INCOME TAXES

Income (loss) from operations before income taxes in fiscal 2015, 2014 and 2013 is presented below:



	Year Ended June 30,
	2015			2014			2013
United States	$	(173.7	)	$	(119.1	)	$	(53.5	)
Foreign	407.0			75.0			372.2
Total	$	233.3		$	(44.1	)	$	318.7

The components of the Company’s total (benefit) provision for income taxes during fiscal 2015, 2014 and 2013 are presented below:



	Year Ended June 30,
	2015			2014			2013
(Benefit) provision for income taxes:
Current:
Federal	$	3.7		$	5.6		$	(26.5	)
State and local	3.3			2.1			2.8
Foreign	54.1			50.8			110.6
Total	61.1			58.5			86.9
Deferred:
Federal	(71.0		)	(30.6		)	8.3
State and local	(12.0		)	(0.7		)	2.6
Foreign	(4.2		)	(7.1		)	19.0
Total	(87.2		)	(38.4		)	29.9
(Benefit) provision for income taxes	$	(26.1	)	$	20.1		$	116.8

During fiscal 2015, the Company transferred certain international intellectual property rights to its wholly owned subsidiary in Switzerland in order to align the Company’s ownership of these international intellectual property rights with its global operations. Although the transfer of foreign intellectual property rights between consolidated entities did not result in any gain in the consolidated results of operations, the Company generated a taxable gain in the U.S. that was offset by net operating loss carryforwards. Income taxes incurred related to the intercompany transactions are treated as a prepaid income tax in the Company’s consolidated balance sheet and amortized to income tax expense over the life of the intellectual property. The prepaid income tax is included in the “Prepaid expenses and other current assets” and “Other noncurrent assets” lines of the Consolidated Balance Sheet in the amount of $7.6 and $143.4, respectively. The prepaid income taxes are amortized as a component of income tax expense over twenty years.

The reconciliation of the U.S. Federal statutory tax rate to the Company’s effective income tax rate during fiscal 2015, 2014 and 2013 is presented below:



	Year Ended June 30,
	2015			2014			2013
Income (loss) before income taxes	$	233.3		$	(44.1	)	$	318.7
Provision (benefit) for income taxes at statutory rate	$	81.7		$	(15.4	)	$	111.6
State and local taxes—net of federal benefit	(5.6		)	0.9			3.5
Foreign tax differentials	(74.4		)	(53.0		)	(44.2		)
Change in valuation allowances	(6.6		)	36.1			18.2
Change in unrecognized tax benefit	(35.2		)	(24.4		)	4.8
Asset impairment charges	—			67.4			—
Share-based compensation	—			1.8			16.0
Permanent differences—net	10.6			1.8			7.2
Other	3.4			4.9			(0.3		)
(Benefit) provision for income taxes	$	(26.1	)	$	20.1		$	116.8
Effective income tax rate	(11.2		)%	(45.6		)%	36.6		%

Significant components of Deferred income tax assets and liabilities as of June 30, 2015 and 2014 are presented below:



	June 30, 2015			June 30, 2014
Deferred income tax assets:
Inventories	$	14.0		$	20.2
Accruals and allowances	77.0			87.4
Sales returns	15.9			20.1
Share-based compensation	26.1			35.4
Employee benefits	38.4			50.9
Net operating loss carry forwards and tax credits	92.4			102.2
Other	27.2			45.3
Less: valuation allowances	(81.9		)	(98.6		)
Net deferred income tax assets	209.1			262.9
Deferred income tax liabilities:
Intangible assets	436.0			421.9
Licensing rights	6.3			6.4
Other	29.7			33.8
Deferred income tax liabilities	472.0			462.1
Net deferred income tax liabilities	$	(262.9	)	$	(199.2	)

The expirations of tax loss carry forwards, amounting to $264.3 as of June 30, 2015, in each of the fiscal years ending June 30, are presented below:



Fiscal Year Ending June 30	United States		Western Europe		Rest of World		Total
2016	$	—	$	—	$	14.9	$	14.9
2017	—		—		18.2		18.2
2018	—		—		37.8		37.8
2019	—		—		51.6		51.6
2020 and thereafter	—		44.6		97.2		141.8
Total	$	—	$	44.6	$	219.7	$	264.3

The total valuation allowances recorded are $81.9 and $98.6 as of June 30, 2015 and 2014, respectively. In fiscal 2015, the change in the valuation allowance was due primarily to a decrease in valuation allowance for net operating losses.

A reconciliation of the beginning and ending amount of UTBs is presented below:



	Year Ended June 30,
	2015			2014			2013
UTBs—July 1	$	400.5		$	331.4		$	326.5
Additions based on tax positions related to the current year	51.6			29.5			36.8
Additions for tax positions of prior years	6.4			91.9			5.0
Reductions for tax positions of prior years	(60.3		)	(9.9		)	—
Settlements	(29.7		)	(33.8		)	(27.9		)
Lapses in statutes of limitations	(14.2		)	(11.6		)	(13.8		)
Foreign currency translation	(11.7		)	3.0			4.8
UTBs—June 30	$	342.6		$	400.5		$	331.4

As of June 30, 2015, the Company had $342.6 of UTBs of which $315.7 represents the amount that, if recognized, would impact the effective income tax rate in future periods. As of June 30, 2015 and 2014, the liability associated with UTBs, including accrued interest and penalties, is $182.9 and $159.4, respectively, which is recorded in Income and other taxes payable and Other non-current liabilities in the Consolidated Balance Sheets.

During fiscal 2015, the Company released interest accruals of ($4.4), while in fiscal 2014 and 2013 the Company accrued total interest of ($1.7) and $1.1, respectively, and penalty benefit of ($1.0), nil and $0.9, respectively. The total gross accrued interest and penalties recorded in the Other noncurrent liabilities in the Consolidated Balance Sheets related to UTBs as of June 30, 2015 and 2014 is $15.2 and $25.5, respectively.

The Company is present in over 35 tax jurisdictions, and any point in time is subject to several audits at various stages of completion. As a result, the Company evaluates tax positions and establishes liabilities for UTBs that may be challenged by local authorities and may not be fully sustained, despite a belief that the underlying tax positions are fully supportable. UTBs are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law, and closing of statute of limitations. Such adjustments are reflected in the provision for income taxes as appropriate. In fiscal year 2015 and 2014, the Company recognized a tax benefit of $62.0 and $49.2 respectively associated with the settlement of tax audits in multiple jurisdictions and the expiration of foreign and state statutes of limitation. The Company has open tax years ranging from 2006 and forward.

On the basis of information available at June 30, 2015, it is reasonably possible that a decrease of up to $93.8 in UTBs related to U.S. and foreign exposures may be necessary within the coming year. It is also possible the ongoing audits by tax authorities may result in increases or decreases to the balance of UTBs. Since it is common practice to extend audits beyond the Statute of Limitations, the Company is unable to predict the timing or conclusion of these audits and, accordingly, the Company is unable to estimate the amount of changes to the balance of UTBs that are reasonably possible at this time. However, the Company believes it has adequately provided for its UTBs for all open tax years in each tax jurisdiction.

It is the Company’s intention to permanently reinvest undistributed earnings and income from the Company’s foreign operations that have been generated through June 30, 2015. Accordingly, no provision has been made for U.S. income taxes on the remaining undistributed earnings of foreign subsidiaries as of June 30, 2015. Cumulative undistributed earnings of non-U.S. subsidiaries was $2,138.7 as of June 30, 2015. It is not practicable for the Company to determine the amount of additional income and withholding taxes that may be payable in the event the remaining undistributed earnings are repatriated.