Note 7 Income Tax

9 Months Ended

Jun. 27, 2015

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Income Tax

The Company estimates its annual effective income tax rate at the end of each quarterly period. The estimate takes into account the geographic mix of expected pre-tax income (loss), expected total annual pre-tax income (loss), enacted changes in tax laws, implementation of tax planning strategies and possible outcomes of audits and other uncertain tax positions. To the extent there are fluctuations in any of these variables during a period, the provision for income taxes may vary.

The provision for income taxes for the third quarter of 2015 and 2014 was $15.8 million and $18.3 million, respectively, and $67.6 million and $46.7 million for the nine months ended June 27, 2015 and June 28, 2014, respectively. Tax expense for the third quarter of 2015 decreased from the same period in the prior year due to a decrease in pre-tax income in high-tax jurisdictions and certain discrete items, including tax expense of $3.3 million upon the maturity of certain interest rate swaps, which were recorded in 2014. Income tax expense for the nine months ended June 27, 2015 was greater than that for the nine months ended June 28, 2014 primarily due to the unfavorable resolution of a foreign tax audit during the second quarter of 2015.

The Company conducts business globally and, as a result, files income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world.

In 2014, a foreign tax authority completed its audit of the Company’s 2006 tax return and issued an assessment challenging certain of the Company’s tax positions. Although the Company disagreed with the assessment and vigorously contested it through the appropriate administrative procedures, the Company made a significant payment to the foreign tax authority during the quarter ended March 28, 2015 to resolve all issues related to this audit. This payment increased income tax expense by a net amount of $15.5 million, which represents the amount by which the amount paid exceeded the Company's reserve for this uncertain tax position.

The Company is currently being audited by the Internal Revenue Service for fiscal years 2008 through 2010. To the extent the Company's net operating loss carryforwards are reduced by the Internal Revenue Service, this would result in a decrease in net operating losses that are offset with a valuation allowance and would not have an impact on the Company's results of operations or cash flow.

Additionally, the Company is being audited by various state tax agencies and certain foreign countries. To the extent the final tax liabilities are different from the amounts accrued, the increases or decreases would be recorded as income tax expense or benefit in the consolidated statements of income. Although the Company believes that resolution of these audits will not have a material adverse impact on the Company’s results of operations, the outcome is subject to uncertainty.

In each of the past three years, the Company has released a portion of its valuation allowance attributable to certain deferred tax assets in the U.S. and foreign jurisdictions. These releases have ranged from $21.5 million to $158.7 million. As of September 27, 2014, the Company had a valuation allowance of $663.2 million. To the extent the Company continues to consistently earn, as well as reliably project, income in the appropriate jurisdictions, it is possible that the valuation allowance will be further reduced at such time when such positive evidence can be substantiated. Continued expected profitability may be sufficient to warrant an additional release of the valuation allowance in 2015, although such positive evidence would need to be weighed against any negative evidence existing at that time.