INCOME TAXES
The following table provides details of income taxes:
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(Dollar amounts in thousands)
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Three months ended
September 30,
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2011
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2010
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Income before income taxes
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$
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247,262
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$
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223,312
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Provision for taxes
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55,267
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69,116
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Effective tax rate
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22.4
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%
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31.0
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%
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The Company’s estimated annual effective tax rate for the fiscal year ending
June 30, 2012
is approximately
25.0%
.
The difference between the actual effective tax rate of
22.4%
during the quarter and the estimated annual effective tax rate of
25.0%
is primarily due to the tax impact of the following items during the three months ended
September 30, 2011
:
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•
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Tax benefit of
$18.3 million
was recognized related to the settlement of a United States federal income tax examination for the fiscal years ended June 30, 2007 through June 30, 2009. During the three months ended September 30, 2011, the Company received acceptance from the Joint Committee of Taxation for the settlement of the U.S. federal income tax examination. As a result of the settlement, the Company reduced its unrecognized tax benefits by
$22.0 million
.
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•
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Tax benefit of
$18.0 million
was recognized related to a decrease in reserves for uncertain tax positions taken in prior years.
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•
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Tax expense of
$23.6 million
was recognized related to an inter-company licensing agreement in connection with the migration of a portion of the Company's manufacturing to Singapore.
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•
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Tax expense of
$5.2 million
was recognized related to a non-deductible decrease in the value of the assets held within the Company’s Executive Deferred Savings Plan.
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Tax expense was lower as a percentage of income during the three months ended
September 30, 2011
compared to the three months ended
September 30, 2010
primarily due to:
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•
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A tax benefit of
$18.3 million
recognized during the three months ended
September 30, 2011
resulting from a decrease in the Company's unrecognized tax benefits due to the settlement of a U.S. federal income tax examination;
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•
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A tax benefit of
$18.0 million
recognized during the three months ended
September 30, 2011
resulting from a decrease in reserves for uncertain tax positions taken in prior years;
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•
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A decrease in tax expense of
$6.9 million
during the three months ended
September 30, 2011
related to state income taxes; and
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•
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A decrease in tax expense of
$7.7 million
during the three months ended
September 30, 2011
related to an increase in the proportion of the Company's earnings generated in jurisdictions with tax rates lower than the U.S. statutory tax rate; partially offset by
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•
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An increase in tax expense of
$23.6 million
during the three months ended
September 30, 2011
related to a migration of a portion of the Company's manufacturing to Singapore.
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In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The Company is subject to federal income tax examination for all years beginning from the year ended June 30, 2010. The Company is subject to state income tax examinations for all years beginning from the fiscal year ended June 30, 2007. The Company is also subject to examinations in other major foreign jurisdictions, including Singapore, for all years beginning from the fiscal year ended June 30, 2007. It is possible that certain examinations may be concluded in the next twelve months. The Company believes it is possible that it may recognize up to
$1.1 million
of its existing unrecognized tax benefits within the next twelve months as a result of the lapse of statutes of limitations and the resolution of examinations with various tax authorities.
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