XML 38 R23.htm IDEA: XBRL DOCUMENT
v3.10.0.1

PRE-TAX INCOME AND INCOME TAXES | 12 Months Ended
--- | ---
May 27, 2018
Income Tax Disclosure [Abstract] |
PRE-TAX INCOME AND INCOME TAXES | PRE-TAX INCOME AND INCOME TAXES The Tax Cuts and Jobs Act of 2017 (the "Tax Act") was enacted into law on December 22, 2017. The changes to U.S. tax law include, but are not limited to, (1) reducing the federal statutory income tax rate from 35% to 21%; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) repealing the exception for deductibility of performance-based compensation to covered employees, along with expanding the number of covered employees; and (4) allowing immediate expensing of machinery and equipment contracted for purchase after September 27, 2017. The Tax Act also establishes new tax provisions that will affect our fiscal year 2019, including, but not limited to, (1) eliminating the deduction for domestic manufacturing activities; (2) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (3) establishing a new minimum tax on Global Intangible Low-Taxed Income ("GILTI"), a new Base Erosion Anti-Abuse Tax, and a new U.S. corporate deduction for Foreign-Derived Intangible Income. On December 22, 2017, the U.S. Securities and Exchange Commission released Staff Accounting Bulletin ("SAB") 118, which allows for a measurement period up to one year after the enactment date of the Tax Act to finalize related income tax impacts. Although our accounting for the impact of the Tax Act is incomplete, we have made reasonable estimates and recorded provisional amounts for items impacted including, among others, the following: •We remeasured deferred tax assets and liabilities based on the rates at which they are expected to reverse and recorded a provisional net benefit of $241.6 million. In addition, as a result of the Tax Act we recorded a provisional benefit of $3.2 million related to the release of valuation allowance against certain deferred tax assets that are more likely than not to be realized. The release of valuation allowance was refined by a $0.5 million increase as of May 27, 2018 from our initial estimate made in our third quarter of fiscal 2018 in accordance with SAB 118. •We computed a provisional tax of approximately $19.8 million related to the application of the one-time transition tax on the net accumulated post-1986 earnings and profits of foreign subsidiaries. The transition tax was refined by a $4.6 million increase as of May 27, 2018 from our initial estimate made in our third quarter of fiscal 2018 in accordance with SAB 118. We have not yet completed our analysis of the GILTI tax rules and are still evaluating whether to make a policy election to treat the GILTI tax as a period expense or to provide U.S. deferred taxes on certain foreign differences between the financial statement and tax basis of foreign assets and liabilities. At May 27, 2018, we did not record a deferred tax liability for these differences. We will continue to analyze the impact of GILTI as more guidance is issued and a decision will be made during fiscal year 2019 on whether to treat the GILTI as a period cost or a deferred tax item. As a result of our fiscal year end, the lower U.S. statutory federal income tax rate resulted in a blended U.S. federal statutory rate of 29.3% for our fiscal year ending May 27, 2018. It is expected to be 21% for fiscal years beginning after May 27, 2018. Pre-tax income from continuing operations (including equity method investment earnings) consisted of the following:
| 2018 |  | 2017 |  | 2016
United States | $ | 902.5 |  |  | $ | 883.5 |  |  | $ | 136.9 |
Foreign | 69.6 |  |  | (82.8 | ) |  | 38.0 |
| $ | 972.1 |  |  | $ | 800.7 |  |  | $ | 174.9 |
The provision for income taxes included the following:
| 2018 |  | 2017 |  | 2016
Current |  |  |  |  |
Federal | $ | 153.1 |  |  | $ | 201.5 |  |  | $ | 206.5 |
State | 17.8 |  |  | 6.7 |  |  | 31.0 |
Foreign | 32.5 |  |  | 6.5 |  |  | 8.6 |
| 203.4 |  |  | 214.7 |  |  | 246.1 |
Deferred |  |  |  |  |
Federal | (43.7 | ) |  | 62.1 |  |  | (161.5 | )
State | 17.4 |  |  | (5.3 | ) |  | (38.9 | )
Foreign | (2.5 | ) |  | (16.8 | ) |  | 0.7 |
| (28.8 | ) |  | 40.0 |  |  | (199.7 | )
| $ | 174.6 |  |  | $ | 254.7 |  |  | $ | 46.4 |
Income taxes computed by applying the U.S. Federal statutory rates to income from continuing operations before income taxes are reconciled to the provision for income taxes set forth in the Consolidated Statements of Operations as follows:
| 2018 |  | 2017 |  | 2016
Computed U.S. Federal income taxes | $ | 285.3 |  |  | $ | 280.2 |  |  | $ | 61.2 |
State income taxes, net of U.S. Federal tax impact | 18.0 |  |  | 22.4 |  |  | (6.4 | )
Remeasurement of U.S. deferred taxes | (241.6 | ) |  | — |  |  | — |
Transition tax on foreign earnings | 19.8 |  |  | — |  |  | — |
Tax credits and domestic manufacturing deduction | (20.6 | ) |  | (19.8 | ) |  | (16.5 | )
Federal rate differential on legal reserve | 12.6 |  |  | — |  |  | — |
Goodwill and intangible impairments | — |  |  | 104.7 |  |  | — |
Stock compensation | (5.7 | ) |  | (18.8 | ) |  | — |
Change of valuation allowance on capital loss carryforward | 78.6 |  |  | (84.1 | ) |  | — |
Change in estimate related to tax methods used for certain international sales, federal credits, and state credits | — |  |  | (8.0 | ) |  | 6.0 |
Other | 28.2 |  |  | (21.9 | ) |  | 2.1 |
| $ | 174.6 |  |  | $ | 254.7 |  |  | $ | 46.4 |
Income taxes paid, net of refunds, were $164.1 million, $213.0 million, and $291.3 million in fiscal 2018, 2017, and 2016, respectively. The tax effect of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consisted of the following:
| May 27, 2018 |  | May 28, 2017
| Assets |  | Liabilities |  | Assets |  | Liabilities
Property, plant and equipment | $ | — |  |  | $ | 141.0 |  |  | $ | — |  |  | $ | 216.6 |
Goodwill, trademarks and other intangible assets | — |  |  | 406.2 |  |  | — |  |  | 623.4 |
Accrued expenses | 15.5 |  |  | — |  |  | 20.2 |  |  | — |
Compensation related liabilities | 34.1 |  |  | — |  |  | 63.9 |  |  | — |
Pension and other postretirement benefits | 45.8 |  |  | — |  |  | 275.2 |  |  | — |
Investment in unconsolidated subsidiaries | — |  |  | 165.8 |  |  | — |  |  | 237.8 |
Other liabilities that will give rise to future tax deductions | 109.7 |  |  | — |  |  | 117.9 |  |  | — |
Net capital and operating loss carryforwards | 762.5 |  |  | — |  |  | 1,112.5 |  |  | — |
Other | 26.3 |  |  | 6.1 |  |  | 60.0 |  |  | 6.3 |
| 993.9 |  |  | 719.1 |  |  | 1,649.7 |  |  | 1,084.1 |
Less: Valuation allowance | (739.6 | ) |  | — |  |  | (1,013.4 | ) |  | — |
Net deferred taxes | $ | 254.3 |  |  | $ | 719.1 |  |  | $ | 636.3 |  |  | $ | 1,084.1 |
The liability for gross unrecognized tax benefits at May 27, 2018 was $32.5 million, excluding a related liability of $7.7 million for gross interest and penalties. Any associated interest and penalties imposed would affect the tax rate. As of May 28, 2017, our gross liability for unrecognized tax benefits was $39.3 million, excluding a related liability of $6.0 million for gross interest and penalties. Interest and penalties recognized in the Consolidated Statements of Operations was an expense of $1.6 million in fiscal 2018, a benefit of $0.3 million in fiscal 2017, and a benefit of $0.2 million in fiscal 2016. The net amount of unrecognized tax benefits at May 27, 2018 and May 28, 2017 that, if recognized, would favorably impact our effective tax rate was $27.8 million and $31.6 million, respectively. We accrue interest and penalties associated with uncertain tax positions as part of income tax expense. We conduct business and file tax returns in numerous countries, states, and local jurisdictions. The U.S. Internal Revenue Service ("IRS") has completed its audit for tax years through fiscal 2015 and all resulting significant items for fiscal 2015 and prior years have been settled with the IRS. Other major jurisdictions where we conduct business generally have statutes of limitations ranging from three to five years. We estimate that it is reasonably possible that the amount of gross unrecognized tax benefits will decrease by up to $15.3 million over the next twelve months due to various Federal, state, and foreign audit settlements and the expiration of statutes of limitations. Of this amount, approximately $6.7 million would reverse through results of discontinued operations. The change in the unrecognized tax benefits for the year ended May 27, 2018 was:
Beginning balance on May 28, 2017 | $ | 39.3 |
Increases from positions established during prior periods | 14.5 |
Decreases from positions established during prior periods | (11.5 | )
Increases from positions established during the current period | 3.5 |
Decreases relating to settlements with taxing authorities | (10.3 | )
Reductions resulting from lapse of applicable statute of limitation | (2.9 | )
Other adjustments to liability | (0.1 | )
Ending balance on May 27, 2018 | $ | 32.5 |
We have approximately $27.5 million of foreign net operating loss carryforwards ($10.7 million will expire between fiscal 2019 and 2039 and $16.8 million have no expiration dates) and $19.4 million of Federal net operating loss carryforwards which expire in fiscal 2037. Federal capital loss carryforwards related to the Private Brands divestiture of approximately $2.8 billion will expire in fiscal 2021. Included in net deferred tax liabilities are $35.7 million of tax effected state net operating loss carryforwards which expire in various years ranging from fiscal 2019 to 2028 and $173.7 million of tax effected state capital loss carryforwards related to the divestiture of Private Brands, the vast majority of which expire in fiscal 2021. Foreign tax credits of $1.0 million will expire between fiscal 2025 and fiscal 2028. State tax credits of approximately $10.1 million will expire in various years ranging from fiscal 2019 to 2028. We have recognized a valuation allowance for the portion of the net operating loss carryforwards, capital loss carryforwards, tax credit carryforwards, and other deferred tax assets we believe are not more likely than not to be realized. The net change in the valuation allowance for fiscal 2018 was a decrease of $273.8 million. For fiscal 2017 and 2016, changes in the valuation allowance were a decrease of $420.1 million and an increase of $1.4 billion, respectively. The current year change principally relates to remeasurement of deferred tax assets and corresponding valuation allowances due to tax reform and an adjustment to the valuation allowance on capital loss due to the termination of the sales agreement for the Wesson® oil business. Historically, we have not provided U.S. deferred taxes on the cumulative undistributed earnings of our foreign subsidiaries. During fiscal 2018, we determined that previously undistributed earnings of certain foreign subsidiaries no longer meet the requirements for indefinite reinvestment under applicable accounting guidance and, therefore, recognized $5.9 million of income tax expense in fiscal 2018. We continue to believe the remaining undistributed earnings of our foreign subsidiaries are indefinitely reinvested and therefore have not provided any additional U.S. deferred taxes. It is not practicable to estimate the amount of U.S. income taxes that would be incurred in the event that we were to repatriate all the cumulative earnings of non-U.S. affiliates and associated companies. Accordingly, deferred taxes will be provided for earnings of non-U.S. affiliates and associated companies when we determine that such earnings are no longer indefinitely reinvested.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration