Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

Components of Income Before Income Taxes

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

	2014		2013			2012
(dollars in millions)
United States	$	344.3	$	1,291.8		$	435.1
Foreign		101.5		(78.4	)		297.3
	$	445.8	$	1,213.4		$	732.4

Income Tax Provision

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

	2014			2013			2012
(dollars in millions)
Current provision
Federal	$	130.1		$	468.5		$	115.0
Foreign		32.3			37.2			40.0
State		15.8			57.6			15.6
		178.2			563.3			170.6
Deferred (benefit) provision
Federal		(17.8	)		(29.9	)		34.2
Foreign		(3.9	)		(3.8	)		(4.2	)
State		(5.2	)		(6.0	)		1.7
		(26.9	)		(39.7	)		31.7
	$	151.3		$	523.6		$	202.3

Deferred Tax Assets and Deferred Tax Liabilities

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

	2014			2013
(dollars in millions)
Deferred tax assets
Employee benefits	$	153.6		$	143.6
Inventory		9.9			4.5
Receivables and rebates		30.0			26.8
Accrued expenses		232.0			119.6
Loss carryforwards and credits		76.5			100.3
Other		—			0.7
Gross deferred tax assets		502.0			395.5
Valuation allowance		(43.9	)		(35.1	)
		458.1			360.4
Deferred tax liabilities
Intangibles		334.5			362.7
Accelerated depreciation		21.1			17.7
Receivables and other		143.6			59.8
		499.2			440.2
	$	(41.1	)	$	(79.8	)

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:

	2014			2013			2012
Federal statutory rate		35	%		35	%		35	%
State taxes, net of federal benefit		2	%		4	%		2	%
Operations taxed at less than U.S. rate		(2	)%(A)		5	%(A)		(9	)%
Other, net		(1	)%		(1	)%		—
		34	%		43	%		28	%

^(A)  Reflects tax effects of litigation charges, net, which consist primarily of product liability claims incurred in a low tax jurisdiction.

Incentive Tax Grant

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

	2014(A)		2013(A)		2012
(dollars in millions, except per share amounts)
Tax benefit	$	7.0	$	5.2	$	53.3
Per share benefit	$	0.09	$	0.06	$	0.62

^(A)  Litigation charges, net reduced the tax benefit recognized from the incentive tax grant in Puerto Rico.

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:

	2014			2013
(dollars in millions)
Balance, January 1	$	58.0		$	43.4
Additions related to prior year tax positions		7.7			8.5
Reductions related to prior year tax positions		(13.9	)		—
Additions for tax positions of the current year		5.1			12.2
Settlements		(18.1	)		(2.4	)
Lapse of statutes of limitation		(2.7	)		(3.7	)
Balance, December 31	$	36.1		$	58.0

Summary of Tax Years Subject To Examination in Major Tax Jurisdictions

As of December 31, 2014, a summary of the tax years that remain subject to examination in the company’s major tax jurisdictions are:

United States – federal	2011 and forward
United States – states	2008 and forward
Germany	2010 and forward
Malaysia	2008 and forward
Puerto Rico	2010 and forward
United Kingdom	2013 and forward