Income Taxes (Tables)

12 Months Ended

Sep. 30, 2014

Components of income before income taxes



	2014		2013		2012
Components of income before income taxes:
United States	$	607.3	$	513.5	$	469.6
Non-United States	526.9		467.4		496.3
Total	$	1,134.2	$	980.9	$	965.9

Components of the income tax provision



Components of the income tax provision:
Current:
United States	$	219.4		$	164.5		$	71.3
Non-United States	85.3			51.1			72.3
State and local	9.9			15.5			3.1
Total current	314.6			231.1			146.7
Deferred:
United States	(3.8		)	(1.3		)	76.8
Non-United States	(4.0		)	(2.9		)	0.4
State and local	0.6			(2.3		)	5.0
Total deferred	(7.2		)	(6.5		)	82.2
Income tax provision	$	307.4		$	224.6		$	228.9

Total income taxes paid	$	323.8		$	203.9		$	167.5

Effective tax rate reconciliation

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



	2014		2013		2012
Statutory tax rate	35.0	%	35.0	%	35.0	%
State and local income taxes	0.8		0.9		0.8
Non-United States taxes	(9.5	)	(9.6	)	(10.3	)
Foreign tax credit utilization	0.5		0.8		0.4
Employee stock ownership plan benefit	(0.2	)	(0.2	)	(0.3	)
Change in valuation allowances	(0.1	)	(0.4	)	(0.2	)
Domestic manufacturing deduction	(1.1	)	(1.1	)	(1.1	)
Adjustments for prior period tax matters	1.0		(2.0	)	(0.6	)
Other	0.7		(0.5	)	—
Effective income tax rate	27.1	%	22.9	%	23.7	%

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):



	2014			2013
Current deferred income tax assets:
Compensation and benefits	$	33.7		$	26.4
Product warranty costs	12.3			13.0
Inventory	18.3			48.0
Allowance for doubtful accounts	8.8			9.8
Deferred credits	7.5			9.3
Returns, rebates and incentives	54.5			49.7
Self-insurance reserves	0.9			2.5
Restructuring reserves	2.1			3.1
Net operating loss carryforwards	3.5			3.7
U.S. federal tax credit carryforwards	0.2			—
Other — net	21.7			24.0
Current deferred income tax assets	163.5			189.5
Long-term deferred income tax assets (liabilities):
Retirement benefits	$	240.4		$	177.4
Property	(81.9		)	(88.5		)
Intangible assets	(50.2		)	(40.2		)
Environmental reserves	16.9			18.0
Share-based compensation	32.6			33.8
Self-insurance reserves	7.9			7.0
Deferred gains	2.4			2.8
Net operating loss carryforwards	31.9			37.6
Capital loss carryforwards	14.8			14.2
U.S. federal tax credit carryforwards	1.3			2.1
State tax credit carryforwards	5.8			4.7
Other — net	11.6			6.7
Subtotal	233.5			175.6
Valuation allowance	(27.8		)	(28.3		)
Net long-term deferred income tax assets	205.7			147.3
Total deferred income tax assets	$	369.2		$	336.8

Tax attributes and related valuation allowances

Tax attributes and related valuation allowances at September 30, 2014 are (in millions):



Tax Attribute to be Carried Forward	Tax Benefit Amount		Valuation Allowance		Carryforward Period Ends
Non-United States net operating loss carryforward	$	6.7	$	4.9	2015	-	2024
Non-United States net operating loss carryforward	10.1		6.7		Indefinite
Non-United States capital loss carryforward	14.8		14.8		Indefinite
United States net operating loss carryforward	5.0		—		2019	-	2033
United States tax credit carryforward	1.5		—		2018	-	2027
State and local net operating loss carryforward	13.6		0.2		2015	-	2033
State tax credit carryforward	5.8		—		2025	-	2029
Subtotal — tax carryforwards	57.5		26.6
Other deferred tax assets	1.2		1.2		Indefinite
Total	$	58.7	$	27.8

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):



	2014			2013			2012
Gross unrecognized tax benefits balance at beginning of year	$	40.8		$	70.3		$	75.1
Additions based on tax positions related to the current year	1.0			1.1			—
Additions based on tax positions related to prior years	2.2			8.8			3.3
Reductions based on tax positions related to prior years	—			—			—
Reductions related to settlements with taxing authorities	—			(36.2		)	(6.3		)
Reductions related to lapses of statute of limitations	(4.2		)	(1.2		)	(2.4		)
Effect of foreign currency translation	(0.9		)	(2.0		)	0.6
Gross unrecognized tax benefits balance at end of year	$	38.9		$	40.8		$	70.3

- 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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