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Income Taxes | 12 Months Ended
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Oct. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Cooper's effective tax rate (ETR) (provision for income taxes divided by pretax income) was 5.3% , 7.0% and 4.8% for fiscal 2017, 2016 and 2015, respectively. The ETR in fiscal 2017 decreased in comparison to fiscal 2016 due to the shift in the geographic mix of income as well as discrete benefits from adopting ASU 2016-9 (Excess tax benefit from share-based compensation). The ETR in fiscal 2016 increased in comparison to fiscal 2015 partially due to an increase in foreign non-deductible integration and transaction expenses, partially offset by renewal of the R&D tax credit and lower state income taxes. The ETR is below the United States statutory rate as a majority of our taxable income is earned in foreign jurisdictions with lower tax rates. The ratio of domestic income to worldwide income significantly impacts our overall tax rate due to the fact that the tax rates in the majority of foreign jurisdictions where we operate are significantly lower than the statutory rate in the United States. The components of income from continuing operations before income taxes and extraordinary items and the income tax provision related to income from all operations in our Consolidated Statements of Income consist of:
Years Ended October 31, (In millions) | 2017 |  | 2016 |  | 2015
Income before income taxes: |  |  |  |  |
United States | $ | 7.8 |  |  | $ | 31.5 |  |  | $ | 31.9 |
Foreign | 386.2 |  |  | 264.1 |  |  | 183.6 |
| $ | 394.0 |  |  | $ | 295.6 |  |  | $ | 215.5 |
Income tax provision | $ | 21.1 |  |  | $ | 20.7 |  |  | $ | 10.4 |
The income tax provision (benefit) related to income from continuing operations in our Consolidated Statements of Income consists of:
Years Ended October 31, (In millions) | 2017 |  | 2016 |  | 2015
Current: |  |  |  |  |
Federal | $ | 6.9 |  |  | $ | 14.6 |  |  | $ | 0.2 |
State | 1.8 |  |  | 1.3 |  |  | 1.2 |
Foreign | 19.5 |  |  | 15.5 |  |  | 3.4 |
| 28.2 |  |  | 31.4 |  |  | 4.8 |
Deferred: |  |  |  |  |
Federal | (3.9 | ) |  | (3.9 | ) |  | 12.0 |
State | 1.4 |  |  | (0.7 | ) |  | (0.5 | )
Foreign | (4.6 | ) |  | (6.1 | ) |  | (5.9 | )
| (7.1 | ) |  | (10.7 | ) |  | 5.6 |
Income tax provision | $ | 21.1 |  |  | $ | 20.7 |  |  | $ | 10.4 |
We reconcile the provision for income taxes attributable to income from operations and the amount computed by applying the statutory federal income tax rate of 35% to income before income taxes as follows:
Years Ended October 31, (In millions) | 2017 |  | 2016 |  | 2015
Computed expected provision for taxes | $ | 137.9 |  |  | $ | 103.5 |  |  | $ | 75.4 |
(Decrease) increase in taxes resulting from: |  |  |  |  |
Income earned outside the United States subject to different tax rates | (114.6 | ) |  | (81.2 | ) |  | (72.6 | )
State taxes, net of federal income tax benefit | 3.9 |  |  | 1.2 |  |  | 1.5 |
Research and development credit | (0.7 | ) |  | (1.2 | ) |  | (0.7 | )
Incentive stock option compensation and non-deductible employee compensation | (12.9 | ) |  | 0.5 |  |  | 0.4 |
Tax accrual adjustment | 5.0 |  |  | (5.0 | ) |  | 3.8 |
Other, net | 2.5 |  |  | 2.9 |  |  | 2.6 |
Actual provision for income taxes | $ | 21.1 |  |  | $ | 20.7 |  |  | $ | 10.4 |
The tax effects of temporary differences that give rise to the deferred tax assets and liabilities are:
Years Ended October 31, (In millions) | 2017 |  | 2016
Deferred tax assets: |  |  |
Accounts receivable, principally due to allowances for doubtful accounts | $ | 5.4 |  |  | $ | 3.3 |
Inventories | 6.1 |  |  | 6.2 |
Litigation settlements | 0.8 |  |  | 0.5 |
Accrued liabilities, reserves and compensation accruals | 50.4 |  |  | 50.3 |
Foreign deferred tax assets (Puerto Rico tax incentives) | 37.9 |  |  | — |
Restricted stock and stock option expenses | 39.7 |  |  | 24.5 |
Net operating loss carryforwards | 3.7 |  |  | 2.7 |
Plant and equipment | — |  |  | 0.4 |
Research and experimental expenses - Section 59(e) | 5.1 |  |  | 6.7 |
Tax credit carryforwards | 8.7 |  |  | 1.8 |
Total gross deferred tax assets | 157.8 |  |  | 96.4 |
Less valuation allowance | (59.1 | ) |  | (13.3 | )
Deferred tax assets | 98.7 |  |  | 83.1 |
Deferred tax liabilities: |  |  |
Tax deductible goodwill | (32.4 | ) |  | (29.5 | )
Plant and equipment | (4.8 | ) |  | — |
Transaction costs | (1.1 | ) |  | (1.1 | )
Foreign deferred tax liabilities | (13.0 | ) |  | (5.6 | )
Other intangible assets | (25.9 | ) |  | (31.2 | )
Total gross deferred tax liabilities | (77.2 | ) |  | (67.4 | )
Net deferred tax assets | $ | 21.5 |  |  | $ | 15.7 |
In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, we believe it is more likely than not that the Company will realize the benefits of these deductible differences, net of the existing valuation allowance at October 31, 2017. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. A valuation allowance of $59.1 million and $13.3 million was recorded against our gross deferred tax asset balance as of October 31, 2017, and October 31, 2016, respectively. The increase is principally related to previously unrecorded deferred taxes associated with certain tax incentives offered by the Puerto Rican government in the areas of local manufacturing, energy use and R&D that have been subject to a full valuation allowance with no impact to our Consolidated Statements of Income. As of October 31, 2017, there was approximately $2.5 billion of undistributed earnings in our foreign subsidiaries which we have not provided for federal income tax since we intend to reinvest this amount outside the United States indefinitely. At October 31, 2017, we had federal net operating loss carryforwards of $31.8 million and state net operating loss carryforwards of $43.7 million. Additionally, we had $7.0 million of federal alternative minimum tax credits, $7.4 million of federal research credits and $1.5 million of California research credits. The federal net operating loss and federal research credits carryforwards expire on various dates between 2026 through 2037, and the federal alternative minimum tax credits carry forward indefinitely. The state net operating loss carryforwards expire on various dates between 2019 through 2037, and the California research credits carry forward indefinitely. The net operating loss and other tax credits may be subject to certain limitations upon utilization under Section 382 of the Internal Revenue Code. The aggregated changes in the balance of gross unrecognized tax benefits were as follows:
(In millions) |
Balance at October 31, 2015 | $ | 40.3 |
Increase from prior year's UTB's | 4.5 |
Increase from current year's UTB's | 6.7 |
UTB (decrease) from expiration of statute of limitations | (11.6 | )
Balance at October 31, 2016 | 39.9 |
Increase from prior year's UTB's | 12.9 |
Increase from current year's UTB's | 9.9 |
UTB (decrease) from expiration of statute of limitations | (2.8 | )
Balance at October 31, 2017 | $ | 59.9 |
As of October 31, 2017, we had unrecognized tax benefits of $40.4 million, including $3.7 million of related accrued interest and penalties that, if recognized, would affect our effective tax rate. It is our policy to recognize interest and penalties directly related to incomes tax as additional income tax expense. Included in the balance of unrecognized tax benefits at October 31, 2017, is $6.1 million related to tax positions for which it is reasonably possible that the total amounts could significantly change during the next twelve months. This amount represents a decrease in unrecognized tax benefits related to expiring statutes in various jurisdictions worldwide and is comprised of transfer pricing and other items. We are required to file income tax returns in the United States federal jurisdiction, various state and local jurisdictions, and many foreign jurisdictions. As of October 31, 2017, the tax years for which we remain subject to United States federal income tax assessment upon examination are 2014 through 2016, as well as other major tax jurisdictions including the United Kingdom, Japan and France. We remain subject to income tax examinations in Australia for the tax years 2013 through 2016.

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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 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 2: 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=65882285&loc=d3e32559-109319 Reference 3: 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=65882285&loc=d3e32718-109319 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=65882285&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=65882285&loc=d3e32537-109319 + Details
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