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Income Taxes | 12 Months Ended
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Oct. 03, 2014
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income before income taxes consists of the following components (in millions):
| Fiscal Years Ended
| October 3, 2014 |  | September 27, 2013 |  | September 28, 2012
United States | $ | 346.8 |  |  | $ | 164.8 |  |  | $ | 113.1 |
Foreign | 218.4 |  |  | 179.7 |  |  | 141.8 |
Income before income taxes | $ | 565.2 |  |  | $ | 344.5 |  |  | $ | 254.9 |
The provision for income taxes consists of the following (in millions):
| Fiscal Years Ended
| October 3, 2014 |  | September 27, 2013 |  | September 28, 2012
Current tax expense (benefit): |  |  |  |  |
Federal | $ | 88.2 |  |  | $ | 38.0 |  |  | $ | 32.4 |
State | (0.5 | ) |  | 0.1 |  |  | (1.7 | )
Foreign | 13.5 |  |  | 14.8 |  |  | 8.6 |
| 101.2 |  |  | 52.9 |  |  | 39.3 |
Deferred tax expense (benefit): |  |  |  |  |
Federal | 12.3 |  |  | 14.4 |  |  | 13.0 |
State | (4.6 | ) |  | (4.9 | ) |  | (3.7 | )
Foreign | (11.2 | ) |  | (0.1 | ) |  | 0.4 |
| (3.5 | ) |  | 9.4 |  |  | 9.7 |
Change in valuation allowance | 9.8 |  |  | 4.1 |  |  | 3.9 |
Provision for income taxes | $ | 107.5 |  |  | $ | 66.4 |  |  | $ | 52.9 |
The actual income tax expense is different than that which would have been computed by applying the federal statutory tax rate to income before income taxes. A reconciliation of income tax expense as computed at the United States Federal statutory income tax rate to the provision for income tax expense follows (in millions):
| Fiscal Years Ended
| October 3, 2014 |  | September 27, 2013 |  | September 28, 2012
Tax expense at United States statutory rate | $ | 197.8 |  |  | $ | 120.6 |  |  | $ | 89.2 |
Foreign tax rate difference | (77.3 | ) |  | (49.8 | ) |  | (44.7 | )
Deemed dividend from foreign subsidiary | — |  |  | — |  |  | 2.4 |
Research and development credits | (2.8 | ) |  | (16.3 | ) |  | (1.7 | )
Change in tax reserve | 11.0 |  |  | 11.7 |  |  | 10.4 |
Change in valuation allowance | 9.8 |  |  | 4.1 |  |  | 3.9 |
Domestic production activities deduction | (10.9 | ) |  | (5.0 | ) |  | (3.9 | )
Audit settlements and adjustments | (19.7 | ) |  | 1.9 |  |  | — |
Other, net | (0.4 | ) |  | (0.8 | ) |  | (2.7 | )
Provision for income taxes | $ | 107.5 |  |  | $ | 66.4 |  |  | $ | 52.9 |
The Company operates in foreign jurisdictions with income tax rates lower than the United States tax rate of 35%. The Company's tax benefits related to foreign earnings taxed at a rate less than the United States federal rate were $77.3 million and $49.8 million for the fiscal years ended October 3, 2014 and September 27, 2013, respectively. During the fourth quarter of fiscal 2014, the Company concluded an Internal Revenue Service (“IRS”) examination of its federal income tax return for fiscal year 2011. As a result of the conclusion of the IRS examination, the Company agreed to various adjustments to its fiscal 2011 tax return which resulted in the recognition of additional tax expense of $0.7 million and $1.9 million for fiscal years 2014 and 2013, respectively. In addition, the conclusion of the IRS examination also resulted in a decrease in our uncertain tax positions of $20.9 million in fiscal 2014, of which $20.4 million was recognized as a benefit to tax expense. The federal tax credit available under the Internal Revenue Code for research and development expenses expired on December 31, 2013. As of October 3, 2014, the United States Congress had not taken action to extend the Research and Experimentation Tax Credit. Accordingly, the income tax provision for the year ended October 3, 2014, does not reflect the impact of any research and development tax credits that would have been earned after December 31, 2013, had the federal tax credit not expired. In December 2013, Mexico enacted a comprehensive tax reform package, which became effective on January 1, 2014. As a result of this change, the Company adjusted its deferred taxes in that jurisdiction, resulting in the recognition of a tax benefit that reduced the Company’s foreign income tax expense by $4.6 million for year ended October 3, 2014. On October 2, 2010, the Company expanded its presence in Asia by launching operations in Singapore. The Company operates under a tax holiday in Singapore, which is effective through September 30, 2020. The tax holiday is conditional upon the Company's compliance with certain employment and investment thresholds in Singapore. The impact of the tax holiday decreased Singapore's taxes by $12.6 million and $10.0 million for the fiscal years ended October 3, 2014 and September 27, 2013, respectively. This resulted in tax benefits of $0.07 and $0.05 of diluted earnings per share for the fiscal years ended October 3, 2014 and September 27, 2013, respectively. As a result of the enactment of the Tax Relief Act of 2012, which retroactively reinstated and extended the research and development tax credit, $7.0 million of federal research and development tax credits which were earned in fiscal 2012 reduced our tax rate during the fiscal year ended September 27, 2013. Deferred income tax assets and liabilities consist of the tax effects of temporary differences related to the following (in millions):
| Fiscal Years Ended
| October 3, 2014 |  | September 27, 2013
Deferred Tax Assets: |  |  |
Current: |  |  |
Inventory | $ | 5.3 |  |  | $ | 3.7 |
Bad debts | 0.2 |  |  | 0.2 |
Accrued compensation and benefits | 5.0 |  |  | 4.0 |
Product returns, allowances and warranty | 4.9 |  |  | 1.6 |
Restructuring | 0.2 |  |  | 0.3 |
Other, net | 0.3 |  |  | 0.5 |
Current deferred tax assets | 15.9 |  |  | 10.3 |
Less valuation allowance | (6.4 | ) |  | (3.2 | )
Net current deferred tax assets | 9.5 |  |  | 7.1 |
Long-term: |  |  |
Intangible assets | 4.7 |  |  | 5.5 |
Share-based and other deferred compensation | 39.4 |  |  | 37.0 |
Net operating loss carry forwards | 12.7 |  |  | 20.3 |
Federal tax credits | 13.0 |  |  | 16.0 |
State tax credits | 43.1 |  |  | 38.5 |
Other, net | 2.7 |  |  | 2.0 |
Long-term deferred tax assets | 115.6 |  |  | 119.3 |
Less valuation allowance | (54.4 | ) |  | (47.8 | )
Net long-term deferred tax assets | 61.2 |  |  | 71.5 |
Deferred tax assets | 131.5 |  |  | 129.6 |
Less valuation allowance | (60.8 | ) |  | (51.0 | )
Net deferred tax assets | 70.7 |  |  | 78.6 |
Deferred Tax Liabilities: |  |  |
Current: |  |  |
Prepaid insurance | (0.8 | ) |  | (0.8 | )
Current deferred tax liabilities | (0.8 | ) |  | (0.8 | )
Long-term: |  |  |
Property, plant and equipment | (11.6 | ) |  | (14.3 | )
Intangible assets | (1.2 | ) |  | (3.1 | )
Long-term deferred tax liabilities | (12.8 | ) |  | (17.4 | )
Net deferred tax liabilities | (13.6 | ) |  | (18.2 | )
Total deferred tax assets | $ | 57.1 |  |  | $ | 60.4 |
In accordance with GAAP, management has determined that it is more likely than not that a portion of its historic and current year income tax benefits will not be realized. As of October 3, 2014, the Company has maintained a valuation allowance of $60.8 million. This valuation allowance is comprised of $43.1 million related to domestic state tax credits, and $17.7 million related to foreign deferred tax assets. If these benefits are recognized in a future period the valuation allowance on deferred tax assets will be reversed and up to a $60.4 million income tax benefit, and up to a $0.4 million reduction to goodwill, may be recognized. The Company will need to generate $144.7 million of future United States federal taxable income to utilize our United States deferred tax assets as of October 3, 2014. Deferred tax assets are recognized for foreign operations when management believes it is more likely than not that the deferred tax assets will be recovered during the carry forward period. The Company will continue to assess its valuation allowance in future periods. As of October 3, 2014, the Company has United States federal net operating loss carry forwards of approximately $21.5 million. The utilization of these net operating losses is subject to certain annual limitations as required under Internal Revenue Code section 382 and similar state income tax provisions. The United States federal net operating loss carry forwards expire at various dates through 2031. The Company also has United States federal income tax credit carry forwards of $7.0 million, of which $6.9 million of federal income tax credit carry forwards have not been recorded as a deferred tax asset. The Company also has state income tax credit carry forwards of $43.1 million, net of federal benefits, for which the Company has provided a valuation allowance. The United States federal tax credits expire at various dates through 2030. The state tax credits relate primarily to California research tax credits which can be carried forward indefinitely. The Company has continued to expand its operations and increase its investments in numerous international jurisdictions. These activities will increase the Company’s earnings attributable to foreign jurisdictions. As of October 3, 2014, no provision has been made for United States federal, state, or additional foreign income taxes related to approximately $739.6 million of undistributed earnings of foreign subsidiaries which have been or are intended to be permanently reinvested. It is not practicable to determine the United States federal income tax liability, if any, which would be payable if such earnings were not permanently reinvested. The Company’s gross unrecognized tax benefits totaled $51.8 million and $63.2 million as of October 3, 2014 and September 27, 2013, respectively. Of the total unrecognized tax benefits at October 3, 2014, $41.8 million would impact the effective tax rate, if recognized. The remaining unrecognized tax benefits would not impact the effective tax rate, if recognized, due to the Company’s valuation allowance and certain positions which were required to be capitalized. There are no positions which the Company anticipates could change within the next twelve months. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in millions):
| Unrecognized tax benefits
Balance at September 27, 2013 | $ | 63.2 |
Decreases based on positions related to prior years | (1.2 | )
Increases based on positions related to current year | 11.0 |
Decreases relating to settlements with taxing authorities | (20.9 | )
Decreases relating to lapses of applicable statutes of limitations | (0.3 | )
Balance at October 3, 2014 | $ | 51.8 |
During the year ended October 3, 2014, the Company recognized $0.3 million of previously unrecognized tax benefits related to the expiration of the statute of limitations. The Company recognized $0.5 million of accrued interest or penalties related to unrecognized tax benefits during fiscal 2014. The decrease in unrecognized tax benefits of $20.9 million was related to the settlement of the Company's IRS audit of fiscal year 2011. The Company’s major tax jurisdictions as of October 3, 2014 are the United States, California, Iowa, Singapore, Mexico and Canada. For the United States, the Company has open tax years dating back to fiscal 1999 due to the carry forward of tax attributes. For California, the Company has open tax years dating back to fiscal 1999 due to the carry forward of tax attributes. For Iowa, the Company has open tax years dating back to fiscal 2003 due to the carry forward of tax attributes. For Canada, the Company has open tax years dating back to fiscal 2007. For Mexico, the Company has open tax years back to fiscal 2008. For Singapore, the Company has open tax years dating back to fiscal 2011. The Company is subject to audit examinations by the respective taxing authorities on a periodic basis, of which the results could impact our financial position, results of operations or cash flows.

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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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