Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Components of Income Before Income Taxes

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

	2016		2015			2014
(dollars in millions)
United States	$	268.1	$	550.3		$	344.3
Foreign		395.6		(200.9	)		101.5
	$	663.7	$	349.4		$	445.8

Income Tax Provision

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

	2016			2015			2014
(dollars in millions)
Current provision
Federal	$	132.3		$	196.8		$	130.1
Foreign		44.5			40.8			32.3
State		20.9			21.5			15.8
		197.7			259.1			178.2
Deferred (benefit) provision
Federal		(62.1	)		(18.3	)		(17.8	)
Foreign		4.4			(26.5	)		(3.9	)
State		(7.7	)		(0.3	)		(5.2	)
		(65.4	)		(45.1	)		(26.9	)
	$	132.3		$	214.0		$	151.3

Deferred Tax Assets and Deferred Tax Liabilities

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

	2016			2015
(dollars in millions)
Deferred tax assets
Employee benefits	$	184.2		$	180.1
Inventory		12.4			12.2
Receivables and rebates		31.7			29.6
Accrued expenses		259.8			165.2
Loss carryforwards and credits		77.7			81.4
Other		2.5			—
Gross deferred tax assets		568.3			468.5
Valuation allowance		(53.3	)		(51.1	)
		515.0			417.4
Deferred tax liabilities
Intangibles		346.2			338.8
Accelerated depreciation		16.9			16.3
Receivables and other		106.4			59.0
		469.5			414.1
	$	45.5		$	3.3

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:

	2016			2015			2014
Federal statutory rate		35	%		35	%		35	%
State taxes, net of federal benefit		1	%		4	%		2	%
Operations taxed at other than U.S. rate		(13	)%		24	%(A)		(2	)%(A)
Research and development tax credit		(1	)%		(2	)%		(1	)%
Other		(2	)%		—			—
		20	%		61	%		34	%

^(A) Includes the tax effects of litigation charges, net, which consist primarily of product liability claims allocated to a low tax jurisdiction.

Incentive Tax Grant

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

	2016		2015(A)		2014(A)
(dollars in millions, except per share amounts)
Tax benefit	$	92.2	$	2.3	$	7.0
Per share benefit	$	1.23	$	0.03	$	0.09

^(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:

	2016			2015
(dollars in millions)
Balance, January 1	$	22.3		$	36.1
Additions related to prior year tax positions		0.7			2.9
Reductions related to prior year tax positions		(2.7	)		(4.8	)
Additions for tax positions of the current year		3.4			2.1
Settlements		(1.1	)		(12.4	)
Lapse of statutes of limitation		(1.1	)		(1.6	)
Balance, December 31	$	21.5		$	22.3

Summary of Tax Years Subject to Examination in Major Tax Jurisdictions

As of December 31, 2016, a summary of the tax years that remain subject to examination in the company’s major tax jurisdictions are:

United States – federal	2014 and forward
United States – states	2008 and forward
China	2008 and forward
Germany	2010 and forward
Japan	2012 and forward
Malaysia	2010 and forward
Puerto Rico	2012 and forward
United Kingdom	2015 and forward