PolyOne 2009 Annual Report

2029. Various foreign subsidiaries have net operating loss carryforwards
totaling $34.5 million, which expire at various dates from
2010 through 2019. We have provided valuation allowances of
$42.9 million against many loss carryforwards.
Components of our deferred tax liabilities and assets as of
December 31, 2009 and 2008 were as follows:
(In millions) 2009 2008
Deferred tax liabilities:
Tax over book depreciation $ 26.2 $ 36.6
Intangibles 2.8 2.9
Equity investments — 1.7
Other, net 10.8 7.5
Total deferred tax liabilities $ 39.8 $ 48.7
Deferred tax assets:
Equity investments $ 1.6 $ —
Post-retirement benefits other than pensions 9.7 36.1
Employment cost and pension 61.0 77.7
Environmental 28.1 29.4
Net operating loss carryforward 32.7 41.9
State taxes 21.2 23.6
Alternative minimum tax credit carryforward 8.3 12.5
Other, net 13.9 16.5
Total deferred tax assets $ 176.5 $ 237.7
Tax valuation allowance (132.9) (187.5)
Net deferred tax assets $ 3.8 $ 1.5
The deferred asset related to state taxes and the related
valuation allowance were each increased from amounts previously
reported by $18.4 million associated with state net operating
losses in states in which realization of the related tax benefits
do not meet the more likely than not threshold.
No provision has been made for income taxes on undistributed
earnings of consolidated non-United States subsidiaries of
$151 million at December 31, 2009 since it is our intention to
indefinitely reinvest undistributed earnings of our foreign subsidiaries.
It is not practicable to estimate the additional income taxes
and applicable foreign withholding taxes that would be payable on
the remittance of such undistributed earnings.
We received worldwide income tax refunds of $0.2 million in
2009, net of payments of $15.3 million. Worldwide income tax
payments in 2008 and 2007 were $9.6 million and $18.3 million,
respectively.
As of December 31, 2009, we have an $8.0 million liability for
uncertain tax positions all of which, if recognized, would impact the
effective tax rate. We expect that the amount of uncertain tax
positions will change in the next twelve months due to the resolution
of an income tax audit in a foreign jurisdiction.
We recognize interest and penalties related to uncertain tax
positions in the provision for income taxes. As of December 31,
2009 and December 31, 2008, we have accrued $0.6 million and
$2.5 million of interest and penalties, respectively.
A reconciliation of the beginning and ending amount of unrecognized
tax benefits is as follows:
Unrecognized Tax
Benefits
(In millions) 2009 2008
Balance as of January 1 $ 6.3 $6.0
Additions based on tax positions related to the
current year 0.9 —
Additions for tax positions of prior years 7.1 0.3
Reductions for tax positions of prior years (6.0) —
Settlements (0.3) —
Balance as of December 31 $ 8.0 $6.3
We are no longer subject to U.S. income tax examinations for
periods preceding 2005, and with limited exceptions, for periods
preceding 2002 for both foreign and state and local tax
examinations.
Note 15 — SHARE-BASED COMPENSATION
Share-based compensation cost is based on the value of the portion
of share-based payment awards that are ultimately expected to
vest during the period. Share-based compensation cost recognized
in the accompanying consolidated statements of operations for the
years ended December 31, 2009, 2008 and 2007 includes compensation
cost for share-based payment awards based on the grant
date fair value estimated in accordance with the provision of FASB
ASC Topic 718, Compensation — Stock Compensation. Because
share-based compensation expense recognized in the accompanying
consolidated statements of operations for the years ended
December 31, 2009, 2008 and 2007 is based on awards ultimately
expected to vest, it has been reduced for estimated forfeitures. We
estimate forfeitures at the time of grant and revise that estimate, if
necessary, in subsequent periods if actual forfeitures differ from
those estimates.
We have one active share-based compensation plan, which is
described below. Share-based compensation is included in Selling
and administrative in the accompanying consolidated statements of
operations. A summary of compensation expense by type of award
follows:
(In millions) 2009 2008 2007
Stock appreciation rights $1.2 $1.5 $ 4.1
Restricted stock units 1.3 0.8 —
Restricted stock awards 0.1 0.7 0.7
Performance shares — — (0.5)
Total share-based compensation $2.6 $3.0 $ 4.3
2008 Equity and Performance Incentive Plan
In May 2008, our shareholders approved the PolyOne Corporation
2008 Equity and Performance Incentive Plan (2008 EPIP). This plan
replaced the 2005 Equity and Performance Incentive Plan (2005
EPIP). The 2005 EPIP was frozen upon the approval of the 2008
EPIP in May 2008. The 2008 EPIP provides for the award of a variety
POLYONE CORPORATION
53