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INCOME TAXES | 3 Months Ended
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Mar. 30, 2013
INCOME TAXES |
INCOME TAXES | (14) INCOME TAXES Uncertain Tax Positions As of March 30, 2013, we had gross unrecognized tax benefits of $73.8 (net unrecognized tax benefits of $37.7). Of these net unrecognized tax benefits, $37.2, if recognized, would impact our effective tax rate from continuing operations. We classify interest and penalties related to unrecognized tax benefits as a component of our income tax provision. As of March 30, 2013, gross accrued interest excluded from the amounts above totaled $8.0 (net accrued interest of $5.8). There were no significant penalties recorded during the three months ended March 30, 2013 or March 31, 2012. Based on the outcome of certain examinations or as a result of the expiration of statute of limitations for certain jurisdictions, we believe that within the next 12 months it is reasonably possible that our previously unrecognized tax benefits could decrease by approximately $10.0 to $15.0. Other Tax Matters For the three months ended March 30, 2013, we recorded an income tax benefit of $4.2 on $6.8 of pre-tax income from continuing operations, resulting in an effective tax rate of (61.8)%. This compares to an income tax provision for the three months ended March 31, 2012 of $13.1 on $21.4 of pre-tax income from continuing operations, resulting in an effective tax rate of 61.2%. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law (the “Act”). Certain provisions of the Act that will benefit our 2012 U.S. federal income tax return, including the Research and Experimentation Credit, could not be recognized in our 2012 financial results (as we recognize tax law changes in the period of enactment) and instead have been reflected in our financial results for the quarter. As a result of the Act, we recorded a tax benefit of $3.2 during the three months ended March 30, 2013 associated with the Research and Experimentation Credit generated in 2012. In addition, we recorded an income tax benefit of $2.0 related to various foreign tax credits. The effective income tax rate for the three months ended March 31, 2012 was impacted unfavorably by an incremental tax charge of $6.1 associated with the deconsolidation of our dry cooling business in China, as the goodwill allocated to the transaction is not deductible for tax purposes. We perform reviews of our income tax positions on a continual basis and accrue for potential uncertain positions when we determine that an uncertain position meets the criteria of the Income Taxes topic of the Codification. Accruals for these uncertain tax positions are recorded in “Income taxes payable” and “Deferred and other income taxes” in the accompanying condensed consolidated balance sheets based on the expectation as to the timing of when the matters will be resolved. As events change and resolution occurs, these accruals are adjusted, such as in the case of audit settlements with taxing authorities. The IRS concluded its audit of our 2008 and 2009 federal income tax returns, which did not result in tax liabilities that materially differed from the accruals previously established. During 2012, the IRS initiated an audit of our 2010 and 2011 federal income tax returns. With regard to this audit, we believe any contingencies are adequately provided for. State income tax returns generally are subject to examination for a period of three to five years after filing the respective tax returns. The impact on such tax returns of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. We have various state income tax returns in the process of examination, administrative appeal or litigation. We believe any uncertain tax positions related to these examinations have been adequately provided for. We have various foreign income tax returns under examination. The most significant of these examinations is in Denmark for the 2006 to 2010 tax years. We believe that any uncertain tax positions related to these examinations have been adequately provided for. An unfavorable resolution of one or more of the above matters could have a material adverse effect on our results of operations or cash flows in the quarter and year in which an adjustment is recorded or the tax is due or paid. As audits and examinations are still in process or we have not yet reached the final stages of the appeals process, the timing of the ultimate resolution and any payments that may be required for the above matters cannot be determined at this time. Upon the conclusion of our disposition activities discussed in Note 3, we may recognize an additional income tax provision or benefit, generally, as part of discontinued operations.

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