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Income Taxes | 12 Months Ended
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Sep. 29, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | 10. Income Taxes The following table presents the components of our consolidated income tax expense for years ended September 29, 2017, September 30, 2016 and October 2, 2015 (in thousands):
|  | For the Years Ended |
|  | September 29, 2017 |  |  | September 30, 2016 |  |  | October 2, 2015 |
Current income tax expense: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 29,297 |  |  | $ | 36,020 |  |  | $ | 72,840 |
State |  |  | 8,535 |  |  |  | 11,336 |  |  |  | 16,248 |
Foreign |  |  | 31,347 |  |  |  | 52,259 |  |  |  | 43,344 |
Total current tax expense |  |  | 69,179 |  |  |  | 99,615 |  |  |  | 132,432 |
Deferred income tax expense (benefit): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 29,390 |  |  |  | 6,439 |  |  |  | 13,337 |
State |  |  | 3,407 |  |  |  | 485 |  |  |  | 2,295 |
Foreign |  |  | 3,866 |  |  |  | (34,331 | ) |  |  | (46,809 | )
Total deferred tax expense (benefit) |  |  | 36,663 |  |  |  | (27,407 | ) |  |  | (31,177 | )
Consolidated income tax expense |  | $ | 105,842 |  |  | $ | 72,208 |  |  | $ | 101,255 |
Deferred taxes reflect the tax effects of temporary differences between the amounts recorded as assets and liabilities for financial reporting purposes and the comparable amounts recorded for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The following table presents the components of our net deferred tax assets at September 29, 2017 and September 30, 2016 (in thousands):
|  | September 29, 2017 |  |  | September 30, 2016 |
Deferred tax assets: |  |  |  |  |  |  |  |
Obligations relating to: |  |  |  |  |  |  |  |
Defined benefit pension plans |  | $ | 52,299 |  |  | $ | 77,834 |
Other employee benefit plans |  |  | 192,299 |  |  |  | 179,063 |
Net Operating Losses |  |  | 136,783 |  |  |  | 139,125 |
Self-insurance programs |  |  | 489 |  |  |  | 1,722 |
Contract revenues and costs |  |  | (18,374 | ) |  |  | (8,177 | )
Deferred Rent |  |  | 25,654 |  |  |  | 7,955 |
Restructuring |  |  | 18,258 |  |  |  | 47,792 |
Other |  |  | 19,389 |  |  |  | 9,933 |
Valuation Allowance |  |  | (58,097 | ) |  |  | (41,684 | )
Gross deferred tax assets |  |  | 368,700 |  |  |  | 413,563 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | (176,327 | ) |  |  | (154,939 | )
Other, net |  |  | (1,438 | ) |  |  | (1,555 | )
Gross deferred tax liabilities |  |  | (177,765 | ) |  |  | (156,494 | )
Net deferred tax assets |  | $ | 190,935 |  |  | $ | 257,069 |
A valuation allowance is recorded to reduce deferred tax assets to the amount that is more likely than not to be realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible amounts. The valuation allowance at September 29, 2017 and September 30, 2016 was $58.1 million and $41.7 million, respectively. Net operating loss carry forwards of foreign subsidiaries at September 29, 2017 and September 30, 2016 totaled $490.9 million and $483.4 million, respectively. If unused, foreign net operating losses of $117.1 million will expire between 2018 and 2037. Net operating losses of $373.8 million can be carried forward indefinitely. The following table presents the income tax benefits realized from the exercise of nonqualified stock options and disqualifying dispositions of stock sold under our employee stock purchase plans for the years ended September 29, 2017, September 30, 2016 and October 2, 2015 (in millions):
For the Years Ended |
September 29, 2017 |  |  | September 30, 2016 |  |  | October 2, 2015 |
$ | 5.20 |  |  | $ | 1.50 |  |  | $ | 0.20 |
The Company’s consolidated effective income tax rate is generally lower than the US statutory rate of 35% primarily due to the impacts of favorable tax rate differences in our foreign operations. The following table reconciles total income tax expense using the statutory U.S. federal income tax rate to the consolidated income tax expense shown in the accompanying Consolidated Statements of Earnings for the years ended September 29, 2017, September 30, 2016 and October 2, 2015 (dollars in thousands):
| For the Years Ended |
|  | September 29, 2017 |  | % |  | September 30, 2016 |  | % |  | October 2, 2015 |  | %
Statutory amount |  | $ | 137,626 |  | 35.0% |  | $ | 100,353 |  | 35.0% |  | $ | 150,548 |  | 35.0%
State taxes, net of the federal benefit |  |  | 8,955 |  | 2.3% |  |  | 7,853 |  | 2.7% |  |  | 12,857 |  | 3.0%
Exclusion of tax on non-controlling interests |  |  | 2,223 |  | 0.6% |  |  | (1,418 | ) | (0.5% | ) |  | (9,069 | ) | (2.1%)
Foreign: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Difference in tax rates of foreign operations |  |  | (16,987 | ) | (4.3% | ) |  | (17,184 | ) | (6.0% | ) |  | (19,180 | ) | (4.5%)
Benefit from foreign valuation allowance release |  |  | (3,085 | ) | (0.8% | ) |  | (11,182 | ) | (3.9% | ) |  | (3,372 | ) | (0.8%)
Tax deductible foreign currency loss |  |  | — |  | 0.0% |  |  | — |  | 0.0% |  |  | (23,100 | ) | (5.4%)
U.K. tax rate change on deferred tax assets |  |  | — |  | 0.0% |  |  | 8,853 |  | 3.1% |  |  | — |  | 0.0%
Nontaxable income from foreign affiliate |  |  | (3,280 | ) | (0.8% | ) |  | — |  | 0.0% |  |  | — |  | 0.0%
U.S. tax cost of foreign operations |  |  | 18,612 |  | 4.7% |  |  | 30,850 |  | 10.9% |  |  | 6,814 |  | 1.6%
Tax differential on foreign earnings |  |  | (4,740 | ) | (1.2% | ) |  | 11,337 |  | 4.1% |  |  | (38,838 | ) | (9.0%)
Foreign tax credits |  |  | (20,454 | ) | (5.2% | ) |  | (44,018 | ) | (15.4% | ) |  | (21,313 | ) | (5.0%)
Uncertain tax positions |  |  | (5,779 | ) | (1.5% | ) |  | 1,449 |  | 0.5% |  |  | 2,281 |  | 0.5%
Other items: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
IRS §179D deduction |  |  | (3,351 | ) | (0.8% | ) |  | (2,153 | ) | (0.8% | ) |  | — |  | 0.0%
IRS §199D deduction |  |  | (2,113 | ) | (0.5% | ) |  | (2,800 | ) | (1.0% | ) |  | (4,582 | ) | (1.1%)
Foreign partnership income/(loss) |  |  | (9,861 | ) | (2.5% | ) |  | (2,658 | ) | (0.9% | ) |  | 11,858 |  | 2.8%
Other items – net |  |  | 3,336 |  | 0.7% |  |  | 4,263 |  | 1.5% |  |  | (2,487 | ) | (0.6%)
Total other items |  |  | (11,989 | ) | (3.1% | ) |  | (3,348 | ) | (1.2% | ) |  | 4,789 |  | 1.1%
Taxes on income |  | $ | 105,842 |  | 26.9% |  | $ | 72,208 |  | 25.2% |  | $ | 101,255 |  | 23.5%
The Company’s consolidated effective income tax rate for the year ended September 29, 2017 increased to 26.9% from 25.2% for fiscal 2016. Key drivers for this year over year increase include the impacts of lower foreign tax credit benefits and lower benefits from valuation allowance releases on foreign deferred tax assets, partly offset by favorable impacts of U.S. tax cost of foreign operations, the non-recurrence of 2016 tax rate change impacts on deferred income tax assets in the UK and favorable impacts from change in uncertain tax positions. The Company’s consolidated effective income tax rate for the year ended September 30, 2016 increased to 25.2% from 23.5% for fiscal 2015. The primary components of this increase in tax rate were due mainly to unfavorable impacts from U.S. tax cost of foreign operations, the non-recurrence of tax deductible foreign currency losses in fiscal 2015, unfavorable impacts from U.K. tax rates changes on deferred tax assets and other unfavorable items. These unfavorable impacts on the tax rate were partly offset by favorable foreign tax credits year over year, favorable income levels from our foreign partnerships in 2016 and comparably higher benefits from foreign valuation allowance releases in fiscal 2016. The following table presents income tax payments made during the years ended September 29, 2017, September 30, 2016 and October 2, 2015 (in millions):
September 29, 2017 |  |  | September 30, 2016 |  |  | October 2, 2015 |
$ | 78.39 |  |  | $ | 116.30 |  |  | $ | 156.50 |
The following table presents the components of our consolidated earnings before taxes for the years ended September 29, 2017, September 30, 2016 and October 2, 2015 (in thousands):
|  | For the Years Ended |
|  | September 29, 2017 |  |  | September 30, 2016 |  |  | October 2, 2015 |
United States earnings |  | $ | 232,342 |  |  | $ | 206,159 |  |  | $ | 283,504 |
Foreign earnings |  |  | 160,875 |  |  |  | 80,564 |  |  |  | 146,633 |
|  | $ | 393,217 |  |  | $ | 286,723 |  |  | $ | 430,137 |
United States income taxes, net of applicable credits, have been provided on the undistributed earnings of the Company’s foreign subsidiaries, except in those instances where the earnings have been permanently reinvested. At September 29, 2017, approximately $26.1 million of such undistributed earnings of certain foreign subsidiaries have been permanently reinvested. Should these earnings be repatriated, approximately $6.0 million of income taxes would be payable. The Company accounts for unrecognized tax benefits in accordance with ASC Topic 740, Income Taxes. It accounts for interest and penalties on unrecognized tax benefits as interest and penalties (i.e., not as part of income tax expense). The Company’s liability for gross unrecognized tax benefits was $38.6 million and $44.2 million at September 29, 2017 and September 30, 2016, respectively, all of which, if recognized, would affect the Company’s consolidated effective income tax rate. The Company had $36.6 million and $36.4 million in accrued interest and penalties at September 29, 2017 and September 30, 2016, respectively. The Company estimates that, within 12 months, $6.5 million of gross, primarily non-U.S. unrecognized tax benefits will reverse due to the anticipated expiration of time to assess tax. As of September 29, 2017, the Company’s U.S. federal income tax returns for tax years 2015 and forward remain subject to examination. The following table presents the reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended September 29, 2017, September 30, 2016 and October 2, 2015 (in thousands):
|  | For the Years Ended |
|  | September 29, 2017 |  |  | September 30, 2016 |  |  | October 2, 2015 |
Balance, beginning of year |  | $ | 44,167 |  |  | $ | 42,666 |  |  | $ | 41,923 |
Additions based on tax positions related to the current year |  |  | 5,900 |  |  |  | 5,670 |  |  |  | 6,440 |
Additions for tax positions of prior years |  |  | 237 |  |  |  | 367 |  |  |  | — |
Reductions for tax positions of prior years |  |  | (4,524 | ) |  |  | (2,451 | ) |  |  | (5,697 | )
Settlement |  |  | (7,200 | ) |  |  | (2,085 | ) |  |  | — |
Balance, end of year |  | $ | 38,580 |  |  | $ | 44,167 |  |  | $ | 42,666 |

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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 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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