Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Income from Continuing Operations Before Income Taxes

Income from continuing operations before income taxes is summarized in the table below.

	Year Ended December 31,
	2012		2011		2010
	(in millions)
Domestic	$	927	$	897	$	1,028
Foreign		235		263		224
Income from continuing operations before income taxes	$	1,162	$	1,160	$	1,252

Components of Current and Deferred Portions of Provision for Income Taxes on Continuing Operations

The components of the Company’s current and deferred portions of the provision for income taxes on continuing operations are presented in the table below.

	Year Ended December 31,
	2012		2011		2010
	(in millions)
Current income tax provision:
Federal	$	197	$	77	$	240
State and local		21		26		25
Foreign		44		69		54
Subtotal		262		172		319
Deferred income tax provision:
Federal		93		97		72
State and local		9		15		27
Foreign		10		12		10
Subtotal		112		124		109
Total provision for income taxes	$	374	$	296	$	428

Reconciliation of Statutory Federal Income Tax Rate to Effective Income Tax Rate on Continuing Operations

A reconciliation of the statutory federal income tax rate to the effective income tax rate on continuing operations of the Company is presented in the table below.

	Year Ended December 31,
	2012			2011			2010
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal income tax benefit		1.7			2.2			2.7
Foreign income taxes		(2.0	)		(2.6	)		(1.1	)
Manufacturing benefits		(1.7	)		(1.6	)		(1.6	)
Research and experimentation and other tax credits		(0.5	)		(1.1	)		(1.2	)
Resolution of tax contingencies		(0.9	)		(7.7	)		(0.8	)
Goodwill impairment		—			1.2			—
Other, net		0.6			0.1			1.2
Effective income tax rate on continuing operations		32.2	%		25.5	%		34.2	%

Components of Net Deferred Tax Assets and Liabilities

The significant components of the Company’s net deferred tax assets and liabilities are presented in the table below.

	December 31,
	2012			2011
	(in millions)
Deferred tax assets:
Inventoried costs	$	33		$	34
Compensation and benefits		113			100
Pension and postretirement benefits		444			367
Loss carryforwards		20			18
Tax credit carryforwards		9			10
Other		47			68
Gross deferred tax assets		666			597
Less: valuation allowance		(19	)		(14	)
Net deferred tax assets		647			583
Deferred tax liabilities:
Goodwill and other intangible assets	$	657		$	593
Income recognition on contracts in process		72			47
Property, plant and equipment		71			85
Long-term debt-CODES		73			61
Other		7			—
Gross deferred tax liabilities		880			786
Total net deferred tax liabilities	$	(233	)	$	(203	)

Classification of Deferred Tax Assets and Liabilities

The classification of the Company’s deferred tax assets and liabilities are presented in the table below.

	December 31,
	2012			2011
	(in millions)
Current deferred tax assets	$	95		$	132
Non-current deferred tax liabilities		(328	)		(335	)
Total net deferred tax liabilities	$	(233	)	$	(203	)

Reconciliation of Change in Unrecognized Income Tax Benefits, Excluding Interest and Penalties

A reconciliation of the change in unrecognized income tax benefits, excluding potential interest and penalties, is presented in the table below.

	2012			2011			2010
	(in millions)
Balance at January 1	$	143		$	195		$	185
Additions for tax positions related to the current year		7			9			8
Additions for tax positions related to prior years		9			33			49
Reductions for tax positions related to prior years		(13	)		(13	)		(47	)
Reductions for tax positions related to settlements with taxing authorities		(1	)		(5	)		—
Reduction for tax positions related to prior years as a result of a lapse of statute of limitations		(15	)		(76	)		—
Balance at December 31	$	130		$	143		$	195