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Income Taxes | 12 Months Ended
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Dec. 31, 2013
Income Taxes |
Income Taxes | (11) Income Taxes Income (loss) from continuing operations before income taxes and the (provision for) benefit from income taxes consisted of the following:
|  | Year ended December 31, |
--- | --- | --- | ---
|  | 2013 |  | 2012 |  | 2011 |
Income (loss) from continuing operations: |  |  |  |  |  |  |  |  |  |
United States |  | $ | 197.2 |  | $ | (242.1 | ) | $ | (39.8 | )
Foreign |  |  | 58.9 |  |  | 44.2 |  |  | 160.2 |
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|  | $ | 256.1 |  | $ | (197.9 | ) | $ | 120.4 |
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(Provision for) benefit from income taxes: |  |  |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |  |  |
United States |  | $ | 70.2 |  | $ | (1.4 | ) | $ | 1.8 |
Foreign |  |  | (30.0 | ) |  | (20.9 | ) |  | (29.3 | )
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Total current |  |  | 40.2 |  |  | (22.3 | ) |  | (27.5 | )
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Deferred and other: |  |  |  |  |  |  |  |  |  |
United States |  |  | (123.1 | ) |  | 8.3 |  |  | 46.7 |
Foreign |  |  | 28.1 |  |  | 35.3 |  |  | (6.9 | )
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Total deferred and other |  |  | (95.0 | ) |  | 43.6 |  |  | 39.8 |
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Total (provision) benefit |  | $ | (54.8 | ) | $ | 21.3 |  | $ | 12.3 |
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As discussed in Note 1, we identified certain misstatements associated with previously reported income tax accounts. To correct for these misstatements, and as permitted by SAB No. 108, we have reduced retained earnings, SPX's shareholders' equity, and total equity by $53.8 as of December 31, 2010, with an offsetting increase primarily to income taxes payable. In addition, we have decreased the income tax benefit for 2012 by $1.4 and increased the income tax benefit for 2011 by $10.7, with the offset primarily to income taxes payable, in the respective accompanying consolidated financial statements. See Note 18 for the impact of these corrections on previously reported amounts for the years ended December 31, 2012 and 2011. The reconciliation of income tax computed at the U.S. federal statutory tax rate to our effective income tax rate was as follows:
|  | Year ended December 31, |
--- | --- | --- | ---
|  | 2013 |  | 2012 |  | 2011 |
Tax at U.S. federal statutory rate |  |  | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State and local taxes, net of U.S. federal benefit |  |  | 1.4 |  |  | (0.1 | ) |  | 0.8 |
U.S. credits and exemptions |  |  | (4.0 | ) |  | 2.5 |  |  | (11.4 | )
Foreign earnings taxed at lower rates |  |  | (11.4 | ) |  | 12.7 |  |  | (5.8 | )
Audit settlements with taxing authorities |  |  | 0.2 |  |  | 14.0 |  |  | (0.6 | )
Adjustments to uncertain tax positions |  |  | 0.9 |  |  | (2.7 | ) |  | (6.8 | )
Changes in valuation allowance |  |  | (0.2 | ) |  | (5.6 | ) |  | (25.9 | )
Tax on repatriation of foreign earnings |  |  | (0.6 | ) |  | (7.7 | ) |  | 5.7 |
Goodwill impairment and basis adjustments |  |  | — |  |  | (37.9 | ) |  | — |
Other |  |  | 0.1 |  |  | 0.6 |  |  | (1.2 | )
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|  |  | 21.4 | % |  | 10.8 | % |  | (10.2 | )%
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Significant components of our deferred tax assets and liabilities were as follows:
|  | As of December 31, |
--- | --- | --- | ---
|  | 2013 |  | 2012 |
Deferred tax assets: |  |  |  |  |  |  |
Working capital accruals |  | $ | 26.8 |  | $ | 33.4 |
Legal, environmental and self-insurance accruals |  |  | 42.3 |  |  | 39.0 |
Pension, other postretirement and postemployment benefits |  |  | 95.5 |  |  | 186.8 |
NOL and credit carryforwards |  |  | 229.8 |  |  | 193.2 |
Payroll and compensation |  |  | 63.5 |  |  | 53.8 |
Other |  |  | 45.1 |  |  | 98.0 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total deferred tax assets |  |  | 503.0 |  |  | 604.2 |
Valuation allowance |  |  | (149.3 | ) |  | (128.1 | )
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Net deferred tax assets |  |  | 353.7 |  |  | 476.1 |
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Deferred tax liabilities: |  |  |  |  |  |  |
Accelerated depreciation |  |  | 69.3 |  |  | 61.5 |
Basis difference in affiliates |  |  | 152.1 |  |  | 151.8 |
Intangible assets recorded in acquisitions |  |  | 285.9 |  |  | 312.9 |
Other |  |  | 25.8 |  |  | 23.7 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total deferred tax liabilities |  |  | 533.1 |  |  | 549.9 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  | $ | (179.4 | ) | $ | (73.8 | )
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General Matters Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We periodically assess deferred tax assets to determine if they are likely to be realized and the adequacy of deferred tax liabilities, incorporating the results of local, state, federal and foreign tax audits in our estimates and judgments. At December 31, 2013, we had the following tax loss carryforwards available: state tax loss carryforwards of approximately $449.0 and tax losses of various foreign jurisdictions of approximately $817.0, all of which are reported in continuing operations. We also had state tax credit carryforwards of $4.1. Of these amounts, approximately $6.0 expire in 2014 and $506.0 expire at various times between 2014 and 2033. The remaining carryforwards have no expiration date. Realization of deferred tax assets, including those associated with net operating loss and credit carryforwards, is dependent upon generating sufficient taxable income in the appropriate tax jurisdiction. We believe that it is more likely than not that we may not realize the benefit of certain of these deferred tax assets and, accordingly, have established a valuation allowance against certain of these deferred tax assets. Although realization is not assured for the remaining deferred tax assets, we believe it is more likely than not that the deferred tax assets will be realized through future taxable earnings or tax planning strategies. However, deferred tax assets could be reduced in the near term if our estimates of taxable income are significantly reduced or tax planning strategies are no longer viable. The valuation allowance increased by $21.2 in 2013 and increased by $3.6 in 2012. Of the net increase in 2013, $0.5 was recognized as a decrease in tax expense from continuing operations. Of the net increase in 2012, $5.4 was recognized as a decrease in tax expense from continuing operations. The amount of income tax that we pay annually is dependent on various factors, including the timing of certain deductions. These deductions can vary from year to year, and, consequently, the amount of income taxes paid in future years will vary from the amounts paid in prior years. Undistributed Foreign Earnings In general, it is our practice and intention to reinvest the earnings of our non-U.S. subsidiaries in those operations. As of December 31, 2013, we had not recorded a provision for U.S. or foreign withholding taxes on approximately $1,634.0 of the excess of the amount for financial reporting over the tax basis of investments in 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 practicable to estimate the amount of a deferred tax liability related to the undistributed earnings of these foreign subsidiaries, in the event that these earnings are no longer considered to be indefinitely reinvested, due to the hypothetical nature of the calculation. There are discrete amounts of foreign earnings (approximately $318.0), primarily related to the gain on sale of our Service Solutions business, where we do plan to repatriate the earnings in the future. During 2012, we provided $100.8 of U.S. and foreign withholding taxes on such earnings, with $91.8 of such amount recorded to discontinued operations. Unrecognized Tax Benefits As of December 31, 2013, we had gross unrecognized tax benefits of $128.4 (net unrecognized tax benefits of $72.9), of which $72.3, if recognized, would impact our effective tax rate from continuing operations. Similarly, at December 31, 2012 and 2011, we had gross unrecognized tax benefits of $108.4 (net unrecognized tax benefits of $72.5) and $120.4 (net unrecognized tax benefits of $103.2), respectively. We classify interest and penalties related to unrecognized tax benefits as a component of our income tax provision. As of December 31, 2013, gross accrued interest excluded from the amounts above totaled $12.4 (net accrued interest of $8.6), while the related amounts as of December 31, 2012 and 2011 were $12.8 (net accrued interest of $8.6) and $16.6 (net accrued interest of $12.4), respectively. Our income tax (provision) benefit for the years ended December 31, 2013, 2012 and 2011 included gross interest income of $0.2, $2.9 and $1.2, respectively, resulting from a reduction in our liability for uncertain tax positions. As of December 31, 2013, penalties excluded from the amounts above totaled $7.1, while the related amounts as of December 31, 2012 and 2011 were $7.1 and $5.6, respectively. Our income tax benefit for the years ended December 31, 2012 and 2011 included penalties of $1.5 and $0.6, respectively, while there were no penalties included in the income tax provision for the year ended December 31, 2013. Based on the outcome of certain examinations or as a result of the expiration of statutes 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 $65.0 to $75.0. The previously unrecognized tax benefits relate to a variety of tax issues including an estimate of the previously unrecorded tax liability referenced in Note 1, tax matters relating to prior acquisitions and dispositions, transfer pricing, and various state matters. The aggregate changes in the balance of unrecognized tax benefits for the years ended December 31, 2013, 2012 and 2011 were as follows:
|  | Year ended December 31, |
--- | --- | --- | ---
|  | 2013 |  | 2012 |  | 2011 |
Unrecognized tax benefit — opening balance |  | $ | 108.4 |  | $ | 120.4 |  | $ | 142.7 |
Gross increases — tax positions in prior period |  |  | 0.5 |  |  | 20.6 |  |  | 3.3 |
Gross decreases — tax positions in prior period |  |  | (2.3 | ) |  | (33.9 | ) |  | (23.4 | )
Gross increases — tax positions in current period |  |  | 28.4 |  |  | 11.2 |  |  | 10.9 |
Settlements |  |  | (1.1 | ) |  | (7.1 | ) |  | (0.9 | )
Lapse of statute of limitations |  |  | (5.5 | ) |  | (2.7 | ) |  | (11.5 | )
Change due to foreign currency exchange rates |  |  | — |  |  | (0.1 | ) |  | (0.7 | )
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Unrecognized tax benefit — ending balance |  | $ | 128.4 |  | $ | 108.4 |  | $ | 120.4 |
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Other Tax Matters During 2013, our income tax provision was impacted by the following income tax benefits: (i) $9.5 related to net reductions in valuation allowances recorded against certain foreign deferred income tax assets; (ii) $6.5 related to various audit settlements and statute expirations; and (iii) $4.1 associated with the Research and Experimentation Credit generated in 2012. During 2012, our income tax benefit was impacted by: (i) an income tax benefit of $26.3 associated with the $281.4 impairment charge recorded for our Cooling reporting unit, as the majority of the goodwill for the Cooling reporting unit has no basis for income tax purposes; (ii) taxes provided of $15.4 on foreign dividends and undistributed earnings that were no longer considered to be indefinitely reinvested; (iii) incremental tax expense of $6.1 associated with the deconsolidation of our dry cooling business in China, as the goodwill allocated to the transaction was not deductible for income tax purposes; and (iv) valuation allowances that were recorded against deferred income tax assets during the year of $5.4. The unfavorable impact of these items was offset partially by income tax benefits of $22.3 associated with audit closures, settlements, statute expirations, and other changes in the accrual for uncertain tax positions, with the most notable being the closure of our German tax examination for the years 2005 through 2009. During 2011, we adopted an alternative method of allocating certain expenses between foreign and domestic sources for federal income tax purposes. As a result of this method change, we determined that it was more likely than not that we would be able to utilize our then-existing foreign tax credits within the remaining carryforward period. Accordingly, we released the valuation allowance on our foreign tax credit carryforwards in 2011, resulting in an income tax benefit of $38.5. In addition, the effective tax rate for the year ended December 31, 2011 was impacted favorably by tax benefits of $2.5 associated with the conclusion of a Canadian appeals process and $7.7 of tax credits related to the expansion of our power transformer facility in Waukesha, WI. These tax benefits were offset partially by $6.9 of federal income taxes that were provided in connection with our plan to repatriate a portion of the earnings of a foreign subsidiary. We perform reviews of our income tax positions on a continuous 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 consolidated balance sheets based on the expectation as to the timing of when the matters will be resolved. As events change and resolutions occur, these accruals are adjusted, such as in the case of audit settlements with taxing authorities. Our federal income tax returns for the 2007 to 2012 tax years are subject to examination. The IRS is currently auditing the 2007 to 2011 tax return years. With regard to all open tax years, 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 of the respective tax return. 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 that 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 are in Denmark for the 2006 to 2010 tax years and South Africa for the 2005 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 reached the final stages of the appeals process for any of the above matters, the timing of the ultimate resolution and any payments that may be required for the above matters cannot be determined at this time.

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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 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: 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 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: 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 5: 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 6: 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 7: 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 8: 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. + Details
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