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Income Taxes | 12 Months Ended
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Dec. 31, 2011
Income Taxes [Abstract] |
Income Taxes | Note 12—Income taxes:
|  | Years ended December 31, |
|  | 2009 |  |  | 2010 |  |  | 2011 |
|  | (In millions) |
Pre-tax income (loss): |  |  |  |  |  |  |  |  |  |  |  |
United States |  | $ | (9.9 | ) |  | $ | (1.9 | ) |  | $ | 50.7 |
Non-U.S. subsidiaries |  |  | (79.0 | ) |  |  | 84.2 |  |  |  | 419.2 |
Total |  | $ | (88.9 | ) |  | $ | 82.3 |  |  | $ | 469.9 |
Expected tax expense (benefit), at U.S. federal statutory income tax rate of 35% |  | $ | (31.1 | ) |  | $ | 28.8 |  |  | $ | 164.5 |
Non-U.S. tax rates |  |  | 1.5 |  |  |  | (4.2 | ) |  |  | (18.1 | )
Incremental U.S. tax on earnings of non-tax group companies |  |  | (10.0 | ) |  |  | 21.8 |  |  |  | 31.6 |
German tax attribute adjustments |  |  | .2 |  |  |  | (35.2 | ) |  |  | — |
U.S. state income taxes, net |  |  | (.2 | ) |  |  | 3.1 |  |  |  | 4.0 |
Adjustment to the reserve for uncertain tax positions, net |  |  | (14.0 | ) |  |  | 5.2 |  |  |  | (8.5 | )
Change in valuation allowance |  |  | 1.4 |  |  |  | (.1 | ) |  |  | (.7 | )
Nondeductible expenses |  |  | 2.6 |  |  |  | 2.5 |  |  |  | 3.7 |
Non-U.S. tax rate changes |  |  | — |  |  |  | (1.6 | ) |  |  | — |
Nontaxable income |  |  | (.9 | ) |  |  | (.9 | ) |  |  | (1.1 | )
Other, net |  |  | (.3 | ) |  |  | (.9 | ) |  |  | (.5 | )
Provision for income taxes (benefit) |  | $ | (50.8 | ) |  | $ | 18.5 |  |  | $ | 174.9 |
Components of income tax expense (benefit): |  |  |  |  |  |  |  |  |  |  |  |
Currently payable (refundable): |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal and state |  | $ | (14.4 | ) |  | $ | 6.0 |  |  | $ | 8.3 |
Non-U.S. |  |  | 1.8 |  |  |  | 17.8 |  |  |  | 81.3 |
Total |  |  | (12.6 | ) |  |  | 23.8 |  |  |  | 89.6 |
Deferred income taxes (benefit): |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal and state |  |  | (7.4 | ) |  |  | 19.0 |  |  |  | 30.7 |
Non-U.S. |  |  | (30.8 | ) |  |  | (24.3 | ) |  |  | 54.6 |
Total |  |  | (38.2 | ) |  |  | (5.3 | ) |  |  | 85.3 |
Provision for income taxes (benefit) |  | $ | (50.8 | ) |  | $ | 18.5 |  |  | $ | 174.9 |
Comprehensive provision for income taxes (benefit) allocable to: |  |  |  |  |  |  |  |  |  |  |  |
Income (loss) from operations |  | $ | (50.8 | ) |  | $ | 18.5 |  |  | $ | 174.9 |
Other comprehensive income: |  |  |  |  |  |  |  |  |  |  |  |
Marketable securities |  |  | 3.9 |  |  |  | 6.0 |  |  |  | 7.7 |
Currency translation |  |  | 5.6 |  |  |  | (.2 | ) |  |  | — |
Pension plans |  |  | 5.8 |  |  |  | (.5 | ) |  |  | (6.5 | )
OPEB plans |  |  | 1.5 |  |  |  | 2.1 |  |  |  | (1.0 | )
Total |  | $ | (34.0 | ) |  | $ | 25.9 |  |  | $ | 175.1 |
The components of the net deferred tax liability at December 31, 2010 and 2011 are summarized below.
|  | December 31, |
|  | 2010 |  |  | 2011 |
|  | Assets |  |  | Liabilities |  |  | Assets |  |  | Liabilities |
|  | (In millions) |
Tax effect of temporary differences related to: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Inventories |  | $ | 3.3 |  |  | $ | (4.0 | ) |  | $ | 8.4 |  |  | $ | (6.6 | )
Marketable securities |  |  | 9.6 |  |  |  | (125.5 | ) |  |  | 2.2 |  |  |  | (142.4 | )
Property and equipment |  |  | — |  |  |  | (86.3 | ) |  |  | — |  |  |  | (89.3 | )
Accrued OPEB costs |  |  | 6.8 |  |  |  | — |  |  |  | 6.8 |  |  |  | — |
Accrued pension costs |  |  | 10.5 |  |  |  | — |  |  |  | 16.8 |  |  |  | — |
Accrued environmental liabilities and other deductible differences |  |  | 45.1 |  |  |  | — |  |  |  | 38.8 |  |  |  | — |
Other taxable differences |  |  | — |  |  |  | (27.6 | ) |  |  | — |  |  |  | (25.3 | )
Investments in subsidiaries and affiliates |  |  | — |  |  |  | (258.2 | ) |  |  | — |  |  |  | (258.2 | )
Tax on unremitted earnings of non-U.S. subsidiaries |  |  | — |  |  |  | (8.4 | ) |  |  | — |  |  |  | (22.0 | )
Tax loss and tax credit carryforwards |  |  | 219.9 |  |  |  | — |  |  |  | 160.0 |  |  |  | — |
Valuation allowance |  |  | (1.9 | ) |  |  | — |  |  |  | (1.3 | ) |  |  | — |
Adjusted gross deferred tax assets (liabilities) |  |  | 293.3 |  |  |  | (510.0 | ) |  |  | 231.7 |  |  |  | (543.8 | )
Netting of items by tax jurisdiction |  |  | (87.4 | ) |  |  | 87.4 |  |  |  | (80.2 | ) |  |  | 80.2 |
|  |  | 205.9 |  |  |  | (422.6 | ) |  |  | 151.5 |  |  |  | (463.6 | )
Less net current deferred tax asset (liability) |  |  | 13.9 |  |  |  | (5.0 | ) |  |  | 18.8 |  |  |  | (6.4 | )
Net noncurrent deferred tax asset (liability) |  | $ | 192.0 |  |  | $ | (417.6 | ) |  | $ | 132.7 |  |  | $ | (457.2 | )
Our provision for income taxes in the third and fourth quarters of 2011 includes an aggregate of $17.2 million for U.S. incremental income taxes on current earnings repatriated from our Chemicals Segment's German subsidiary, which earnings were used to fund a portion of the repurchases of our Senior Secured Notes discussed in Note 9. In addition, we accrue U.S. incremental income taxes on the earnings of our Chemical Segment's Canadian subsidiary and the earnings of our Component Product Segment's Canadian and Taiwanese subsidiaries, which earnings we previously determined are not permanently reinvested. Tax authorities are examining certain of our non-U.S. tax returns and have or may propose tax deficiencies, including penalties and interest. Because of the inherent uncertainties involved in settlement initiatives and court and tax proceedings, we cannot guarantee that these tax matters will be resolved in our favor, and therefore our potential exposure, if any, is also uncertain. In 2011 our Chemicals Segment received notices of re-assessment from the Canadian federal and provincial tax authorities related to the years 2002 through 2004. We object to the re-assessments and believe the position is without merit. Accordingly, we are appealing the re-assessments, and in connection with such appeal we were required to post letters of credit aggregating Cdn. $5.2 million (see Note 7). In February 2012, and in conjunction with the re-assessment notices received in 2011, we posted an additional letter of credit of Cdn $2.1 million. If the full amount of the proposed adjustment were ultimately to be assessed against us the cash tax liability would be approximately $11.6 million. We believe we have adequate accruals for additional taxes and related interest expense which could ultimately result from tax examinations. We believe the ultimate disposition of tax examinations should not have a material adverse effect on our consolidated financial position, results of operations or liquidity. As a consequence of a European Court ruling that resulted in a favorable resolution of certain income tax issues in Germany, during the first quarter of 2010 the German tax authorities agreed to an increase in Kronos' German net operating loss carryforwards. Accordingly, we recognized a non-cash income tax benefit of $35.2 million in the first quarter of 2010. We are required to recognize a deferred income tax liability with respect to the incremental U.S. (federal and state) and foreign withholding taxes that would be incurred when undistributed earnings of a foreign subsidiary are subsequently repatriated, unless management has determined that those undistributed earnings are permanently reinvested for the foreseeable future. Prior to March 31, 2010, we had not recognized a deferred income tax liability related to incremental income taxes on the pre-2005 undistributed earnings of our Taiwanese subsidiary, as those earnings were deemed to be permanently reinvested. We are required to reassess the permanent reinvestment conclusion on an ongoing basis to determine if our intentions have changed. At the end of March 2010, and based primarily upon changes in our cash management plans, we determined that all of the undistributed earnings of our Taiwanese subsidiary could no longer be considered to be permanently reinvested in Taiwan. Accordingly, in the first quarter of 2010 we recognized an aggregate $1.9 million provision for deferred income taxes on the pre-2005 undistributed earnings of our Taiwanese subsidiary. Our provision for income taxes in 2009 includes a noncash income tax benefit of $14.0 million due to a net decrease in our reserves for uncertain tax positions. The benefit includes a net $4.7 million decrease primarily as a result of the resolution of tax audits in Belgium and Germany. The following table shows the changes in the amount of our uncertain tax positions (exclusive of the effect of interest and penalties) during 2009, 2010 and 2011:
|  | Years ended December 31, |
|  | 2009 |  |  | 2010 |  |  | 2011 |
|  | (In millions) |
Unrecognized tax benefits: |  |  |  |  |  |  |  |  |  |  |  |
Amount beginning of year |  | $ | 46.6 |  |  | $ | 31.8 |  |  | $ | 37.4 |
Net increase (decrease): |  |  |  |  |  |  |  |  |  |  |  |
Tax positions taken in prior periods |  |  | (5.3 | ) |  |  | .3 |  |  |  | .5 |
Tax positions taken in current period |  |  | (6.4 | ) |  |  | 5.4 |  |  |  | 6.0 |
Settlements with taxing authorities—cash paid |  |  | (.1 | ) |  |  | — |  |  |  | — |
Lapse due to applicable statute of limitations |  |  | (3.7 | ) |  |  | (.5 | ) |  |  | (20.6 | )
Changes in currency exchange rates |  |  | .7 |  |  |  | .4 |  |  |  | (.3 | )
Amount at end of year |  | $ | 31.8 |  |  | $ | 37.4 |  |  | $ | 23.0 |
If our uncertain tax positions were recognized, a benefit of $26.7 million, $32.2 million and $23.5 million at December 31, 2009, 2010 and 2011, respectively, would affect our effective income tax rate. We currently estimate that our unrecognized tax benefits will decrease by approximately $1.6 million during the next twelve months due to the reversal of certain timing differences and the expiration of certain statues of limitations. We file income tax returns in various U.S. federal, state and local jurisdictions. We also file income tax returns in various foreign jurisdictions, principally in Germany, Canada, Taiwan, Belgium and Norway. Our U.S. income tax returns prior to 2008 are generally considered closed to examination by applicable tax authorities. Our foreign income tax returns are generally considered closed to examination for years prior to: 2002 for Norway; 2006 for Canada and Taiwan; 2007 for Germany; and 2008 for Belgium. We accrue interest and penalties on our uncertain tax positions as a component of our provision for income taxes. We accrued $1.6 million, $.8 million and $.6 million of interest and penalties during 2009, 2010 and 2011, respectively, and at each of December 31, 2010 and 2011 we had $3.9 million accrued for interest and an immaterial amount accrued for penalties for our uncertain tax positions. At December 31, 2011, Kronos had the equivalent of $799 million and $188 million of net operating loss carryforwards for German corporate and trade tax purposes, respectively. At December 31, 2011, we have concluded that no deferred income tax asset valuation allowance is required to be recognized with respect to such carryforwards, principally because (i) such carryforwards have an indefinite carryforward period, (ii) we have utilized a portion of such carryforwards during the most recent three-year period and (iii) we currently expect to utilize the remainder of such carryforwards over the long term. However, prior to the complete utilization of these carryforwards, particularly if the economic recovery were to be short-lived or we generate operating losses in our German operations for an extended period of time, it is possible we might conclude the benefit of the carryforwards would no longer meet the more-likely-than-not recognition criteria, at which point we would be required to recognize a valuation allowance against some or all of the then-remaining tax benefit associated with the carryforwards. At December 31, 2011, approximately $52 million of net operating loss carryforwards related to various U.S. state jurisdictions with expiration dates ranging from 2012 to 2031. At December 31, 2011, we have concluded that a portion of the various U.S. state jurisdictions net operating losses do not meet the more-likely-than-not recognition criteria, accordingly we have recognized a deferred income tax asset valuation allowance of $1.1 million with respect to our carryforwards ($1.8 million at December 31, 2010).

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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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