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Income Taxes
 12 Months Ended
Dec. 31, 2012
Income Taxes [Abstract]  
Income Taxes

Note 10.    Income Taxes

 

A roll-forward of unrecognized tax benefits and associated accrued interest and penalties is as follows:

 

                         

(in millions)

   Interest and
Penalties		     Unrecognized
Tax Benefits		     Total  

Opening balance at January 1, 2010

   $ 3.8     $ 15.6     $ 19.4  

Additions related to tax positions taken in the current period

     0.0       0.0       0.0  

Additions for tax positions of prior periods

     0.1       2.0       2.1  

Settlements

     (3.6 )      (9.3 )      (12.9 ) 
   

 

 

    

 

 

    

 

 

  

Closing balance at December 31, 2010

     0.3       8.3       8.6  

Current

     (0.2 )      (2.0 )      (2.2 ) 
   

 

 

    

 

 

    

 

 

  

Non-current

   $ 0.1     $ 6.3     $ 6.4  
   

 

 

    

 

 

    

 

 

  

Opening balance at January 1, 2011

   $ 0.3     $ 8.3     $ 8.6  

Additions related to tax positions taken in the current period

     0.0       5.2       5.2  

Additions for tax positions of prior periods

     0.2       0.5       0.7  

Reductions for tax positions of prior periods

     (0.1 )      (1.8 )      (1.9 ) 
   

 

 

    

 

 

    

 

 

  

Closing balance at December 31, 2011

     0.4       12.2       12.6  

Current

     (0.3 )      (2.9 )      (3.2 ) 
   

 

 

    

 

 

    

 

 

  

Non-current

   $ 0.1     $ 9.3     $ 9.4  
   

 

 

    

 

 

    

 

 

  

Opening balance at January 1, 2012

   $ 0.4     $ 12.2     $ 12.6  

Additions related to tax positions taken in the current period

     0.0       0.2       0.2  

Additions for tax positions of prior periods

     0.2       0.0       0.2  

Reductions due to lapsed statutes of limitations

     0.0       (0.2 )      (0.2 ) 
   

 

 

    

 

 

    

 

 

  

Closing balance at December 31, 2012

     0.6       12.2       12.8  

Current

     (0.3 )      (2.7 )      (3.0 ) 
   

 

 

    

 

 

    

 

 

  

Non-current

   $ 0.3     $ 9.5     $ 9.8  
   

 

 

    

 

 

    

 

 

  

 

All of the $12.8 million of unrecognized tax benefits, and interest and penalties, would impact our effective tax rate if recognized.

 

We recognize accrued interest and penalties associated with uncertain tax positions as part of income taxes in our consolidated statements of income.

 

During the fourth quarter of 2012, the Company recorded a $0.2 million addition to unrecognized tax benefits and there was a $0.2 million reduction in unrecognized tax benefits due to the expiration of applicable statutes of limitations during the third quarter of 2012.

 

The Company or one of its subsidiaries files income tax returns with the U.S. federal government, and various state and foreign jurisdictions. As at December 31, 2012, the Company’s German subsidiaries were subject to tax audits in Germany and the Company’s United Kingdom subsidiaries were subject to tax audits in the United Kingdom. The Company does not currently anticipate that adjustments, if any, arising out of these tax audits would result in a material change to its financial position as at December 31, 2012.

 

The Company and its U.S. subsidiaries remain open to federal income tax examination by the IRS for years 2009 onwards. The Company and its U.S. subsidiaries received notification in January 2013, of a federal income tax examination by the IRS for 2009. The Company does not currently anticipate that adjustments, if any, arising out of this tax audit would result in a material change to its financial position as at December 31, 2012. The Company’s subsidiaries in foreign tax jurisdictions are open to examination including France (2009 onwards), Germany (2006 onwards), Switzerland (2011 onwards) and the United Kingdom (2010 onwards).

 

The sources of income before income taxes were as follows:

 

                         

(in millions)

   2012     2011     2010  

Domestic

   $ 5.6     $ (42.6 )    $ 11.1  

Foreign

     89.6       95.2       59.6  
   

 

 

    

 

 

    

 

 

  
    $ 95.2     $ 52.6     $ 70.7  
   

 

 

    

 

 

    

 

 

  

 

The components of income tax charges are summarized as follows:

 

                         

(in millions)

   2012     2011     2010  

Current:

                        

Federal

   $ 2.9     $ 5.4     $ 7.2  

Foreign

     11.8       13.6       4.0  
   

 

 

    

 

 

    

 

 

  
      14.7       19.0       11.2  
   

 

 

    

 

 

    

 

 

  

Deferred:

                        

Federal

     12.3       (12.8 )      (9.0 ) 

Foreign

     (0.1 )      (2.5 )      (5.2 ) 
   

 

 

    

 

 

    

 

 

  
      12.2       (15.3 )      (14.2 ) 
   

 

 

    

 

 

    

 

 

  
    $ 26.9     $ 3.7     $ (3.0 ) 
   

 

 

    

 

 

    

 

 

  

 

Cash payments for income taxes were $13.1 million, $18.1 million and $22.9 million during 2012, 2011 and 2010, respectively.

 

The effective tax rate varies from the U.S. federal statutory rate because of the factors indicated below:

 

                         
     2012     2011     2010  

Statutory rate

     35.0 %      35.0 %      35.0 % 

Foreign income inclusions

     48.9       20.5       7.1  

Impairment of Octane Additives segment goodwill

     0.5       1.3       1.1  

Foreign tax credits

     (38.3 )      (25.8 )      (7.1 ) 

Pension (credit)/charge

     (0.3 )      (8.9 )      0.5  

Foreign tax rate differential

     (16.4 )      (19.1 )      (13.5 ) 

Permanent tax adjustments

     (0.2 )      0.3       (2.1 ) 

Amortization

     0.5       0.7       1.7  

Tax (credit)/charge from previous years

     (0.6 )      (1.9 )      (2.9 ) 

Net charge/(credit) from unrecognized tax benefits

     0.3       7.7       (15.3 ) 

OFFP/FCPA settlement accrual

     0.0       0.0       (5.6 ) 

United Kingdom income tax rate reduction

     (0.6 )      (4.8 )      (1.6 ) 

Other items and adjustments, net

     (0.5 )      2.0       (1.5 ) 
   

 

 

    

 

 

    

 

 

  
      28.3 %      7.0 %      (4.2 )% 
   

 

 

    

 

 

    

 

 

  

 

Significant factors affecting the variation to statutory rate are set out above and include foreign income inclusions net of foreign tax credits. The mix of taxable profits generated in the different geographical localities in which the Group operates had a significant positive impact on the effective tax rate in 2012.

 

Details of deferred tax assets and liabilities are analyzed as follows:

 

                 

(in millions)

   2012     2011  

Deferred tax assets:

                

Foreign tax credits

   $ 5.5     $ 19.6  

Accrued expenses

     4.6       8.8  

Stock options

     5.5       4.0  

Excess of tax over book basis in property, plant and equipment

     1.1       1.2  

Net operating loss carry forwards

     0.3       0.8  

Pension liabilities

     9.2       0.0  

Other

     4.7       5.5  
     

Valuation allowance

     0.0       (7.5 ) 
     

Deferred tax liabilities:

                

Goodwill amortization

     (6.9 )      (6.5 ) 

Pension asset

     0.0       (5.4 ) 

Other intangible assets

     (0.9 )      (1.5 ) 

Other

     (3.2 )      (2.2 ) 
   

 

 

    

 

 

  

Total net deferred tax asset

   $ 19.9     $ 16.8  
   

 

 

    

 

 

  

Deferred taxes are included within the consolidated balance sheets as follows:

                

Deferred tax assets

   $ 23.7     $ 19.7  

Deferred tax liabilities

     (3.8 )      (2.9 ) 
   

 

 

    

 

 

  
    $ 19.9     $ 16.8  
   

 

 

    

 

 

  

Current portion of deferred tax assets

   $ 11.0     $ 0.0  

Deferred tax assets, net of current portion

     12.7       19.7  

Current portion of deferred tax liabilities

     (0.2 )      0.0  

Deferred tax liabilities, net of current portion

     (3.6 )      (2.9 ) 
   

 

 

    

 

 

  
    $ 19.9     $ 16.8  
   

 

 

    

 

 

  

 

Details of the deferred tax asset valuation allowance are as follows:

 

                         

(in millions)

   2012     2011     2010  

At January 1

   $ (7.5 )    $ (10.8 )    $ (4.4 ) 

Change in foreign tax credits

     7.5       3.3       (6.4 ) 
   

 

 

    

 

 

    

 

 

  

At December 31

   $ 0.0     $ (7.5 )    $ (10.8 ) 
   

 

 

    

 

 

    

 

 

  

 

As a result of the Company’s assessment of its net deferred tax assets at December 31, 2012, the Company considers it more likely than not that no valuation allowance is required for $0.3 million (2011 – $0.8 million) of its net operating loss carry forwards and that no valuation allowance is required against its foreign tax credit carry forwards (2011 – $7.5 million).

 

The net operating loss carry forwards arose in the U.S. in the current period and prior periods as a result of trading and state tax losses. It is expected that sufficient taxable profits will be generated against which these net operating loss carry forwards can be relieved prior to their expiration in 2021. The foreign tax credit carry forwards arose in the U.S. in prior periods. The Company has determined that future foreign income inclusions will be sufficient to utilize all of the $5.5 million (2011 – $12.1 million) of the foreign tax credit carry forwards prior to their expiration in 2017 and 2021 and therefore no valuation allowance is required.

 

Should it be determined in the future that it is no longer more likely than not that these assets will be realized, a valuation allowance would be required, and the Company’s operating results would be adversely affected during the period in which such a determination would be made.

 

During 2012 a dividend of $110.0 million was remitted from the Company’s overseas subsidiaries to the U.S.. The dividend was remitted to provide funding for the Company’s acquisition program. The Company is in a position to control whether or not to repatriate foreign earnings and we intend to permanently reinvest earnings overseas to fund overseas subsidiaries. No taxes have been provided for the unremitted earnings of our overseas subsidiaries as any tax basis differences relating to investments in these overseas subsidiaries are considered to be permanent in duration. The amount of unremitted earnings at December 31, 2012 and 2011 was approximately $717 million and $665 million, respectively. If these earnings are remitted, additional taxes could result after offsetting foreign income taxes paid although the calculation of the additional taxes is not practical at this time.