Taxes Based on Income

6 Months Ended

Jul. 02, 2011

Taxes Based on Income [Abstract]

Taxes Based on Income

Note 10. Taxes Based on Income

The following table summarizes the Company’s income before taxes, provision for income taxes, and effective tax rate:

	Three Months Ended						Six Months Ended
(In millions)	July 2, 2011			July 3, 2010			July 2, 2011			July 3, 2010
Income before taxes	$	110.8		$	125.8		$	178.2		$	202.7
Provision for income taxes		37.5			42.0			60.1			64.2
Effective tax rate		34	%		33	%		34	%		32	%

The effective tax rate for the three and six months ended July 2, 2011 included an expense of $2.9 million and $6.2 million, respectively, from discrete events, primarily for tax return true-ups and accruals related to tax contingencies. The Company’s effective tax rate is lower than the U.S. federal statutory rate of 35% due to the Company’s operations in jurisdictions outside the U.S. where statutory tax rates are generally lower. Additional deferred taxes are not provided for most foreign earnings because the Company currently plans to indefinitely reinvest these amounts.

The amount of income taxes the Company pays is subject to ongoing audits by taxing jurisdictions around the world. The Company’s estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. The Company believes that it has adequately provided for reasonably foreseeable outcomes related to these matters. However, the Company’s future results may include favorable or unfavorable adjustments to its estimated tax liabilities in the period the assessments are made, revised or resolved, which may impact the Company’s effective tax rate and the amount of cash payments for taxes. With some exceptions, the Company and its subsidiaries are no longer subject to income tax examinations by tax authorities for years prior to 2006.

It is reasonably possible that during the next 12 months the Company may realize a decrease in its gross uncertain tax positions by approximately $35 million, primarily as the result of making cash payments and closing tax years. The Company anticipates that it is reasonably possible that cash payments of up to $8 million relating to gross uncertain tax positions could be made within the next 12 months.

Subsequent to the quarter ended July 2, 2011, tax authorities in a foreign jurisdiction offered to settle certain tax matters relating to the 2002 through 2005 tax years for approximately $25 million. The Company is currently evaluating its options regarding this matter. However, considering the technical merits of the Company’s position, the Company has not recorded a reserve for uncertain tax positions related to this matter.