Black & Decker 2015 Annual Report Download - page 110

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The reconciliation of the U.S. federal statutory income tax provision to the income taxes provision on continuing operations is
as follows:
(Millions of Dollars) 2015 2014 2013
Tax at statutory rate................................................................................ $ 402.9 $ 379.7 $ 205.8
State income taxes, net of federal benefits............................................. 14.9 24.3 (6.6)
Difference between foreign and federal income tax.............................. (166.9)(178.0)(124.9)
Tax accrual reserve ................................................................................ 43.9 1.1 15.3
Audit settlements ................................................................................... 1.3 (5.3) 0.9
NOL/capital loss & valuation allowance related items.......................... (21.6)2.7 6.8
Foreign dividends and related items ...................................................... 19.1 25.6 (9.5)
Change in deferred tax liabilities on undistributed foreign earnings..... (31.0)(6.0)(19.5)
Statutory income tax rate change........................................................... 4.8 (0.6)(1.7)
Other-net ................................................................................................ (18.8)(16.4) 2.0
Income taxes on continuing operations.................................................. $ 248.6 $ 227.1 $ 68.6
The components of earnings from continuing operations before income taxes consisted of the following:
(Millions of Dollars) 2015 2014 2013
United States.......................................................................................... $ 405.5 $ 234.4 $ 112.7
Foreign................................................................................................... 745.3 850.4 474.9
Earnings from continuing operations before income taxes.................... $ 1,150.8 $ 1,084.8 $ 587.6
Except for certain legacy Black & Decker foreign earnings, as described below, all remaining undistributed foreign earnings of
the Company at January 2, 2016, in the amount of approximately $4.391 billion, are considered to be invested indefinitely or
will be remitted substantially free of additional tax. Accordingly, no provision has been made for tax that might be payable
upon remittance of such earnings, nor is it practicable to determine the amount of this liability. As of January 2, 2016, the
amount of earnings subject to repatriation is $1.312 billion for which a deferred tax liability of $319.9 million exists.
The Company’s liabilities for unrecognized tax benefits relate to U.S. and various foreign jurisdictions. The following table
summarizes the activity related to the unrecognized tax benefits:
(Millions of Dollars) 2015 2014 2013
Balance at beginning of year................................................................... $ 280.8 $ 269.5 $ 207.2
Additions based on tax positions related to current year ........................ 23.2 27.4 37.1
Additions based on tax positions related to prior years .......................... 24.3 40.1 46.9
Reductions based on tax positions related to prior years........................ (14.3)(30.9)(13.2)
Settlements.............................................................................................. (21.5)(5.9) 7.7
Statute of limitations expirations ............................................................ (9.4)(19.4)(16.2)
Balance at end of year............................................................................. $ 283.1 $ 280.8 $ 269.5
The gross unrecognized tax benefits at January 2, 2016 and January 3, 2015 includes $262.2 million and $261.0 million,
respectively, of tax benefits that, if recognized, would impact the effective tax rate. The liability for potential penalties and
interest related to unrecognized tax benefits was decreased by $0.1 million in 2015, increased by $22.0 million in 2014 and
increased by $4.1 million in 2013. The liability for potential penalties and interest totaled $59.5 million as of January 2, 2016,
$59.6 million as of January 3, 2015, and $37.6 million as of December 28, 2013. The Company classifies all tax-related interest
and penalties as income tax expense.
The Company considers many factors when evaluating and estimating its tax positions and the impact on income tax expense,
which may require periodic adjustments and which may not accurately anticipate actual outcomes. It is reasonably possible that
the amount of the unrecognized benefit with respect to certain of the Company's unrecognized tax positions will significantly
increase or decrease within the next 12 months. These changes may be the result of settlement of ongoing audits or final
decisions in transfer pricing matters. At this time, an estimate of the range of reasonably possible outcomes is $5 million to $10
million.