Income Taxes (Tables)

12 Months Ended

Sep. 30, 2012

Components of income before income taxes



	2012		2011		2010
Components of income before income taxes:
United States	$	469.6	$	364.3	$	144.9
Non-United States	496.3		503.3		399.3
Total	$	965.9	$	867.6	$	544.2

Components of the income tax provision



Components of the income tax provision:
Current:
United States	$	71.3	$	51.0		$	9.7
Non-United States	72.3		75.0			36.7
State and local	3.1		(2.0		)	(0.1		)
Total current	146.7		124.0			46.3
Deferred:
United States	76.8		46.6			41.2
Non-United States	0.4		(5.2		)	13.1
State and local	5.0		5.1			3.2
Total deferred	82.2		46.5			57.5
Income tax provision	$	228.9	$	170.5		$	103.8

Total income taxes paid	$	167.5	$	118.6		$	100.7

Effective tax rate reconciliation

The reconciliation between the U.S. federal statutory rate and our effective tax rate was:



	2012		2011		2010
Statutory tax rate	35.0	%	35.0	%	35.0	%
State and local income taxes	0.8		0.7		0.3
Non-United States taxes	(10.3	)	(12.7	)	(12.8	)
Foreign tax credit utilization	0.4		0.9		1.3
Employee stock ownership plan benefit	(0.3	)	(0.3	)	(0.4	)
Change in valuation allowances	(0.2	)	0.8		(3.2	)
Domestic manufacturing deduction	(1.1	)	(0.8	)	(0.2	)
Resolution of prior period tax matters	(0.6	)	(2.9	)	(4.1	)
Other	—		(1.0	)	3.2
Effective income tax rate	23.7	%	19.7	%	19.1	%

Deferred income tax assets and liabilities

The tax effects of temporary differences that give rise to our net deferred income tax assets and liabilities were (in millions):



	2012			2011
Current deferred income tax assets:
Compensation and benefits	$	28.7		$	26.1
Product warranty costs	14.3			14.1
Inventory	58.4			57.3
Allowance for doubtful accounts	15.6			15.2
Deferred credits	9.5			9.4
Returns, rebates and incentives	47.5			44.3
Self-insurance reserves	2.7			2.2
Restructuring reserves	2.4			1.1
Net operating loss carryforwards	3.7			1.6
U.S. federal tax credit carryforwards	—			8.4
State tax credit carryforwards	0.9			—
Other — net	24.9			19.9
Current deferred income tax assets	208.6			199.6
Long-term deferred income tax assets (liabilities):
Retirement benefits	$	369.3		$	335.4
Property	(90.3		)	(80.3		)
Intangible assets	(34.1		)	(28.9		)
Environmental reserves	13.7			11.9
Share-based compensation	40.1			33.6
Self-insurance reserves	6.2			5.7
Deferred gains	3.3			3.8
Net operating loss carryforwards	38.5			41.6
Capital loss carryforwards	17.2			18.3
U.S. federal tax credit carryforwards	1.5			1.5
State tax credit carryforwards	3.4			3.5
Other — net	14.1			22.9
Subtotal	382.9			369.0
Valuation allowance	(31.8		)	(32.8		)
Net long-term deferred income tax assets	351.1			336.2
Total deferred income tax assets	$	559.7		$	535.8

Tax attributes and valuation allowances

Tax attributes and related valuation allowances at September 30, 2012 are (in millions):



	Tax Benefit		Valuation		Carryforward Period
Tax Attribute to be Carried Forward	Amount		Allowance		Ends
Non-United States net operating loss carryforward	$	7.2	$	5.3	2013-2022
Non-United States net operating loss carryforward	12.4		6.8		Indefinite
Non-United States capital loss carryforward	17.2		17.2		Indefinite
United States net operating loss carryforward	7.0		—		2019-2027
United States tax credit carryforward	1.5		—		2018-2027
State and local net operating loss carryforward	15.6		0.7		2012-2031
State tax credit carryforward	4.3		—		2015-2026
Subtotal — tax carryforwards	65.2		30.0
Other deferred tax assets	1.8		1.8		Indefinite
Total	$	67.0	$	31.8

Gross Unrecognized tax benefits, excluding interest and penalties

A reconciliation of our gross unrecognized tax benefits, excluding interest and penalties, is as follows (in millions):



	2012			2011			2010
Gross unrecognized tax benefits balance at beginning of year	$	75.1		$	66.3		$	116.7
Additions based on tax positions related to the current year	—			22.3			6.3
Additions based on tax positions related to prior years	3.3			9.3			1.0
Reductions based on tax positions related to prior years	—			(0.6		)	(12.0		)
Reductions related to settlements with taxing authorities	(6.3		)	(18.5		)	(44.0		)
Reductions related to lapses of statute of limitations	(2.4		)	(3.0		)	(3.7		)
Effect of foreign currency translation	0.6			(0.7		)	2.0
Gross unrecognized tax benefits balance at end of year	70.3			75.1			66.3
Offsetting tax benefits	(47.0		)	(44.9		)	(51.1		)
Net unrecognized tax benefits	$	23.3		$	30.2		$	15.2

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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