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Income Taxes | 12 Months Ended
--- | ---
Sep. 27, 2014
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The Company’s income (loss) before income taxes consisted of the following:
|  | Years ended
September 27, 2014 |  | September 28, 2013 |  | September 29, 2012
Domestic |  | $ | 95.1 |  |  | $ | (1,184.6 | ) |  | $ | (46.0 | )
Foreign |  | (47.0 | ) |  | (8.3 | ) |  | (15.7 | )
|  | $ | 48.1 |  |  | $ | (1,192.9 | ) |  | $ | (61.7 | )
The provision (benefit) for income taxes contains the following components:
|  | Years ended
September 27, 2014 |  | September 28, 2013 |  | September 29, 2012
Federal: |  |  |  |  |  |
Current |  | $ | 242.2 |  |  | $ | 154.9 |  |  | $ | 146.2 |
Deferred |  | (212.5 | ) |  | (182.7 | ) |  | (143.6 | )
|  | 29.7 |  |  | (27.8 | ) |  | 2.6 |
State: |  |  |  |  |  |
Current |  | 22.1 |  |  | 15.3 |  |  | 15.3 |
Deferred |  | (24.7 | ) |  | (16.7 | ) |  | (10.2 | )
|  | (2.6 | ) |  | (1.4 | ) |  | 5.1 |
Foreign: |  |  |  |  |  |
Current |  | 9.6 |  |  | 7.7 |  |  | 5.6 |
Deferred |  | (5.9 | ) |  | 1.4 |  |  | (1.4 | )
|  | 3.7 |  |  | 9.1 |  |  | 4.2 |
|  | $ | 30.8 |  |  | $ | (20.1 | ) |  | $ | 11.9 |
The income tax provision (benefit) differs from the tax provision computed at the U.S. federal statutory rate due to the following:
|  | Years ended
September 27, 2014 |  | September 28, 2013 |  | September 29, 2012
Income tax provision (benefit) at federal statutory rate |  | 35.0 | % |  | (35.0 | )% |  | (35.0 | )%
Increase (decrease) in tax resulting from: |  |  |  |  |  |
Goodwill impairment |  | — |  |  | 32.8 |  |  | 3.3 |
Domestic production activities deduction |  | (30.6 | ) |  | (1.2 | ) |  | (20.3 | )
State income taxes, net of federal benefit |  | 4.3 |  |  | (0.2 | ) |  | 5.3 |
Research and investment tax credits |  | (5.2 | ) |  | (1.2 | ) |  | (1.6 | )
Unrecognized tax benefits |  | 2.5 |  |  | 0.3 |  |  | 13.5 |
Contingent consideration |  | — |  |  | 2.6 |  |  | 59.8 |
Nondeductible transaction expenses |  | — |  |  | — |  |  | 7.5 |
Cessation of Adiana |  | — |  |  | — |  |  | (28.6 | )
Compensation |  | 5.5 |  |  | 0.2 |  |  | 2.3 |
Foreign rate differential |  | 10.7 |  |  | 0.1 |  |  | 3.1 |
Change in valuation allowance |  | 35.4 |  |  | (0.8 | ) |  | 5.4 |
Other |  | 6.3 |  |  | 0.7 |  |  | 4.7 |
|  | 63.9 | % |  | (1.7 | )% |  | 19.4 | %
The Company’s effective tax rate in fiscal 2014 was higher than the statutory rate primarily due to unbenefited foreign losses partially offset by the domestic production activities deduction benefit. The Company’s effective tax rate in fiscal 2013 was lower than the statutory rate primarily due to the non-deductible goodwill impairment charge, non-deductible contingent consideration expense related to the TCT International Co., Ltd. ("TCT") and Interlace acquisitions, and unbenefited foreign losses, partially offset by the domestic production activities deduction benefit and the release of a $19.9 million valuation allowance related to capital losses which were utilized to offset capital gains generated during the year. The Company’s effective tax rate in fiscal 2012 was significantly impacted by non-deductible contingent consideration compensation expense, non-deductible acquisition costs, a non-deductible goodwill impairment charge, and a net increase in income tax reserves and valuation allowances on certain foreign losses. The impact from these items was partially offset by the domestic production activities deduction benefit and a loss claimed on the discontinued Adiana product line. The fiscal 2012 pre-tax loss magnified the permanent items’ impact on the effective tax rate. The Company uses the liability method to account for income taxes in accordance with ASC 740, Income Taxes. Under this method, deferred income taxes are recognized for the future tax consequences of differences between the tax and financial accounting bases of assets and liabilities at each reporting period. Deferred income taxes are based on enacted tax laws and statutory tax rates applicable to the period in which these differences are expected to affect taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized. The Company’s significant deferred tax assets and liabilities are as follows:
|  | September 27, 2014 |  | September 28, 2013
Deferred tax assets |  |  |  |
Net operating loss carryforwards |  | $ | 54.2 |  |  | $ | 49.3 |
Capital losses |  | 22.3 |  |  | 23.8 |
Non-deductible accruals |  | 16.8 |  |  | 21.5 |
Non-deductible reserves |  | 27.1 |  |  | 16.1 |
Stock-based compensation |  | 25.0 |  |  | 30.2 |
Research and other credits |  | 12.3 |  |  | 10.7 |
Nonqualified deferred compensation plan |  | 13.7 |  |  | 14.7 |
Other temporary differences |  | 11.6 |  |  | 7.0 |
|  | 183.0 |  |  | 173.3 |
Less: valuation allowance |  | (62.8 | ) |  | (43.4 | )
|  | $ | 120.2 |  |  | $ | 129.9 |
Deferred tax liabilities |  |  |  |
Depreciation and amortization |  | $ | (1,314.6 | ) |  | $ | (1,494.1 | )
Debt discounts and deferrals |  | (120.9 | ) |  | (189.3 | )
Debt issuance costs |  | (6.8 | ) |  | (10.9 | )
Investment in subsidiary |  | (13.9 | ) |  | (10.7 | )
|  | $ | (1,456.2 | ) |  | $ | (1,705.0 | )
|  | $ | (1,336.0 | ) |  | $ | (1,575.1 | )
Under ASC 740, the Company can only recognize a deferred tax asset for the future benefit to the extent that it is “more likely than not” that these assets will be realized. After considering all available positive and negative evidence, the Company established a valuation allowance against specifically identified deferred tax assets because it is more-likely-than-not that these will not be realized. In determining these assets realizability, the Company considered numerous factors including historical profitability, the character and estimated future taxable income, prudent and feasible tax planning strategies, and the industry in which it operates. The valuation allowance increased $19.4 million in fiscal 2014 from fiscal 2013 primarily due to unbenefited foreign losses and unrealized capital losses on investment write-downs. At September 27, 2014, the Company had $20.7 million, $94.7 million and $63.8 million in gross federal, state, and foreign net operating losses, respectively, and $3.7 million, $11.0 million and $1.8 million in federal, state, and foreign credit carryforwards, respectively. These losses and credits expire between 2015 and 2034, except for $62.0 million in losses and $6.6 million in credits that have unlimited carryforward periods. The federal, state, and foreign net operating losses exclude $4.5 million, $203.3 million and $63.1 million, respectively, of net operating losses, which the Company expects will expire unutilized. The Company had $137.0 million in gross unrecognized tax benefits, excluding interest, at September 27, 2014 and $121.8 million at September 28, 2013. At September 27, 2014, $66.1 million represents the unrecognized tax benefits that, if recognized, would reduce the Company’s effective tax rate. In the next twelve months it is reasonably possible that the Company will reduce its gross unrecognized tax benefits by $6.0 to $8.0 million due to statutes of limitations expiring and potential favorable settlements with taxing authorities. The Company’s unrecognized income tax benefits activity for fiscal 2014 and 2013 was as follows:
|  | 2014 |  | 2013
Balance at beginning of fiscal year |  | $ | 121.8 |  |  | $ | 53.1 |
Tax positions related to current year: |  |  |  |
Additions |  | 10.8 |  |  | 65.0 |
Reductions |  | — |  |  | — |
Tax positions related to prior years: |  |  |  |
Additions related to change in estimate |  | 10.9 |  |  | 3.3 |
Reductions |  | (2.7 | ) |  | (0.4 | )
Payments |  | — |  |  | (0.6 | )
Lapses in statutes of limitations and settlements |  | (3.8 | ) |  | (2.3 | )
Acquired tax positions: |  |  |  |
Additions related to reserves acquired from acquisitions |  | — |  |  | 3.7 |
Balance as of the end of the fiscal year |  | $ | 137.0 |  |  | $ | 121.8 |
The Company’s policy is to include accrued interest and penalties related to unrecognized tax benefits and income tax liabilities, when applicable, in income tax expense. As of September 27, 2014 and September 28, 2013, gross accrued interest was $8.3 million and $3.6 million, respectively. At September 27, 2014, no significant penalties have been accrued. The Company and its subsidiaries are subject to various federal, state, and foreign income taxes. The Company’s U.S. Federal income tax returns are no longer subject to examination prior to fiscal year 2011. State income tax returns are generally no longer subject to examination prior to fiscal year 2010. The Internal Revenue Service commenced its examination of the Company’s consolidated federal income tax return for fiscal 2011 in July 2013. The Company is also undergoing a tax examination in Germany for fiscal years 2008 through 2010. In September 2014, the Internal Revenue Service commenced its examination of Gen-Probe’s consolidated federal income tax returns for calendar years 2010 through the 2012 acquisition date. The Company has a tax holiday in Costa Rica that currently does not materially impact its effective tax rate and is scheduled to expire in 2015. The Company intends to reinvest, indefinitely, approximately $61.9 million in unremitted foreign earnings. It is not practical to estimate the additional taxes that may be payable upon repatriation.

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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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