Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income from Continuing Operations Before Income Taxes

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

	Year Ended December 31,
	2014		2013		2012
	(in millions)
Domestic	$	760	$	858	$	892
Foreign		165		197		230
Income from continuing operations before income taxes	$	925	$	1,055	$	1,122

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,
	2014		2013		2012
	(in millions)
Current income tax provision:
Federal	$	87	$	181	$	198
State and local		4		34		21
Foreign		36		38		44
Subtotal		127		253		263
Deferred income tax provision:
Federal		107		35		80
State and local		13		—		8
Foreign		1		7		9
Subtotal		121		42		97
Total provision for income taxes	$	248	$	295	$	360

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,
	2014		2013		2012
Statutory federal income tax rate		35.0%		35.0%		35.0%
State and local income taxes, net of federal income tax benefit		2.3		2.1		1.7
Foreign income taxes		(3.4)		(1.6)		(2.0)
Manufacturing benefits		(1.7)		(1.9)		(1.8)
Research and experimentation and other tax credits		(4.1)		(3.6)		(0.5)
Resolution of tax contingencies		(0.9)		(1.0)		(0.9)
Other, net		(0.4)		(1.0)		0.6
Effective income tax rate on continuing operations		26.8%		28.0%		32.1%

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,
	2014		2013
	(in millions)
Deferred tax assets:
Inventoried costs	$	86	$	72
Compensation and benefits		152		164
Pension and postretirement benefits		402		207
Loss carryforwards		15		24
Tax credit carryforwards		10		7
Other		84		75
Gross deferred tax assets		749		549
Less: valuation allowance		(9)		(22)
Net deferred tax assets		740		527
Deferred tax liabilities:
Goodwill and other intangible assets	$	792	$	726
Income recognition on contracts in process		78		58
Property, plant and equipment		98		85
Long-term debt-CODES		—		81
Other		88		65
Gross deferred tax liabilities		1,056		1,015
Total net deferred tax liabilities	$	(316)	$	(488)

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,
	2014		2013
	(in millions)
Current deferred tax assets	$	127	$	147
Non-current deferred tax liabilities		(443)		(635)
Total net deferred tax liabilities	$	(316)	$	(488)

Summary of Loss and Tax Credit Carryforwards

The following table presents the Company’s loss and tax credit carryforwards as of December 31, 2014 on a tax return basis. The Company has established a valuation allowance as indicated in those instances in which it does not believe that it is more likely than not it will generate sufficient taxable income, of the appropriate character and in the applicable subsidiary, to utilize the carryforwards.

	Year Ended December 31, 2014
	Carryforwards				Valuation Allowances
	Gross		Tax Effected		Gross		Tax Effected		Expiration Periods
	(in millions)				(in millions)
Capital loss carryforwards(1)	$	25	$	9	$	14	$	5	2016-2017
Federal net operating loss carryforwards		5		2		5		2	2026-2030
Foreign net operating loss carryforwards		7		2		2		1	Indefinite
State net operating loss carryforwards		94		2		48		1	2016-2033
Total loss carryforwards			$	15			$	9
State tax credit carryforwards		11		7		—		—	2016-2033
Foreign tax credit carryforwards		3		3		—		—	Indefinite
Total tax credit carryforwards			$	10			$	—

⁽¹⁾  During 2014, the Company reduced its valuation allowance for capital loss carryforwards by $4 million because it now believes that it will more likely than not have sufficient capital gains to realize this portion of the underlying deferred tax asset.

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.

	2014		2013		2012
	(in millions)
Balance at January 1	$	169	$	138	$	150
Additions for tax positions related to the current year		20		18		8
Additions for tax positions related to prior years		13		41		9
Reductions for tax positions related to prior years		(15)		(8)		(13)
Reductions for tax positions related to settlements with   taxing authorities		(1)		—		(1)
Reduction for tax positions related to prior years as a result   of a lapse of statute of limitations		(6)		(20)		(15)
Balance at December 31	$	180	$	169	$	138