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Income Taxes | 12 Months Ended
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Dec. 31, 2014
Income Tax Disclosure [Abstract] |
Income Taxes | Note 16 Income Taxes The components of earnings (loss) from continuing operations before income tax provision, as retrospectively changed to account for our change from LIFO to FIFO, were as follows:
|  | Year Ended December 31, |
(In millions) |  | 2014 |  |  | 2013 |  |  | 2012 |
Domestic |  | $ | (62.2 | ) |  | $ | (92.6 | ) |  | $ | (1,450.8 | )
Foreign |  |  | 329.4 |  |  |  | 272.8 |  |  |  | (433.6 | )
Total |  | $ | 267.2 |  |  | $ | 180.2 |  |  | $ | (1,884.4 | )
The components of our income tax provision (benefit), as retrospectively changed to account for our change from LIFO to FIFO, were as follows:
|  | Year Ended December 31, |
(In millions) |  | 2014 |  |  | 2013 |  |  | 2012 |
Current tax expense: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (216.0 | ) |  | $ | (4.3 | ) |  | $ | (8.6 | )
State and local |  |  | 0.2 |  |  |  | (3.9 | ) |  |  | (6.5 | )
Foreign |  |  | 88.8 |  |  |  | 85.2 |  |  |  | 69.0 |
Total current |  |  | (127.0 | ) |  |  | 77.0 |  |  |  | 53.9 |
Deferred tax expense (benefit) : |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 176.8 |  |  |  | 4.2 |  |  |  | (231.8 | )
State and local |  |  | (27.2 | ) |  |  | 10.4 |  |  |  | (24.9 | )
Foreign |  |  | (13.5 | ) |  |  | (6.7 | ) |  |  | (62.6 | )
Total deferred tax benefit |  |  | 136.1 |  |  |  | 7.9 |  |  |  | (319.3 | )
Total provision (benefit) |  | $ | 9.1 |  |  | $ | 84.9 |  |  | $ | (265.4 | )
Deferred tax assets (liabilities) consist of the following:
|  | Year Ended |  |  | Year Ended |
(In millions) |  | 2014 |  |  | 2013 |
Settlement agreement and related accrued interest(1) |  | $ | — |  |  | $ | 460.7 |
Restructuring reserves |  |  | 4.7 |  |  |  | 3.1 |
Accruals not yet deductible for tax purposes |  |  | 56.5 |  |  |  | 68.3 |
Net operating loss carry forwards |  |  | 291.1 |  |  |  | 127.0 |
Foreign, federal and state credits and investment tax allowances |  |  | 109.3 |  |  |  | 32.7 |
Employee benefit items |  |  | 163.8 |  |  |  | 130.6 |
Other |  |  | 44.1 |  |  |  | 20.2 |
Gross deferred tax assets |  |  | 669.5 |  |  |  | 842.6 |
Valuation allowance |  |  | (227.8 | ) |  |  | (240.0 | )
Total deferred tax assets |  |  | 441.7 |  |  |  | 602.6 |
Depreciation and amortization |  |  | (40.0 | ) |  |  | (51.8 | )
Unremitted foreign earnings |  |  | (130.0 | ) |  |  | (135.2 | )
Intangibles |  |  | (214.2 | ) |  |  | (256.0 | )
Other |  |  | (12.3 | ) |  |  | (21.5 | )
Total deferred tax liabilities |  |  | (396.5 | ) |  |  | (464.5 | )
Net deferred tax assets |  | $ | 45.2 |  |  | $ | 138.1 |
(1) | The 2013 deferred tax asset reflects the cash portion of the Settlement agreement and related accrued interest and the fair market value of 18 million shares of our common stock at a post-split price of $17.86 per share based on the price when the Settlement agreement was reached in 2002. See Note 17, “Commitments and Contingencies,” for further discussion.
In assessing the need for a valuation allowance, we estimate future taxable earnings, with consideration for the feasibility of ongoing planning strategies and the realizability of tax benefit carry forwards and past operating results, to determine which deferred tax assets are more likely than not to be realized in the future. Changes to tax laws, statutory tax rates and future taxable earnings can have an impact on valuation allowances related to deferred tax assets. The decrease in net deferred tax assets is attributable to our funding of the Settlement agreement in 2014. $209 million previously included in this category was characterized as a tax receivable. The balance is now included as part of our net operating loss carry forwards and our foreign, federal and state credits. We have concluded that it is more likely than not that we will realize the $442 million balance of deferred tax assets at December 31, 2014, net of the valuation allowance of $228 million. The valuation allowance primarily relates to the uncertainty of utilizing the following deferred tax assets: $768 million of U.S. federal and foreign net operating loss carry forwards, or $242 million on a tax-effected basis, $95 million of foreign and federal tax credits and investment allowances, $1.6 billion of state net operating loss carry forwards, or $81 million on a tax-effected basis, and $21 million of state tax credits, or $14 million net of federal tax benefits. For the year ended December 31, 2014, the valuation allowance decreased by $12 million, primarily as a result of funding the Settlement agreement. For the year ended December 31, 2013, the valuation allowance increased by $40 million, due to an increase in our valuation allowance with respect to the deferred tax asset for the Settlement agreement, partially offset by a reduced valuation allowance related to the use of foreign tax credits and state net operating losses. As of December 31, 2014, we have U.S. federal and foreign net operating loss carry forwards totaling $768 million that expire during the following calendar years (in millions): 2015 — $5; 2016 — $4; 2017 — $7; 2018 — $20; 2019 — $9; 2020 and beyond — $451; and no expiration — $272. The state net operating loss carryforwards totaling $1.6 billion (a deferred tax asset of $81 million) expire in various amounts over one to 20 years. As of December 31, 2014, we have foreign and federal foreign tax credit carry forwards and investment allowances totaling $95 million that expire during the following calendar years (in millions): 2015 — $1; 2016 — $25; 2017 — $12; 2018 — $12; 2019 — $14; 2020 and beyond — $22; and no expiration — $9. The state tax credit carry forwards, totaling $21 million, expire in various amounts over one to 20 years. Our $130 million deferred tax liability for unremitted foreign earnings relates to approximately $1 billion of our foreign subsidiaries’ accumulated earnings that we believe are not reinvested indefinitely in our business. It is not practicable to estimate the amount of tax that might be payable on the portion of those accumulated earnings that we believe are reinvested indefinitely. Net deferred income taxes (credited) charged to stockholders’ equity were $30 million in 2014, $(7) million in 2013 and $(25) million in 2012. During the fourth quarter of 2014, we changed the method of valuing our inventories that used the LIFO method to the FIFO method, so that all of our inventories are now valued at FIFO. The $25 million adjustment to the retained earnings balance as of January 1, 2012 was net of a $16 million tax provision. Refer to Note 2, “Summary of Significant Accounting Policies – Inventories” for a discussion of this change in accounting policy. The U.S. federal statutory corporate tax rate reconciles to our effective income tax rate, as retrospectively changed to account for our change from LIFO to FIFO, as follows:
|  | Year Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Statutory U.S. federal tax rate |  |  | 35 | % |  |  | 35 | % |  |  | 35 | %
State income taxes, net of federal tax benefit |  |  | (2.1 | ) |  |  | (1.2 | ) |  |  | 0.5 |
Foreign earnings taxed at lower effective rates |  |  | (15.1 | ) |  |  | (8.8 | ) |  |  | (0.2 | )
U.S. tax on foreign earnings |  |  | 3.9 |  |  |  | 4.7 |  |  |  | (0.6 | )
Impairment |  |  | — |  |  |  | — |  |  |  | (20.0 | )
Reorganization tax benefit |  |  | (0.9 | ) |  |  | (6.7 | ) |  |  | — |
Net change in valuation allowance |  |  | (5.0 | ) |  |  | 22.4 |  |  |  | (2.2 | )
Net change in unrecognized tax benefits |  |  | (8.7 | ) |  |  | 2.0 |  |  |  | 1.9 |
Other |  |  | (3.7 | ) |  |  | (0.3 | ) |  |  | (0.3 | )
Effective income tax rate |  |  | 3.4 | % |  |  | 47.1 | % |  |  | 14.1 | %
Unrecognized Tax Benefits We are providing the following disclosures related to our unrecognized tax benefits and the effect on our effective income tax rate if recognized (in millions):
Unrecognized tax benefits at December 31, 2013 |  | $ | 221.9 |
Additions for tax positions of current year |  |  | 5.2 |
Additions for tax positions of prior years |  |  | 7.7 |
Reductions for tax positions of prior years |  |  | (45.9 | )
Unrecognized tax benefits at December 31, 2014 |  | $ | 188.9 |
In 2014, we reduced our unrecognized tax benefit by $33 million, primarily due to a release of reserves in connection with funding the Settlement agreement, an amnesty program available in a foreign jurisdiction and approximately $6 million of payments made in connection with that program. If the unrecognized tax benefits at December 31, 2014 were recognized, our income tax provision would decrease by $156 million, resulting in a substantially lower effective tax rate. It is reasonably possible that within the next 12 months our unrecognized tax benefit position will decrease by approximately $107 million. We recognize interest and penalties related to unrecognized tax benefits in income tax provision on the consolidated statements of operations. We had a liability of approximately $27 million (of which $12 million represents penalties) at January 1, 2014 and a liability of $29 million (of which $11 million represents penalties) at December 31, 2014 for the payment of interest and penalties (before any tax benefit). In 2014, interest and penalties of $4 million were reversed in connection with the related tax accruals for uncertainties in prior years. Income Tax Returns The Internal Revenue Service (the “Service”) has concluded its examination of the legacy Sealed Air U.S. federal income tax returns for all years through 2008, except 2007 remains open to the extent of a capital loss carryback. Examination of legacy Diversey U.S. federal income tax returns has also been substantially completed through 2010, but the Service could challenge the Diversey U.S. income tax losses carried forward to subsequent periods. The Service is currently auditing the 2007 and 2010 consolidated U.S. federal income tax returns of legacy Sealed Air. State income tax returns are generally subject to examination for a period of three to five years after their filing date. We have various state income tax returns in the process of examination. Income tax returns in foreign jurisdictions have statutes of limitations generally ranging from three to five years after their filing date and except where still under examination or where we are litigating, we have generally concluded all other income tax matters globally for years through 2007. Our foreign income tax returns are under examination in various jurisdictions in which we conduct business and we are litigating certain issues in several jurisdictions.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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