Income Tax (Tables)

12 Months Ended

Dec. 31, 2014

Pretax income for computation of income tax provision

Our income (loss) from continuing operations before income taxes on which the provision for income taxes was computed is as follows:



	For the years ended
	December 31, 2014			December 31, 2013			December 29, 2012
	(In millions)
Domestic	$	736.2		$	809.7		$	712.8
Foreign	(149.9		)	(155.2		)	(120.7		)
Total	$	586.3		$	654.5		$	592.1

Current and deferred provisions of income tax expense (benefits)

Income tax expense (benefit) includes the following current and deferred provisions:



	For the years ended
	December 31, 2014			December 31, 2013			December 29, 2012
	(In millions)
Current:
Federal	$	78.4		$	39.1		$	45.5
State	12.9			11.8			8.3
Foreign	(22.5		)	50.7			28.2
Total current tax expense (benefit)	$	68.8		$	101.6		$	82.0
Deferred:
Federal	$	27.6		$	59.6		$	47.9
State	2.0			5.1			6.3
Foreign	(29.4		)	(82.3		)	18.3
Total deferred tax expense (benefit)	$	0.2		$	(17.6	)	$	72.5
Total income tax expense (benefit) from continuing operations	$	69.0		$	84.0		$	154.5

Computation of effective income tax rate

Our effective tax rate varies from the U.S. federal statutory income tax rate as follows:



	For the years ended
	December 31, 2014		December 31, 2013		December 29, 2012
Statutory Federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefits	2.5	%	1.3	%	1.4	%
Effect of foreign tax rates	(24.3	)%	(27.4	)%	(24.5	)%
Effect of foreign tax law and rate changes	—	%	0.5	%	6.8	%
Effect of unrecognized tax benefits	(3.9	)%	3.3	%	(0.7	)%
Change in valuation allowance	0.4	%	(1.5	)%	6.0	%
Other, net	2.1	%	1.6	%	2.1	%
Effective tax rate	11.8	%	12.8	%	26.1	%

Our effective tax rates were significantly lower than the federal statutory rate of 35% primarily due to the impact of lower effective income tax rates applicable to our foreign businesses, driven by lower local statutory income tax rates and tax planning. The statutory tax rates in the countries in Europe which we operate range from 9% in Montenegro to 21% in the U.K. Canada has a statutory tax rate of approximately 26%. In addition to these lower effective foreign tax rates, during 2014, our effective tax rate was also favorably impacted by the favorable resolution of unrecognized tax benefits primarily in Europe. Specifically, the reduction in unrecognized tax benefits impacting income tax expense was primarily driven by the favorable resolution of tax audits resolved in Europe during the first quarter of 2014 of $18.5 million and the expiration of certain statutes of limitations during the third quarter of 2014 as further discussed below. The changes to our unrecognized tax benefits, further discussed below, and the above-mentioned APA settlement drove the slight improvement to our effective tax rate in 2014.

Separately, the change in our effective tax rate from 2012 to 2013 was driven by the increase in the statutory income tax rate in Serbia and increased valuation allowance on our deferred positions. Specifically, the 2012 foreign tax law and rate change impact, primarily relates to the increased statutory corporate income tax rate in Serbia from 10% to 15%, effective January 1, 2013 (enacted in 2012). As a result of the impact of the rate change on differences between the book basis and tax basis of intangible and other assets purchased in the Acquisition, we increased our deferred tax liability by $38.3 million in the fourth quarter of 2012. We also recorded additional tax expense in 2012 due to increases in our valuation allowance related to capital loss carryforwards and operating losses in several of our jurisdictions.

Composition of deferred tax assets and liabilities

The table below summarizes our deferred tax assets and liabilities:



	As of
	December 31, 2014			December 31, 2013
	(In millions)
Current deferred tax assets:
Compensation related obligations	$	2.8		$	1.2
Foreign exchange gain/loss	—			29.3
Accrued liabilities and other	15.8			49.4
Valuation allowance	(4.9		)	(3.0		)
Balance sheet reserves and accruals	10.7			2.4
Other	7.8			—
Total current deferred tax assets	$	32.2		$	79.3
Current deferred tax liabilities:
Partnership investments	169.8			160.9
Other	—			6.1
Total current deferred tax liabilities	$	169.8		$	167.0
Net current deferred tax assets	—			—
Net current deferred tax liabilities	$	137.6		$	87.7



	As of
	December 31, 2014			December 31, 2013
	(In millions)
Non-current deferred tax assets:
Compensation related obligations	$	8.0		$	8.7
Pension and postretirement benefits	118.7			94.8
Foreign exchange gain/loss	—			14.8
Tax credit carryforwards	1.5			1.7
Tax loss carryforwards⁽¹⁾	166.8			164.0
Intercompany financing	6.8			8.4
Partnership investments	27.2			11.8
Accrued liabilities and other	1.0			5.5
Other	10.4			16.6
Valuation allowance⁽¹⁾	(100.5		)	(104.0		)
Total non-current deferred tax assets	$	239.9		$	222.3
Non-current deferred tax liabilities:
Fixed assets	107.3			120.5
Partnership investments	—			22.1
Foreign exchange gain/loss	13.7			—
Intangible assets	789.1			939.5
Hedging	12.5			7.2
Other	5.5			6.1
Total non-current deferred tax liabilities	$	928.1		$	1,095.4
Net non-current deferred tax assets	—			—
Net non-current deferred tax liabilities	$	688.2		$	873.1

(1)

We have revised our reported beginning and ending 2013 amounts to reflect the inclusion of tax loss carryforwards of $9.3 million that have a corresponding $9.3 million valuation allowance in China. For local tax purposes, these China net operating losses can be carried forward five years. For U.S. GAAP purposes, these net operating losses have been fully valued as they would not be realizable before they expire. In our 2013 presentation, a net zero deferred tax asset for these loss carryforwards was reflected in the table presentation.

The decrease in current deferred tax assets is primarily driven by the settlement of our outstanding cross currency swaps. In January 2014, we early settled the final remaining outstanding currency swaps, resulting in the realization of the related domestic deferred tax asset at the settled upon amount. See Note 17, "Derivative Instruments and Hedging Activities" for further discussion. The decrease in non-current deferred tax liabilities in 2014 was primarily driven by the intangible asset impairments in Serbia and Croatia, as well as the impact of foreign exchange rate fluctuations on our deferred tax balances.

We have deferred tax assets for U.S. tax carryforwards that expire between 2015 and 2031 of $8.6 million and $8.6 million at December 31, 2014, and December 31, 2013, respectively. We have foreign tax carryforwards that expire between 2015 and 2034 of $142.1 million and $134.9 million as of December 31, 2014, and December 31, 2013, respectively. We have foreign tax carryforwards that do not expire of $17.6 million and $22.2 million as of December 31, 2014, and December 31, 2013, respectively. The measurement of deferred tax assets is reduced by a valuation allowance if, based upon available evidence, it is more likely than not that the deferred tax assets will not be realized. We have evaluated the realizability of our deferred tax assets in each jurisdiction by assessing the adequacy of expected taxable income, including the reversal of existing temporary differences, historical and projected operating results and the availability of prudent and feasible tax planning strategies. Based on this analysis, we have determined that the valuation allowances recorded in each period presented are appropriate.

The following table presents our deferred tax assets and liabilities on a net basis:



	As of
	December 31, 2014		December 31, 2013
	(In millions)
Domestic net current deferred tax liabilities	$	164.6	$	138.1
Foreign net current deferred tax liabilities	0.2		—
Foreign net current deferred tax assets	27.2		50.4
Net current deferred tax liabilities	$	137.6	$	87.7
Domestic net non-current deferred tax assets	$	23.1	$	22.2
Foreign net non-current deferred tax assets	35.1		16.1
Foreign net non-current deferred tax liabilities	746.4		911.4
Net non-current deferred tax liabilities	$	688.2	$	873.1

Schedule of Unrecognized Tax Benefits Roll Forward

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows:



	For the years ended
	December 31, 2014			December 31, 2013			December 29, 2012
	(In millions)
Balance at beginning of year	$	137.9		$	109.2		$	104.4
Additions for tax positions related to the current year	2.2			3.7			9.9
Additions for tax positions of prior years	20.4			59.2			8.6
Reductions for tax positions of prior years	(19.4		)	(3.2		)	(0.1		)
Settlements	(55.4		)	(2.6		)	(0.9		)
Release due to statute expiration and legislative changes	(18.4		)	(24.9		)	(14.4		)
Foreign currency adjustment	(7.5		)	(3.5		)	1.7
Balance at end of year	$	59.8		$	137.9		$	109.2

Summary of Positions for which Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Table Text Block]



	For the years ended
	December 31, 2014			December 31, 2013			December 29, 2012
Reconciliation of unrecognized tax benefits balance	(In millions)
Estimated interest and penalties	$	7.2		$	15.5		$	8.5
Offsetting positions	(3.7		)	(3.8		)	(1.9		)
Unrecognized tax positions	59.8			137.9			109.2
Total unrecognized tax benefits	$	63.3		$	149.6		$	115.8

Presented net against non-current deferred tax assets	$	37.9		$	—		$	—
Current (included in accounts payable and other current liabilities)	—			42.5			0.3
Non-current	25.4			107.1			115.5
Total unrecognized tax benefits	$	63.3		$	149.6		$	115.8

Amount of unrecognized tax benefits that would impact the effective tax rate	$	59.8		$	137.9		$	109.2