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Income Taxes | 12 Months Ended
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Dec. 31, 2011
Income Taxes [Abstract] |
Income Taxes | Note 16 Income Taxes The components of earnings (loss) before income tax provision were as follows:
|  | 2011 |  |  | 2010 |  |  | 2009 |
Domestic |  | $ | (73.6 | ) |  | $ | 84.0 |  |  | $ | 127.3 |
Foreign |  |  | 289.7 |  |  |  | 259.4 |  |  |  | 202.6 |
Total |  | $ | 216.1 |  |  | $ | 343.4 |  |  | $ | 329.9 |
The components of the income tax provision were as follows:
|  | 2011 |  |  | 2010 |  |  | 2009 |
Current tax expense: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 37.0 |  |  | $ | 22.1 |  |  | $ | 35.8 |
State and local |  |  | 5.9 |  |  |  | 5.6 |  |  |  | 7.1 |
Foreign |  |  | 79.7 |  |  |  | 63.1 |  |  |  | 59.3 |
Total current |  |  | 122.6 |  |  |  | 90.8 |  |  |  | 102.2 |
Deferred tax (benefit), expense: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (54.4 | ) |  |  | 2.1 |  |  |  | (4.6 | )
State and local |  |  | (5.3 | ) |  |  | (2.1 | ) |  |  | (0.5 | )
Foreign |  |  | 4.1 |  |  |  | (3.3 | ) |  |  | (11.5 | )
Total deferred tax benefit |  |  | (55.6 | ) |  |  | (3.3 | ) |  |  | (16.6 | )
Total provision |  | $ | 67.0 |  |  | $ | 87.5 |  |  | $ | 85.6 |
SEALED AIR CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements — (Continued) Deferred tax assets (liabilities) consist of the following:
|  | December 31, |
|  | 2011 |  |  | 2010 |
Settlement agreement and related accrued interest(1) |  | $ | 383.8 |  |  | $ | 367.9 |
Restructuring reserves |  |  | 10.8 |  |  |  | — |
Accruals not yet deductible for tax purposes |  |  | 72.5 |  |  |  | 17.0 |
Net operating loss carry forwards |  |  | 124.5 |  |  |  | 33.9 |
Foreign, federal and state credits and investment tax allowances |  |  | 130.2 |  |  |  | 9.2 |
Employee benefit items |  |  | 145.0 |  |  |  | 57.2 |
Other |  |  | 1.0 |  |  |  | 4.2 |
Gross deferred tax assets |  |  | 867.8 |  |  |  | 489.4 |
Valuation allowance |  |  | (219.1 | ) |  |  | (43.1 | )
Total deferred tax assets |  |  | 648.7 |  |  |  | 446.3 |
Depreciation and amortization |  |  | (73.4 | ) |  |  | (48.2 | )
Unremitted foreign earnings |  |  | (149.8 | ) |  |  | (47.1 | )
Inventories |  |  | — |  |  |  | (4.7 | )
Intangibles |  |  | (599.0 | ) |  |  | (20.2 | )
Other |  |  | (14.9 | ) |  |  | (13.3 | )
Total deferred tax liabilities |  |  | (837.1 | ) |  |  | (133.5 | )
Net deferred tax (liabilities) assets |  | $ | (188.4 | ) |  | $ | 312.8 |
(1) | This deferred tax asset reflects the cash portion of the Settlement agreement and related accrued interest and the fair market value of 18 million shares of our common stock at a post-split price of $17.86 per share based on the price when the Settlement agreement was reached in 2002. However, the value of this deferred tax asset will depend on the price of our common stock at the time it is issued under the Settlement agreement. See Note 17, “Commitments and Contingencies,” for further discussion.
In assessing the need for a valuation allowance, we estimate future taxable earnings, with consideration for the feasibility of ongoing planning strategies and the realizability of tax benefit carry forwards and past operating results, to determine which deferred tax assets are more likely than not to be realized in the future. Changes to tax laws, statutory tax rates and future taxable earnings can have an impact on valuation allowances related to deferred tax assets. The increase in deferred tax assets is primarily attributable to the acquisition of Diversey. Net operating loss carry forwards relate to foreign net operating loss carry forwards of various Diversey foreign subsidiaries and Diversey state net operating loss carry forwards. The increase in tax credits and investment tax allowances primarily relate to Diversey tax credits in the U.S. and at various foreign subsidiaries. Substantially all of the increase in employee benefit items relate to non-U.S. pension obligations as well as equity and other deferred compensation due to current and former Diversey employees. Based upon anticipated future results, we have concluded that it is more likely than not that we will realize the $868 million balance of deferred tax assets at December 31, 2011, net of the valuation allowance of $219 million. The valuation allowance primarily relates to the uncertainty of utilizing the following deferred tax assets: $409 million of foreign net operating loss carryforwards, or $110 million on a tax-effected basis, $104 million of foreign and federal tax credits, $908 million of state net operating loss carry forwards, or $42 million on a tax-effected basis, and $13 million of state tax credits. For the year ended December 31, 2011, the valuation allowance increased by $176 million due to $162 million related to the acquisition of Diversey, $3 million that was charged to the income tax provision and $11 million resulting from a net increase to deferred tax assets with a 100% valuation allowance. For the year ended December 31, 2010, the valuation allowance decreased by $4 million, which reduced the income tax provision. For the year ended December 31, 2009, the valuation allowance increased by $7 million, which increased the income tax provision. As of December 31, 2011, we have foreign net operating loss carryforwards totaling $409 million that expire during the following calendar years (in millions): 2012 - $2; 2013 - $20; 2014 - $7; 2015 - $22; 2016 - $15; 2017 and beyond - $84; and no expiration - $259. The state net operating loss carryforwards totaling $908 million, expire in various amounts over one to 20 years. As of December 31, 2011, we have foreign and federal foreign tax credit carryforwards and investment allowances totaling $108 million that expire during the following calendar years (in millions): 2015 - $8; 2016 - $20; 2017 and beyond - $60; and no expiration - $20. The state tax credit carryforwards, totaling $13 million, expire in various amounts over one to 20 years. Net deferred income taxes charged (credited) to stockholders’ equity were $6 million in 2011, $(5) million in 2010 and $4 million in 2009. The U.S. federal statutory corporate tax rate reconciles to our effective income tax rate as follows:
|  | 2011 |  |  | 2010 |  |  | 2009 |
Statutory U.S. federal tax rate |  |  | 35.0% |  |  |  | 35.0% |  |  |  | 35.0% |
State income taxes, net of federal tax benefit |  |  | 0.3 |  |  |  | 0.6 |  |  |  | 1.5 |
Foreign earnings taxed at lower effective rates |  |  | (6.3) |  |  |  | (9.2) |  |  |  | (8.7) |
Nondeductible acquisition costs |  |  | 2.5 |  |  |  | — |  |  |  | — |
U.S. domestic manufacturing deduction |  |  | (2.4) |  |  |  | (1.1) |  |  |  | (1.0) |
Net change in unrecognized tax benefits |  |  | 0.4 |  |  |  | — |  |  |  | 1.7 |
Other |  |  | 1.5 |  |  |  | 0.2 |  |  |  | (2.6) |
Effective income tax rate |  |  | 31.0% |  |  |  | 25.5% |  |  |  | 25.9% |
SEALED AIR CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements — (Continued) Unrecognized tax benefits We are providing the following disclosures related to our unrecognized tax benefits and the effect on our effective income tax rate if recognized.
|  | Gross |  |  | Net |
Unrecognized tax benefits at January 1, 2011 |  | $ | 72.5 |  |  | $ | 64.7 |
Additions relating to the acquisition of Diversey (included in other liabilities) |  |  | 182.7 |  |  |  | 182.7 |
Additions for tax positions of prior years |  |  | 2.7 |  |  |  | 2.7 |
Reductions for tax positions of prior years |  |  | (3.4 | ) |  |  | (3.4 | )
Unrecognized tax benefits at December 31, 2011 |  | $ | 254.5 |  |  | $ | 246.7 |
If the unrecognized tax benefits at December 31, 2011 were recognized, our income tax provision would decrease by $201 million, resulting in a substantially lower effective tax rate. As described in Note 17, “Commitments and Contingencies,” in 2011 the Bankruptcy Court has taken various actions with respect to the PI Settlement Plan. Although we do not know whether or when a final plan of reorganization will become effective, it is reasonably possible that within the next 12 months our unrecognized tax benefit position will decrease because of recognizing a portion of the unrecognized tax benefits relating to the Settlement agreement. We recognize interest and penalties related to unrecognized tax benefits in income tax provision on the consolidated statements of operations. We had a liability of approximately $4 million (of which $2 million represents penalties) at January 1, 2011 and a liability of $32 million (of which $15 million represents penalties) at December 31, 2011 for the payment of interest and penalties (before any tax benefit). In 2011, interest and penalties of $1.5 million (gross) ($1.5 million (net)) were recognized in connection with the related tax accruals for uncertainties in prior years. In addition, interest and penalties of $0.5 million (gross) ($0.5 million (net)) were reversed in connection with the related tax accruals for uncertainties in prior years. Income Tax Returns The Internal Revenue Service (the “Service”) has concluded its examination of the legacy Sealed Air U.S. federal income tax returns for all years through 2006. Examination of legacy Diversey U.S. federal income tax returns has also been substantially completed through 2006, but the Service could challenge the Diversey U.S. income tax losses carried forward to subsequent periods. State income tax returns are generally subject to examination for a period of three to five years after their filing date. We have various state income tax returns in the process of examination. Income tax returns in foreign jurisdictions have statutes of limitations generally ranging from three to five years after their filing date and except where still under examination or where we are litigating, we have generally concluded all other income tax matters globally for years through 2005. Our foreign income tax returns are under examination in various jurisdictions in which we conduct business and we are litigating certain issues in several jurisdictions. The statute of limitations for tax assessments will expire in many jurisdictions during 2012. It is reasonably possible there could be a reduction of approximately $20 million in unrecognized tax benefits during 2012.

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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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