Income Taxes

12 Months Ended

Oct. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 6. Income Taxes

In November 2020, the Company completed an intra-group transfer of certain intellectual property and related assets of CooperVision to a UK subsidiary as part of a group restructuring to establish headquarters operations in the UK. Determining fair value involved significant judgment related to future revenue growth, operating margins, and discount rates. The transfer resulted in a step-up of the UK tax-deductible basis in the intellectual property and goodwill, creating a temporary difference between the book basis and the tax basis of these assets. As a result, the Company recognized a deferred tax asset of $1,987.9 million, with a corresponding income tax benefit, during the first quarter of fiscal 2021. During the third quarter of fiscal 2021, the Company recognized a $536.7 million tax benefit related primarily to the remeasurement of this deferred tax asset caused by the UK enactment of a 25% corporate tax rate.

Components of income before income taxes:

Years Ended October 31, (In millions)	2023		2022		2021
Income before income taxes:
United States	$	(135.7)	$	31.4	$	(31.0)
Foreign	548.6		443.9		522.5
	$	412.9	$	475.3	$	491.5

Components of provision for income taxes:

Years Ended October 31, (In millions)	2023		2022		2021
Current:
Federal	$	37.3	$	10.2	$	21.0
State	3.7		3.8		1.3
Foreign	33.0		21.7		26.7
	74.0		35.7		49.0
Deferred:
Federal	(36.7)		10.5		(8.8)
State	(7.5)		(2.2)		(0.5)
Foreign	88.9		45.6		(2,492.9)
	44.7		53.9		(2,502.2)
Provision for income taxes	$	118.7	$	89.5	$	(2,453.2)

Reconciliation between the expected provision for income taxes at the US federal statutory rate and the provision for income taxes:

Years Ended October 31, (In millions)	2023		2022		2021
Provision for income taxes at United States statutory tax rate	$	86.7	$	99.8	$	103.2
(Decrease) increase in taxes resulting from:
Foreign earnings in jurisdictions with different tax rates	7.0		(22.3)		(43.6)
Foreign earnings subject to United States tax	34.3		21.1		25.4
Excess tax benefits from share-based compensation	(2.4)		(2.6)		(13.0)
Intra-group transfer to UK subsidiary	—		—		(1,987.8)
Remeasurement of deferred tax assets from UK rate change	—		—		(536.7)
Change in unrecognized tax benefits	—		(12.7)		(7.6)
State tax provision	(4.2)		5.0		0.8
Other, net	(2.7)		1.2		6.1
Provision for income taxes	$	118.7	$	89.5	$	(2,453.2)

Components of deferred tax assets and liabilities:

Years Ended October 31, (In millions)	2023		2022
Deferred tax assets:
Accounts receivable	$	7.5	$	4.9
Inventories	14.3		6.3
Accrued liabilities, reserves and compensation accruals	94.8		79.9
Foreign deferred tax assets	2,369.5		2,500.5
Share-based compensation	14.8		14.5
Net operating loss and tax credit carryforwards	24.3		19.6
Capitalized research and experimental expenses	23.6		15.4
Total gross deferred tax assets	2,548.8		2,641.1
Less: valuation allowance	(20.7)		(60.1)
Deferred tax assets	2,528.1		2,581.0
Deferred tax liabilities:
Tax deductible goodwill	(47.4)		(39.7)
Intangible assets	(132.4)		(153.8)
Plant and equipment	(51.2)		(48.8)
Foreign deferred tax liabilities	(49.0)		(45.5)
Total gross deferred tax liabilities	(280.0)		(287.8)
Net deferred tax assets	$	2,248.1	$	2,293.2

In assessing the realizability of deferred tax assets, the Company analyzes whether some or all deferred tax assets will not be realized. This analysis considers historical taxable income, the projected reversal of deferred tax liabilities, projected taxable income and tax planning strategies. Based upon this analysis, it is more likely than not the deferred tax assets, net of valuation allowance, will be realized. The decrease in valuation allowance is primarily related to foreign tax attributes.

At October 31, 2023, the Company had federal net operating loss carryforwards of $78.7 million and state net operating loss carryforwards of $87.1 million. Federal net operating loss carryforwards of $46.0 million expire on various dates between 2024 and 2037 and $32.7 million do not expire. The state net operating loss carryforwards expire on various dates between 2027 through 2044.

A tax benefit is recognized if it is more likely than not that a tax position will be sustained on its technical merits, based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority.

Changes in unrecognized tax benefits:

(In millions)
Balance at October 31, 2021	$	353.8
Decrease based on tax positions in prior fiscal years	(12.5)
Settlements	(0.2)
Lapses of statutes of limitations	(4.2)
Balance at October 31, 2022	$	336.9
Decrease based on tax positions in prior fiscal years	(0.5)
Increase based on tax positions in current fiscal year	2.0
Lapses of statutes of limitations	(6.9)
Balance at October 31, 2023	$	331.5

These tax benefits, if recognized, would reduce provision for income taxes for 2023, 2022 and 2021, by $323.2 million, $324.3 million, and $336.5 million, respectively. Interest and penalties related to unrecognized tax benefits are recognized in provision for income taxes. As of October 31, 2023, 2022 and 2021, accrued gross interest and penalties related to unrecognized tax benefits was $5.8 million, $5.4 million, and $6.4 million, respectively.

Included in the balance of unrecognized tax benefits at October 31, 2023, is $8.1 million related to tax positions for which it is reasonably possible that the total amounts could change during the next twelve months.

Filed tax returns are subject to examination by tax authorities in major tax jurisdictions after fiscal 2018, including the UK and the US.