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Income Taxes | 12 Months Ended
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Dec. 31, 2011
Income Tax Expense (Benefit) [Abstract] |
Income Taxes | 14. Income Taxes The domestic and foreign components of income before income taxes were as follows (in millions):
|  | Years Ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Domestic |  | $ | 1,282 |  |  | $ | 727 |  |  | $ | 761 |
Foreign |  |  | 1,640 |  |  |  | 1,670 |  |  |  | 1,447 |
|  | $ | 2,922 |  |  | $ | 2,397 |  |  | $ | 2,208 |
The components of the provision for income taxes consisted of (in millions):
|  | Years Ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 484 |  |  | $ | 421 |  |  | $ | 526 |
State |  |  | 37 |  |  |  | 34 |  |  |  | 35 |
Foreign |  |  | 768 |  |  |  | 448 |  |  |  | 348 |
Total current income tax provision |  |  | 1,289 |  |  |  | 903 |  |  |  | 909 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (28 | ) |  |  | (260 | ) |  |  | (249 | )
State |  |  | (3 | ) |  |  | (8 | ) |  |  | (5 | )
Foreign |  |  | (321 | ) |  |  | 103 |  |  |  | 80 |
Total deferred income tax provision |  |  | (352 | ) |  |  | (165 | ) |  |  | (174 | )
Total income tax provision |  | $ | 937 |  |  | $ | 738 |  |  | $ | 735 |
The difference between the effective tax rate reflected in the provision for income taxes and the U.S. federal statutory rate was as follows (in millions):
|  | Years Ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Federal income tax at U.S. statutory rate |  | $ | 1,023 |  |  | $ | 839 |  |  | $ | 773 |
Foreign income tax rate differential |  |  | (152 | ) |  |  | (117 | ) |  |  | (120 | )
State income tax, net of federal benefit |  |  | 22 |  |  |  | 17 |  |  |  | 18 |
Nondeductible expenses |  |  | 42 |  |  |  | 40 |  |  |  | 30 |
Tax benefit of manufacturing deduction |  |  | (37 | ) |  |  | (19 | ) |  |  | (17 | )
Foreign dividends, net of foreign tax credits |  |  | 9 |  |  |  | 15 |  |  |  | 10 |
Change in deferred tax valuation allowance |  |  | (18 | ) |  |  | — |  |  |  | — |
Change in contingency reserve and other |  |  | 48 |  |  |  | (37 | ) |  |  | 41 |
Total income tax provision |  | $ | 937 |  |  | $ | 738 |  |  | $ | 735 |
Significant components of our deferred tax assets and liabilities were as follows (in millions):
|  |  | $0.000 |  |  |  | $0.000 |  |  |  | $0.000 |
|  | December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Deferred tax assets: |  |  |  |  |  |  |  |  |  |  |  |
Allowances and operating liabilities |  | $ | 331 |  |  | $ | 344 |  |  | $ | 343 |
Net operating loss carryforwards |  |  | 14 |  |  |  | 10 |  |  |  | 7 |
Postretirement benefits |  |  | 14 |  |  |  | 17 |  |  |  | 12 |
Foreign tax credit carryforwards |  |  | 106 |  |  |  | 220 |  |  |  | — |
Other |  |  | 151 |  |  |  | 75 |  |  |  | 28 |
|  |  | 616 |  |  |  | 666 |  |  |  | 390 |
Valuation allowance for deferred tax assets |  |  | (13 | ) |  |  | (9 | ) |  |  | (8 | )
Total deferred tax assets |  |  | 603 |  |  |  | 657 |  |  |  | 382 |
Deferred tax liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Tax over book depreciation |  |  | 204 |  |  |  | 213 |  |  |  | 168 |
Intangible assets |  |  | 1,398 |  |  |  | 1,307 |  |  |  | 1,413 |
Deferred income |  |  | 226 |  |  |  | 456 |  |  |  | 363 |
Accrued U.S. tax on unremitted earnings |  |  | 70 |  |  |  | 149 |  |  |  | 49 |
Other |  |  | 168 |  |  |  | 211 |  |  |  | 98 |
Total deferred tax liabilities |  |  | 2,066 |  |  |  | 2,336 |  |  |  | 2,091 |
Net deferred tax liability |  | $ | 1,463 |  |  | $ | 1,679 |  |  | $ | 1,709 |
The balance of unrecognized tax benefits at December 31, 2011 and 2010 was $131 million and $118 million, respectively. Included in the change in the balance of unrecognized tax benefits for the period ended December 31, 2011 was an increase of $10 million associated with the acquisition of Ameron. Also included in the change in the balance of unrecognized tax benefits for the period ended December 31, 2011 was an increase of $12 million of unrecognized tax benefits associated with certain tax credits claimed in prior years plus the pricing of certain internal transfers of inventory that may not be accepted as a tax deduction in foreign jurisdictions. A $9 million reduction in the balance of unrecognized tax benefits resulted from the lapse of applicable statutes of limitations in foreign jurisdictions. Of the net increase of $13 million in the balance of unrecognized tax benefits, $10 million was recorded as an increase in Goodwill and $3 million was recorded as an increase of income tax expense in the current year and is reflected in the “other” category in the income tax rate schedule above. These unrecognized tax benefits are included in the balance of other liabilities in the Consolidated Balance Sheet at December 31, 2011. If the $131 million of unrecognized tax benefits accrued at December 31, 2011 are ultimately realized, $58 million would be recorded as a reduction of income tax expense. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
|  |  | $0,000 |  |  |  | $0,000 |  |  |  | $0,000 |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Unrecognized tax benefit at beginning of year |  | $ | 118 |  |  | $ | 58 |  |  | $ | 61 |
Additions based on tax positions related to the current year |  |  | 9 |  |  |  | 1 |  |  |  | 10 |
Additions for tax positions of prior years |  |  | 13 |  |  |  | 82 |  |  |  | — |
Reductions for tax positions of prior years |  |  | — |  |  |  | (5 | ) |  |  | (12 | )
Reductions for lapse of applicable statutes of limitations |  |  | (9 | ) |  |  | (18 | ) |  |  | (1 | )
Unrecognized tax benefit at end of year |  | $ | 131 |  |  | $ | 118 |  |  | $ | 58 |
The Company does not anticipate that the total unrecognized tax benefits will significantly change due to the settlement of audits or the expiration of statutes of limitation within 12 months of this reporting date. To the extent penalties and interest would be assessed on any underpayment of income tax, such accrued amounts have been classified as a component of income tax expense in the financial statements consistent with the Company’s policy. During the year ended December 31, 2011, the Company recorded as a reduction of income tax expense a $1 million release of accrued interest and penalties related to uncertain tax positions, and as an increase in Goodwill a $1 million accrual of accrued interest and penalties associated with the uncertain tax positions of Ameron. At December 31, 2011, the Company has accrued approximately $8 million of interest and penalties relating to unrecognized tax benefits. These interest and penalties are included in the balance of other liabilities in the Consolidated Balance Sheet at December 31, 2011. The Company is subject to taxation in the United States, various states and foreign jurisdictions. The Company has significant operations in the United States, Canada, the United Kingdom, the Netherlands and Norway. Tax years that remain subject to examination by major tax jurisdictions vary by legal entity, but are generally open in the U.S. for the tax years ending after 2007 and outside the U.S. for the tax years ending after 2005. In the United States, the Company has $20 million of net operating loss carryforwards as of December 31, 2011, which expire at various dates through 2030. The potential benefit of $7 million has been reduced by a $7 million valuation allowance. Future income tax payments will be reduced in the event the Company ultimately realizes the benefit of these net operating losses. If the Company ultimately realizes the benefit of these net operating loss carryforwards, the valuation allowance of $7 million would reduce future income tax expense. Outside the United States, the Company has $34 million of net operating loss carryforwards as of December 31, 2011, which expire in the year 2021. The potential benefit of $7 million has been reduced by a $5 million valuation allowance. Future income tax payments will be reduced in the event the Company ultimately realizes the benefit of these net operating losses. If the Company ultimately realizes the benefit of these net operating loss carryforwards, the valuation allowance of $6 million would reduce future income tax expense. Also in the United States, the Company has $106 million of excess foreign tax credits as of December 31, 2011, which expire at various dates through 2021. These credits have been allotted a valuation allowance of $1 million and would be realized as a reduction of future income tax payments. During 2011, the Company recorded $88 million in net deferred tax liabilities with a corresponding increase in goodwill related to the acquisition of Conner Steel Products Holding Company and Ameron. Undistributed earnings of certain of the Company’s foreign subsidiaries amounted to $3,789 million and $2,503 million at December 31, 2011 and 2010, respectively. Those earnings are considered to be permanently reinvested and no provision for U.S. federal and state income taxes has been made. Distribution of these earnings in the form of dividends or otherwise could result in U.S. federal taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable in various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practical; however, unrecognized foreign tax credit carryforwards would be available to reduce some portion of the U.S. liability. Because of the number of tax jurisdictions in which the Company operates, its effective tax rate can fluctuate as operations and the local country tax rates fluctuate. The Company is also subject to audits by federal, state and foreign jurisdictions which may result in proposed assessments. The Company’s future tax provision will reflect any favorable or unfavorable adjustments to its estimated tax liabilities when resolved. The Company is unable to predict the outcome of these matters. However, the Company believes that none of these matters will have a material adverse effect on the results of operations or financial condition of the Company.

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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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