Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Components of Income Before Income Taxes

The components of income from operations before income taxes for the following years ended December 31 consisted of:

	2012		2011		2010
(dollars in millions)
United States	$	435.1	$	425.1	$	455.8
Foreign		297.3		85.7		261.9
	$	732.4	$	510.8	$	717.7

Income Tax Provision

The income tax provision for the following years ended December 31 consisted of:

	2012			2011			2010
(dollars in millions)
Current provision
Federal	$	115.0		$	170.0		$	168.3
Foreign		40.0			23.3			31.8
State		15.6			7.8			10.3
		170.6			201.1			210.4
Deferred provision (benefit)
Federal		34.2			(18.9	)		3.7
Foreign		(4.2	)		(2.7	)		(7.2	)
State		1.7			3.3			1.2
		31.7			(18.3	)		(2.3	)
	$	202.3		$	182.8		$	208.1

Deferred Tax Assets and Deferred Tax Liabilities

Deferred tax assets and deferred tax liabilities at December 31 consisted of:

	2012			2011
(dollars in millions)
Deferred tax assets
Employee benefits	$	169.9		$	168.8
Inventory		—			16.6
Receivables and rebates		24.1			25.8
Accrued expenses		34.7			30.5
Loss carryforwards and credits		112.5			112.4
Gross deferred tax assets		341.2			354.1
Valuation allowance		(32.5	)		(32.2	)
		308.7			321.9
Deferred tax liabilities
Intangibles		252.4			234.2
Accelerated depreciation		25.8			22.8
Other		3.9			3.2
		282.1			260.2
	$	26.6		$	61.7

Reconciliation between Effective Income Tax Rate and Federal Statutory Rate

A reconciliation between the effective income tax rate and the federal statutory rate for the following years ended December 31 is:

	2012			2011			2010
Federal statutory rate		35	%		35	%		35	%
State taxes, net of federal benefit		2	%		2	%		2	%
Operations taxed at less than U.S. rate		(9	)%		(2	)%		(9	)%
Legal settlement, non-deductible portion		—			2	%		—
Other, net		—			(1	)%		1	%
		28	%		36	%		29	%

Incentive Tax Grant

The approximate dollar and per share effects of the Malaysian and Puerto Rican tax grants are as follows:

	2012		2011(A)		2010
(dollars in millions, except per share amounts)
Tax benefit	$	53.3	$	3.7	$	44.6
Per share benefit	$	0.62	$	0.04	$	0.47

(A) No tax benefit was recognized from the incentive tax grant in Puerto Rico due to the charge for Hernia Product Claims.

Reconciliation of Gross Amount of Unrecognized Tax Benefits

A reconciliation of the gross amounts of unrecognized tax benefits, excluding interest and penalties, is as follows:

	2012			2011
(dollars in millions)
Balance, January 1	$	45.0		$	53.6
Additions related to prior year tax positions		1.7			4.5
Reductions related to prior year tax positions		(5.3	)		(9.0	)
Additions for tax positions of the current year		7.2			8.1
Settlements		(2.8	)		(11.3	)
Lapse of statutes of limitation		(2.4	)		(0.9	)
Balance, December 31	$	43.4		$	45.0

Summary of Tax Years Subject To Examination in Major Tax Jurisdictions

As of December 31, 2012, a summary of the tax years that remain subject to examination in the company’s major tax jurisdictions are:

United States – federal	2008 and forward
United States – states	2003 and forward
Germany	2010 and forward
Malaysia	2007 and forward
Puerto Rico	2008 and forward
United Kingdom	2010 and forward