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Income Taxes
9 Months Ended
Jan. 25, 2012
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The total amount of gross unrecognized tax benefits for uncertain tax positions, including positions impacting only the timing of tax benefits, was $48.9 million and $70.7 million, on January 25, 2012 and April 27, 2011, respectively. The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $36.8 million and $56.5 million, on January 25, 2012 and April 27, 2011, respectively. It is reasonably possible that the amount of unrecognized tax benefits will decrease by as much as $24.4 million in the next 12 months primarily due to the expiration of statutes of limitations in various foreign jurisdictions along with the progression of federal, state, and foreign audits in process.
The Company classifies interest and penalties on tax uncertainties as a component of the provision for income taxes. The total amounts of interest and penalties accrued at January 25, 2012 were $14.6 million and $13.5 million, respectively. The corresponding amounts of accrued interest and penalties at April 27, 2011 were $27.3 million and $21.1 million, respectively.
The provision for income taxes consists of provisions for federal, state and foreign income taxes. The Company operates in an international environment with almost 70% of its sales outside the U.S. Accordingly, the consolidated income tax rate is a composite rate reflecting the earnings in various locations and the applicable tax rates. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Australia, Canada, Italy, the United Kingdom and the United States. The Company has substantially concluded all national income tax matters for years through Fiscal 2009 for the U.S. and the United Kingdom, and through Fiscal 2007 for Australia, Canada, and Italy.
During the second quarter of Fiscal 2012, a foreign subsidiary of the Company exercised a tax option under local law to revalue certain of its intangible assets, increasing the local tax basis by $220.2 million. This revaluation resulted in a reduction in Fiscal 2012 tax expense, fully recognized in the second quarter, of $34.9 million reflecting the deferred tax benefit from the higher tax basis partially offset by the current tax liability arising from this revaluation of $34.8 million. The subsidiary paid $10.4 million of the $34.8 million during the second quarter of Fiscal 2012 and will pay $13.9 million in the second quarter of Fiscal 2013 with the remainder due during the second quarter of Fiscal 2014. The tax benefit from the higher basis amortization will result in a reduction in cash taxes over the five year tax amortization period totaling $69.1 million partially offset by the $34.8 million aforementioned tax payments.
The effective tax rate for the nine months ended January 25, 2012 was 20.0% compared to 26.0% last year. The decrease in the effective tax rate is primarily the result of the revaluation noted above, the reversal of an uncertain tax position liability due to the expiration of the statute of limitations in a foreign tax jurisdiction during the third quarter, the beneficial resolution of a foreign tax case recorded in the second quarter, and a statutory tax rate reduction in the United Kingdom that was enacted during the first quarter of Fiscal 2012. These current year benefits were partially offset by the inclusion of a benefit in the prior year resulting from the release of valuation allowances.