Income Taxes

12 Months Ended

Jul. 01, 2011


*NOTE 23:*	*INCOME TAXES*

The provisions for income taxes are summarized as follows:


	2011			2010			2009
	(In millions)

Current:
United States	$	229.1		$	270.5		$	227.3
International		4.9			1.0			1.7
State and local		30.0			17.4			20.1

		264.0			288.9			249.1

Deferred:
United States		31.2			(11.5	)		(58.3	)
International		(0.1	)		(2.4	)		(4.0	)
State and local		(1.5	)		3.7			(13.9	)

		29.6			(10.2	)		(76.2	)

	$	293.6		$	278.7		$	172.9

The components of deferred income tax assets (liabilities) were as follows:


	2011						2010
	Current			Non-Current			Current			Non-Current
	(In millions)

Inventory valuations	$	30.1		$	—		$	23.8		$	—
Accruals		142.1			66.0			126.7			68.4
Depreciation		—			(50.6	)		—			(28.4	)
Domestic tax loss and credit carryforwards		—			38.3			—			27.2
International tax loss and credit carryforwards		—			39.6			—			41.4
International research and development expense deferrals		—			39.8			—			41.5
Acquired intangibles		—			(95.8	)		—			(28.8	)
Share-based compensation		—			40.0			—			32.5
Unfunded pension liability		—			15.7			—			16.2
Unrecognized tax benefits		—			9.0			—			6.9
All other — net		1.7			(10.5	)		(2.3	)		8.2

		173.9			91.5			148.2			185.1
Valuation allowance		(2.9	)		(85.8	)		(2.9	)		(77.4	)

	$	171.0		$	5.7		$	145.3		$	107.7

A reconciliation of the United States statutory income tax rate to our effective income tax rate follows:


	2011			2010			2009

U.S. statutory income tax rate		35.0	%		35.0	%		35.0	%
State taxes		1.6			1.1			0.3
International income		0.4			0.2			0.3
Settlement of tax audits		—			—			(1.3	)
Research and development tax credit		(1.2	)		(0.7	)		(2.0	)
U.S. production activity benefit		(2.6	)		(1.6	)		(2.4	)
Impairment of goodwill and other long-lived assets		—			—			6.6
Other items		0.1			(0.8	)		(0.9	)

Effective income tax rate		33.3	%		33.2	%		35.6	%

United States income taxes have not been provided on $341.4 million of undistributed earnings of international subsidiaries because of our intention to reinvest those earnings indefinitely. Determination of unrecognized deferred U.S. tax liability for the undistributed earnings of international subsidiaries is not practicable. Tax loss and credit carryforwards as of July 1, 2011 have expiration dates ranging between one year and no expiration in certain instances. The amount of Federal, international, and state and local tax loss carryforwards as of July 1, 2011 were $57.8 million, $80.0 million and $10.7 million, respectively. Income (loss) from continuing operations before income taxes of international subsidiaries was $8.9 million, $(4.9) million and $(59.3) million in fiscal 2011, 2010 and 2009, respectively. Income taxes paid were $322.4 million, $280.5 million and $308.4 million in fiscal 2011, 2010 and 2009, respectively. The valuation allowance increased $8.4 million from $80.3 million at the end of fiscal 2010 to $88.7 million at the end of fiscal 2011. The valuation allowance has been established for financial reporting purposes to offset certain domestic and foreign deferred tax assets due to uncertainty regarding our ability to realize them in the future.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:


	2011			2010			2009
	(In millions)

Balance at beginning of the fiscal year	$	33.2		$	23.1		$	42.9
Additions based on tax positions taken during the current fiscal year		3.2			6.1			2.3
Additions based on tax positions taken during prior fiscal years		18.4			7.6			0.4
Decreases based on tax positions taken during prior fiscal years		(3.1	)		(0.2	)		(19.3	)
Decreases from settlements		(1.7	)		—			(3.0	)
Decreases from lapse of statutes of limitations		(1.6	)		(3.4	)		(0.2	)

Balance at end of the fiscal year	$	48.4		$	33.2		$	23.1

As of July 1, 2011, we had $48.4 million of unrecognized tax benefits, of which $35.4 million would favorably impact our future tax rates in the event that the tax benefits are eventually recognized.

We recognize accrued interest and penalties related to unrecognized tax benefits as part of our income tax expense. We had accrued $3.5 million for the potential payment of interest and penalties as of July 2, 2010 (and this amount was not included in the $33.2 million of unrecognized tax benefits balance at July 2, 2010 shown above) and $2.4 million of this total could favorably impact future tax rates. We had accrued $7.0 million for the potential payment of interest and penalties as of July 1, 2011 (and this amount was not included in the $48.4 million of unrecognized tax benefits balance at July 1, 2011 shown above) and $5.3 million of this total could favorably impact future tax rates.

We file numerous separate and consolidated income tax returns reporting our financial results and, where appropriate, those of our subsidiaries and affiliates, in the U.S. Federal jurisdiction, and various state, local and foreign jurisdictions. Pursuant to the Compliance Assurance Process, the Internal Revenue Service (“IRS”) is examining fiscal 2010, fiscal 2011 and fiscal 2012. We are currently under examination by the Canadian Revenue Agency for fiscal years 2005 through 2010, and we are appealing portions of a Canadian assessment relating to fiscal years 2000 through 2004. We are currently under examination by various state and international tax authorities for fiscal years ranging from 1997 through 2010. It is reasonably possible that there could be a significant decrease or increase to our unrecognized tax benefit balance during the course of the next twelve months as these examinations continue, other tax examinations commence or various statutes of limitations expire. An estimate of the range of possible changes cannot be made because of the significant number of jurisdictions in which we do business and the number of open tax periods.