | 2012 |
Federal and state capital losses |  |  |  | 13 |  |  |  |  | 2013 |
U.S. federal tax credits |  |  |  | 33 |  |  |  |  | 2012 |
U.S. state tax credits |  |  |  | 12 |  |  |  |  | 2012 |
Foreign net operating losses |  |  |  | 87 |  |  |  |  | 2012 |
As of December 31, 2011, a valuation allowance of $438 had been established to reduce the deferred income tax asset related to certain U.S. state and foreign net operating losses and U.S. capital loss carryforwards. During 2011, the valuation allowance increased by $410 resulting from the following: an increase of $340 attributable to U.S. federal and state net noncurrent temporary differences, an increase of $57 attributable to U.S. state net operating loss and credit carryforwards, an increase of $12 attributable to foreign net operating loss carryforwards and foreign investments, and an increase of $1 attributable to U.S. federal capital loss carryforwards. Shareholders’ equity at December 31, 2011 and 2010 reflects excess income tax benefits related to stock-based compensation in 2011 and 2010 of approximately $7 and $6, respectively. Uncertain Tax Positions We recognize income tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the Consolidated Financial Statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. A reconciliation of the beginning and ending amount of unrecognized tax benefits for each of the three years ended December 31, 2011 is as follows:
|  | 2011 |  | 2010 |  | 2009
Unrecognized tax benefits – January 1 |  |  | $ | 169 |  |  |  | $ | 149 |  |  |  | $ | 126 |
Additions for: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Prior year tax positions |  |  |  | 1 |  |  |  |  | 17 |  |  |  |  | 28 |
Current year tax positions |  |  |  | 15 |  |  |  |  | 48 |  |  |  |  | 2 |
Purchase accounting |  |  |  | – |  |  |  |  | 5 |  |  |  |  | – |
Reductions for: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Prior year tax positions |  |  |  | (21 | ) |  |  |  | (38 | ) |  |  |  | (6 | )
Settlements |  |  |  | – |  |  |  |  | (12 | ) |  |  |  | (1 | )
Unrecognized tax benefits – December 31 |  |  | $ | 164 |  |  |  | $ | 169 |  |  |  | $ | 149 |
As of December 31, 2011, $92 of the unrecognized tax benefits would affect the effective tax rate if realized. Included in the balance at December 31, 2011 are tax positions of $72, which, because of deferred tax accounting would not impact the annual effective rate, but could accelerate the payment of cash to the taxing authority. See Note 4, “Discontinued Operations” for discussion of the Tax Matters Agreement. We do not believe that the uncertain tax positions will significantly change within twelve months of the reporting date. In many cases, uncertain tax positions are related to tax years that remain subject to examination by the relevant taxing authorities. The following table summarizes the earliest open tax years by major jurisdiction:
JURISDICTION |  | EARLIEST OPEN YEAR
Germany |  |  |  | 2006 |
Italy |  |  |  | 2005 |
Netherlands |  |  |  | 2008 |
United Kingdom |  |  |  | 2008 |
United States |  |  |  | 2007 |
We classify interest relating to tax matters as a component of interest expense and tax penalties as a component of income tax expense in our Consolidated Income Statement. During 2011 and 2010, we recognized less than $1 in net interest expense related to tax matters. We had $18 and $14 of interest accrued as of December 31, 2011 and 2010, respectively.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 + Details
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