Income Taxes

The components of income before income taxes consist of the following for the years ended December 31:



	2013		2012		2011
United States operations	$	365	$	386	$	438
International operations	292		269		202
Total income before taxes	$	657	$	655	$	640

The provision for income taxes consists of the following for the years ended December 31:



	2013			2012		2011
Current:
Federal	$	118		$	108	$	136
State and local	12			13		8
International	40			40		38
Total current	170			161		182
Deferred:
Federal	(5		)	15		(6		)
State and local	(3		)	3		(3		)
International	4			16		10
Total deferred	(4		)	34		1
Provision for income taxes	$	166		$	195	$	183

The items accounting for the difference between income taxes computed at the U.S. federal statutory rate and the Company's effective tax rate are as follows for the years ended December 31:



	2013		2012		2011
Statutory tax rate	35.0	%	35.0	%	35.0	%
U.S. manufacturing deduction	(1.1	)	(1.2	)	(2.0	)
State and local income taxes, net of federal benefit	1.0		1.7		0.8
Research and development credits	(0.6	)	—		(0.6	)
International tax rates	(6.8	)	(5.2	)	(3.5	)
Tax audits and unrecognized tax positions	0.6		(0.2	)	(0.8	)
Tax rate and law changes	(1.4	)	(0.2	)	—
Other, net	(1.4	)	(0.1	)	(0.3	)
Total effective tax rate	25.3	%	29.8	%	28.6	%

The tax audits and unrecognized tax positions provided a net benefit in 2012 and 2011 as a result of statute of limitation expirations of open examination periods by the taxing authorities. The international taxes benefit is primarily the result of certain countries in which the Company operates having lower statutory tax rates than the U.S. statutory tax rate and for 2012 and 2011, the benefits associated with certain international restructurings. The tax rate and law changes benefit in 2013 was primarily the result of changes in the UK statutory tax rate and the retroactive extension of the 2012 U.S. R&D tax credit in 2013.

Undistributed earnings of the Company's international subsidiaries amounted to approximately $1,417 at December 31, 2013. No U.S. income taxes have been provided for these undistributed earnings as the Company intends to indefinitely reinvest these earnings abroad. If the Company were to distribute these earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for international tax credits) and withholding taxes payable to various international jurisdictions. At this time, it is not practicable to determine the amount of deferred income taxes that would be payable on the unremitted international earnings of the Company, assuming such earnings were distributed.

Deferred income tax provisions reflect the effect of temporary differences between consolidated financial statement and tax reporting of income and expense items. The net deferred tax assets/liabilities at December 31, 2013 and 2012 resulted from the following temporary differences:



	2013			2012
Deferred tax assets:
Inventories	$	23		$	27
Net operating loss carryforwards	9			14
Post-retirement benefits and other employee benefits	43			46
Pension benefits	4			20
Other	22			19
Total deferred tax assets	101			126
Valuation allowances	(4		)	(5		)
Net deferred tax assets	97			121
Deferred tax liabilities:
Property, plant and equipment, and intangibles	(131		)	(138		)
Total deferred tax liabilities	(131		)	(138		)
Net deferred tax assets (liabilities)	$	(34	)	$	(17	)

The net operating loss carryforwards relate to domestic and international operations. At December 31, 2013, $9 of these deferred tax assets expire between 2014 and 2033. The Company has provided valuation allowances on these deferred tax assets of approximately $4. Realization of deferred tax assets representing net operating loss carryforwards for which a valuation allowance has not been provided is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards.

Deferred tax assets and liabilities in the preceding table, netted by taxing jurisdiction, are included in the following captions in the Company's consolidated balance sheets at December 31:



	2013			2012
Deferred tax assets	$	31		$	32
Other assets	11			17
Other accrued expenses	(2		)	(2		)
Deferred tax liabilities	(74		)	(64		)
Net deferred tax assets (liabilities)	$	(34	)	$	(17	)

Uncertain Tax Positions. The Company and its subsidiaries file income tax returns for U.S. federal and various state, local and international taxes, as applicable. The Company is no longer subject to, with limited exceptions, U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to 2005.

The following table sets forth changes in the total gross unrecognized tax benefits, excluding interest and penalties, for the years ended December 31:



	2013			2012			2011
Balance, beginning of year	$	33		$	33		$	21
Tax positions related to current year:
Additions	7			4			6
Reductions	—			—			—
Tax positions related to prior years:
Additions	2			1			18
Reductions	(1		)	(1		)	(3		)
Settlements	—			—			—
Statutes of limitation expirations	(4		)	(4		)	(9		)
Balance, end of year	$	37		$	33		$	33

At December 31, 2013, 2012 and 2011, respectively, there are $24, $20 and $21 of net unrecognized tax benefits that, if recognized, would affect the annual effective tax rate.

The Company believes it is reasonably possible that the unrecognized tax benefits at December 31, 2013 may decrease by approximately $2 due to audit activity and statute of limitation expirations in several jurisdictions within 12 months of December 31, 2013.

The Company accrues interest, net of tax and penalties, related to unrecognized tax benefits as components of its income tax provision. The Company recognized no expense in 2013 and approximately $1 of expense and $2 of benefit in 2012 and 2011, respectively, related to interest and penalties. The Company accrued approximately $3 for payment of interest, net of tax and penalties, as of December 31, 2013 and 2012.