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Income Taxes
6 Months Ended
Jul. 03, 2015
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES
The Company’s effective tax rate for the three and six months ended July 3, 2015 was 23.0% and 23.3%, respectively, as compared to 23.0% and 23.4% for the three and six months ended June 27, 2014, respectively.
The Company's effective tax rate for 2015 and 2014 differs from the U.S. federal statutory rate of 35.0% due principally to the Company’s earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the U.S. federal statutory rate. The effective tax rate for each of the three and six months ended July 3, 2015 reflects benefits from foreign exchange losses and expiration of statutes of limitation, partially offset by tax expense incurred for transactions in preparation for the disposition of the Company's communications business to NetScout (refer to Note 3). The Company incurred $17 million ($0.02 per diluted share) of discrete tax expense in the second quarter of 2015 on transactions related to this disposition. The Company also realized other discrete tax benefits of $16 million (0.02 per diluted share) during the three months ended July 3, 2015 which offset this charge. The effective tax rate for the three and six months ended June 27, 2014 includes tax benefits in foreign tax jurisdictions for release of valuation allowances and expiration of statutes of limitation, partially offset by audit settlements in various tax jurisdictions.
Tax authorities in Denmark have raised significant issues related to interest accrued by certain of the Company's subsidiaries. On December 10, 2013, the Company received assessments from the Danish tax authority (“SKAT”) totaling approximately DKK 1.2 billion including interest through July 3, 2015 (approximately $178 million based on exchange rates as of July 3, 2015), imposing withholding tax relating to interest accrued in Denmark on borrowings from certain of the Company's subsidiaries for the years 2004-2009. If the SKAT claims are successful, it is likely that the Company would be assessed additional amounts for years 2010-2012 totaling approximately DKK 675 million including interest through July 3, 2015 (approximately $100 million based on exchange rates as of July 3, 2015). Management believes the positions the Company has taken in Denmark are in accordance with the relevant tax laws and intends to vigorously defend its positions. The Company appealed these assessments with the National Tax Tribunal in 2014 and intends on pursuing this matter through the European Court of Justice should this appeal be unsuccessful. The ultimate resolution of this matter is uncertain, could take many years, and could result in a material adverse impact to the Company's financial statements, including its effective tax rate.