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Income Taxes
 12 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
Income taxes INCOME TAXES
The components of “Earnings before Income Taxes and Equity Method Loss” in the Consolidated Statements of Operations and other summary information is presented in the following table.
Year Ended September 30,
202420232022
Domestic$436.4 $397.2 $799.9 
Foreign35.7 15.7 95.4 
Earnings before Income Taxes and Equity Method Loss$472.1 $412.9 $895.3 
Income tax expense$105.1 $99.7 $85.7 
Effective income tax rate22.3 %24.1 %9.6 %
Income tax expense consisted of the following:
Year Ended September 30,
202420232022
Current:
Federal$111.2 $96.4 $71.1 
State22.9 21.0 11.1 
Foreign6.5 5.2 13.2 
140.6 122.6 95.4 
Deferred:
Federal(22.8)(10.7)(9.7)
State(12.6)(11.8)— 
Foreign(0.1)(0.4)— 
(35.5)(22.9)(9.7)
Income tax expense$105.1 $99.7 $85.7 
The following table presents the reconciliation of income tax expense with amounts computed at the U.S. federal statutory tax rate.
Year Ended September 30,
202420232022
Computed tax at federal statutory rate (21%)
$99.1 $86.7 $188.0 
State income tax, net of effect on federal tax12.9 12.2 10.3 
Non-deductible compensation7.9 7.0 5.9 
Rate differential on foreign income1.9 (0.2)(10.2)
Return-to-provision1.3 (0.1)(0.5)
Enacted tax law and changes in deferred tax rates
0.9 (5.8)0.9 
Valuation allowances
(8.4)1.0 1.4 
Excess tax benefits for share-based payments(5.6)(5.7)(3.6)
Income tax credits(2.9)(2.4)(1.9)
Enhanced deduction for food donations
(1.6)(1.6)(1.0)
Non-deductible goodwill impairment charge
— 8.9 — 
Gain on investment in BellRing (a)
— (1.1)(91.8)
Net losses and basis difference attributable to equity method investment
— — (14.1)
Other, net (none in excess of 5% of statutory tax)
(0.4)0.8 2.3 
Income tax expense$105.1 $99.7 $85.7 
(a)No income taxes were recorded with respect to the non-cash realized and unrealized book gains on the Company’s Investment in BellRing during the years ended September 30, 2023 or 2022, as the Company fully divested its Investment in BellRing within 12 months of the BellRing Spin-off in a manner intended to qualify as tax-free for U.S. federal income tax purposes. For additional information on the Investment in BellRing, refer to Notes 5 and 17.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Non-current deferred tax assets (liabilities) were as follows:
September 30, 2024September 30, 2023
AssetsLiabilitiesNetAssetsLiabilitiesNet
Lease liabilities
$61.9 $— $61.9 $49.1 $— $49.1 
Disallowed interest carryforwards56.0 — 56.0 53.9 — 53.9 
Derivative, equity securities and investment adjustments
40.6— 40.641.0— 41.0
Net operating loss and credit carryforwards
27.6 — 27.6 20.9 — 20.9 
Inventory26.8 — 26.8 16.0 — 16.0 
Accrued vacation, incentive and severance24.6 — 24.6 10.3 — 10.3 
Stock-based and deferred compensation
23.7 — 23.7 20.6 — 20.6 
Capitalized research and development18.3 — 18.3 11.2 — 11.2 
Accrued liabilities10.9 — 10.9 10.8 — 10.8 
Basis difference attributable to equity method investment4.7 — 4.7 4.7 — 4.7 
Intangible assets— (585.5)(585.5)— (592.2)(592.2)
Property— (239.9)(239.9)— (226.1)(226.1)
ROU assets— (58.9)(58.9)— (46.2)(46.2)
Pension and other postretirement benefits— (23.8)(23.8)— (16.2)(16.2)
Other items6.5 (2.8)3.7 6.9 (2.7)4.2 
Total gross deferred income taxes301.6 (910.9)(609.3)245.4 (883.4)(638.0)
Valuation allowance(43.7)— (43.7)(36.4)— (36.4)
Total deferred income taxes$257.9 $(910.9)$(653.0)$209.0 $(883.4)$(674.4)
As of September 30, 2024, the Company’s $27.6 deferred tax asset for net operating loss (“NOL”) and credit carryforwards is comprised of state NOLs of $6.8, foreign tax loss carryforwards of $17.1, state credit carryforwards of $2.3 and U.S. federal NOL carryforwards of $1.4. The expiration for the majority of these carryforwards is either greater than 10 years or is able to be carried forward indefinitely. The Company has offset approximately $0.6 of the $6.8 state NOLs and $14.5 of the $17.1 of
foreign tax loss carryforwards by a valuation allowance based on management’s judgment that it is more likely than not that the benefits of those deferred tax assets will not be realized in the future. In addition, as of September 30, 2024, the Company had a deferred tax asset for disallowed U.S. interest expense of $56.0 subject to Internal Revenue Code Section 163(j) limitations, which may be carried forward indefinitely. Based on management’s judgement, with the exception of a $7.7 valuation allowance recorded for state-related disallowed interest carryforwards, it is more likely than not that the Company will recognize the benefit of this deferred tax asset in the future.
As of September 30, 2024 and 2023, the Company had a valuation allowance of $43.7 and $36.4, respectively, based on management’s judgment that it is more likely than not that the benefits of its deferred tax assets will not be realized in the future. Valuation allowance activity is presented in the following table.
As of and for the Year Ended September 30,
202420232022
Balance, beginning of year$36.4 $35.5 $41.6 
Deeside acquisition
20.4 — — 
State carryforwards, including NOLs, Section 163(j) and credits
(11.8)(0.1)(7.6)
Other foreign-related changes
(1.3)1.0 1.5 
Balance, end of year$43.7 $36.4 $35.5 
The Company generally repatriates a portion of current year earnings from select non-U.S. subsidiaries only if the economic cost of the repatriation is not considered material. No provision has been made for income taxes on the Company’s undistributed earnings of consolidated foreign subsidiaries of $131.6 as of September 30, 2024, as it is the Company’s intention to indefinitely reinvest undistributed earnings of its foreign subsidiaries to, amongst other things, fund local operations, fund debt service payments, fund pension and other post-retirement obligations, fund capital projects and support foreign growth initiatives, including potential acquisitions. If the Company repatriated any of the earnings, it could be subject to withholding tax and the impact of foreign currency movements. It is not practicable to estimate the additional income taxes and applicable foreign withholding taxes that would be payable on the remittance of such undistributed earnings. Applicable income and withholding taxes will be provided on these earnings in the periods in which they are no longer considered reinvested.
Unrecognized Tax Benefits
The Company recognizes the tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The tax benefits recognized from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. To the extent the Company’s assessment of such tax positions changes, the change in estimate will be recorded in the period in which the determination is made.
Unrecognized tax benefits activity is presented in the following table.
As of and for the Year Ended September 30,
202420232022
Balance, beginning of year$12.8 $11.7 $12.5 
Additions for tax positions taken in current year and acquisitions1.5 0.8 0.1 
Additions for tax positions taken in prior years0.7 0.4 — 
Settlements with tax authorities/statute expirations(5.2)(0.1)(0.9)
Balance, end of year$9.8 $12.8 $11.7 
The amount of the net unrecognized tax benefits that, if recognized, would directly affect the effective income tax rate was $9.8 at September 30, 2024. The Company believes that, due to expiring statutes of limitations and settlements with tax authorities, it is reasonably possible that the total unrecognized tax benefits may decrease up to approximately $0.3 within twelve months of the reporting date.
The Company computes tax-related interest and penalties as the difference between the tax position recognized for financial reporting purposes and the amount previously taken on the Company’s tax returns and classifies these amounts as components of income tax expense. The Company recorded income tax expense of $0.4, $0.5 and $0.1 related to interest and penalties in the years ended September 30, 2024, 2023 and 2022, respectively. The Company had accrued interest and penalties of $1.5 and $1.1 at September 30, 2024 and 2023, respectively. The accrued interest and penalties are not included in the table above.
U.S. federal, U.S. state and foreign jurisdiction income tax returns for the tax years ended September 30, 2021 through September 30, 2023 are generally open and subject to examination by the tax authorities in each respective jurisdiction.