Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

Income Taxes [Abstract]

Components of income before income taxes

The components of income from continuing operations before income taxes were as follows:

	Year Ended December 31,
(dollars in millions)	2014		2013		2012
U.S. operations	$	294	$	219	$	664
Foreign operations		786		636		178
Income from continuing operations before income taxes	$	1,080	$	855	$	842

Provision for income taxes

The provisions for income taxes were as follows:

	Year Ended December 31,
(dollars in millions)	2014			2013			2012
Current:
U.S. federal	$	70		$	–		$	97
U.S. state and local		4			11			7
Foreign		231			166			137
		305			177			241
Deferred:
U.S. federal		–			31			(37	)
U.S. state and local		(3	)		2			(2	)
Foreign		(44	)		(14	)		(45	)
		(47	)		19			(84	)
Income tax provision	$	258		$	196		$	157

Effective income tax rate reconciliation

The reasons for the differences between the provision for income taxes and income taxes using the U.S. federal income tax rate were as follows:

	Year Ended December 31,
	2014			2013			2012
U.S. federal statutory rate		35.0	%		35.0	%		35.0	%
State and local income taxes		–			1.0			0.4
Foreign statutory rate differential		(10.7	)		(11.6	)		(10.2	)
Change in valuation allowance on deferred tax assets		3.4			(1.7	)		6.6
Nondeductible expenses		(0.1	)		1.1			0.9
Net U.S. tax on foreign source income		(2.9	)		(3.2	)		(12.2	)
All other		(0.8	)		2.3			(1.9	)
Total		23.9	%		22.9	%		18.6	%
Total income taxes paid (dollars in millions)	$	353		$	329		$	240

Components of deferred tax assets and liabilities

Components of deferred tax assets (liabilities) were as follows:

	December 31,
(dollars in millions)	2014			2013
Deferred tax liabilities:
Plant and equipment	$	(190	)	$	(171	)
Intangible assets		(221	)		(251	)
Other		(9	)		(16	)
Total deferred tax liabilities		(420	)		(438	)
Deferred tax assets:
Inventory		48			20
Postretirement benefits other than pensions		3			12
Reserves and accruals		160			93
Net operating losses and tax credits		259			246
Pensions		38			16
Other		27			17
Total deferred tax assets		535			404
Valuation allowance		(79	)		(59	)
Net deferred tax assets (liabilities)	$	36		$	(93	)

Changes in unrecognized tax benefits

Changes in the Company’s accruals for unrecognized tax benefits were as follows:

	Year Ended December 31,
(dollars in millions)	2014			2013			2012
Balance at beginning of year	$	103		$	121		$	148
Decreases in estimates for tax positions taken prior to the current year		–			–			(11	)
Increases due to tax positions taken during the current year		6			3			–
Decreases relating to settlements with tax authorities		(10	)		(19	)		(10	)
Decreases resulting from the lapse of applicable statutes of limitation		–			–			(7	)
Net increases (decreases) due to translation and interest		(2	)		(2	)		1
Balance at end of year	$	97		$	103		$	121

Summary of income tax examinations

The Company and its subsidiaries file income tax returns in the United States, various domestic states and localities and in many foreign jurisdictions. The earliest years’ tax returns filed by the Company that are still subject to examination by authorities in the major tax jurisdictions are as follows:

United States	United Kingdom	Canada	France	Germany	Norway	Singapore	Italy
2011	2012	2006	2012	2008	2010	2010	2008

Summary of valuation allowance

Changes in the Company’s valuation allowances against these net operating loss and credit carryforwards and other deferred tax assets were as follows:

	Year Ended December 31,
(dollars in millions)	2014			2013			2012
Balance at beginning of year	$	59		$	84		$	30
Valuation allowances for unutilized net operating losses and excess foreign tax credits generated in the current year		25			11			36
Change in valuation allowances related to prior years		(2	)		(16	)		19
Write-off of valuation allowances and associated deferred tax assets for certain losses that have no possibility of being utilized		–			(19	)		–
Effect of translation		(3	)		(1	)		(1	)
Balance at end of year	$	79		$	59		$	84

Summary of tax credit carryforwards

Tax attribute carryforwards which are available for use on future income tax returns at December 31, 2014 are as follows:

(dollars in millions)	Domestic		Foreign		Expiration
Net operating losses - regular income tax	$	–	$	381	2018 - Indefinite
Net operating losses – state income tax	$	6	$	–		2018 – 2034
Foreign tax credits	$	93	$	–		2016 – 2024