Taxes On Earnings

12 Months Ended

Sep. 30, 2011

Taxes On Earnings [Abstract]

Taxes On Earnings

14. TAXES ON EARNINGS

The Company accounts for income taxes in accordance with ASC 740. ASC 740 provides for an asset and liability approach under which deferred income taxes are based upon enacted tax laws and rates applicable to the periods in which the taxes become payable.

Taxes on earnings from continuing operations were as follows:

	Fiscal Years Ended
(In millions)	2011			2010		2009
Current provision:
Federal	$	80.4		$	69.1	$	104.1
State and local		11.7			15.5		19.7
Foreign		52.7			50.7		41.4
Total current		144.8			135.3		165.2
Deferred provision (benefit):
Federal		32.9			27.2		(14.5	)
State and local		6.0			2.8		(1.8	)
Foreign		(3.6	)		0.1		(5.7	)
Total deferred		35.3			30.1		(22.0	)
Taxes on earnings	$	180.1		$	165.4	$	143.2

Earnings from continuing operations before taxes are generated from the following geographic areas:

	Fiscal Years Ended
(In millions)	2011		2010		2009
United States	$	299.3	$	282.1	$	261.0
Foreign		289.4		250.8		213.6
	$	588.7	$	532.9	$	474.6

The effective tax rate differs from the U.S. federal statutory tax rate as a result of the following:

	Fiscal Years Ended
	2011			2010			2009
Federal statutory income tax rate		35.0	%		35.0	%		35.0	%
State and local taxes, net of federal tax benefit		2.5			2.2			2.1
Non-U.S. income taxed at different rates, net		(3.3	)		(4.6	)		(3.0	)
Resolution of tax contingencies due to lapses of statutes of limitations		(2.8	)		(0.1	)		(3.5	)
Other		(0.8	)		(1.5	)		(0.4	)
Effective tax rate		30.6	%		31.0	%		30.2	%

During fiscal years 2011, 2010 and 2009, the Company's effective tax rate was lower than the U.S. federal statutory rate primarily because the Company's foreign earnings are taxed at rates that, on average, are lower than the U.S. federal rate. This reduction is partly offset by the fact that the Company's domestic earnings are also subject to state income taxes. During fiscal years 2011 and 2009, the benefit of the release of liabilities for uncertain tax positions as a result of the expiration of the statutes of limitation in various jurisdictions also contributed to the Company's effective tax rate being lower than the U.S. federal statutory rate.

Significant components of deferred tax assets and liabilities are as follows:

(In millions)	September 30, 2011			October 1, 2010
Deferred Tax Assets:
Deferred revenues	$	36.0		$	39.0
Deferred compensation		30.0			28.4
Product Warranty		13.2			13.2
Inventory adjustments		18.9			18.2
Equity-based compensation		39.0			47.5
Environmental Reserve		6.9			7.5
Net operating loss carryforwards		49.0			38.0
Contingent loss reserve		0.4			1.3
Other		39.5			45.5
		232.9			238.6
Valuation allowance		(46.9	)		(38.5	)
Total deferred tax assets		186.0			200.1
Deferred Tax Liabilities:
Goodwill amortization		(27.7	)		(25.2	)
Accelerated depreciation		(27.2	)		(19.0	)
Other		(24.0	)		(13.7	)
Total deferred tax liabilities		(78.9	)		(57.9	)
Net deferred tax assets	$	107.1		$	142.2
Reported As:
Net current deferred tax assets		113.9			118.2
Net long-term deferred tax assets (included in "Other Assets")		10.8			42.4
Net current deferred tax liabilities (included in "Accrued Expenses")		(3.2	)		(3.9	)
Net long-term deferred tax liabilities (included in "Other long-term liabilities")		(14.4	)		(14.5	)
Net deferred tax assets	$	107.1		$	142.2

The Company has not provided for U.S. federal income and foreign withholding taxes on $926.5 million of cumulative undistributed earnings of non-U.S. subsidiaries. Such earnings are intended to be reinvested in the non-U.S. subsidiaries for an indefinite period of time. If such earnings were not considered to be reinvested indefinitely, additional deferred taxes of approximately $247.9 million would be provided.

The Company has federal net operating loss carryforwards of approximately $5.8 million expiring between 2012 and 2032. The federal net operating loss carryforwards are subject to an annual limitation of approximately $0.6 million per year. The Company has state net operating loss carryforwards of $2.2 million expiring between 2015 and 2035. The Company has foreign net operating loss carryforwards of $145.7 million with an indefinite life. Of this amount, $38.6 million is unavailable to the Company under local loss utilization rules.

The valuation allowance increased by $8.4 million during fiscal year 2011. Of the ending valuation allowance of $46.9 million, $15.3 million is attributable to ACCEL's deferred tax assets as of the acquisition date which, if recognized, will be allocated to reduce goodwill.

Income taxes paid were as follows:

	Fiscal Years Ended
(In millions)	2011		2010		2009
Federal income taxes paid, net	$	70.0	$	76.0	$	83.5
State income taxes paid, net		11.9		14.9		17.1
Foreign income taxes paid, net		57.5		46.1		35.0
Total	$	139.4	$	137.0	$	135.6

The Company accounts for uncertainty in income taxes in accordance with the provisions in ASC 740 related to accounting for uncertainty in income taxes, which contain a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates that it is more likely than not that, based on the technical merits, the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement.

Changes in the Company's unrecognized tax benefits were as follows:

	Fiscal Years Ended
(In millions)	2011			2010			2009
Unrecognized tax benefits balance—beginning of fiscal year	$	46.4		$	58.9		$	78.4
Additions based on tax positions related to a prior year		1.0			1.4			3.0
Reductions based on tax positions related to a prior year		(0.4	)		(14.4	)		(8.6	)
Additions based on tax positions related to the current year		8.6			7.9			9.8
Reductions based on tax positions related to the current year		—			—			(4.2	)
Settlements		(5.1	)		(7.2	)		(6.0	)
Reductions resulting from the expiration of the applicable statute of limitations		(13.4	)		(0.2	)		(13.5	)
Unrecognized tax benefits balance—end of fiscal year	$	37.1		$	46.4		$	58.9

As of September 30, 2011, the total amount of gross unrecognized tax benefits was $37.1 million. Of this amount, $34.6 million would affect the effective tax rate if recognized. The difference would be offset by changes to deferred tax assets and liabilities.

The Company includes interest and penalties related to income taxes within "Taxes on earnings" on the Consolidated Statements of Earnings. As of September 30, 2011, the Company had accrued $7.6 million for the payment of interest and penalties related to unrecognized tax benefits. A net benefit of $2.8 million related to interest and penalties was included in "Taxes on earnings." As of October 1, 2010, the Company had accrued $10.4 million for the payment of interest and penalties related to unrecognized tax benefits. A net expense of $1.5 million related to interest and penalties was included in "Taxes on earnings."

The Company files U.S. federal, U.S. state, and foreign tax returns. The Company's U.S. federal tax returns are generally no longer subject to tax examinations for years prior to 2008. The Company has significant operations in Switzerland. The Company's Swiss tax returns are generally no longer subject to tax examinations for years prior to 2007. For U.S. states and other foreign tax returns, the Company is generally no longer subject to tax examinations for years prior to 2005.