Income Taxes

The Company's effective tax rate from continuing operations (ETR) was 27.8% and 26.8% for the quarter and six months ended October 3, 2014, respectively, and 32.2% and 31.7% for the quarter and six months ended September 27, 2013, respectively. The following are the primary drivers of the ETR for the six months ended October 3, 2014 and September 27, 2013, respectively. For the tax impact of discontinued operations, see Note 4.


•	During the second quarter and six months ended October 3, 2014 and September 27, 2013, the ETR decreased due to the global mix of income and changes in valuation allowances in certain non-U.S. jurisdictions.


•	During the second quarter and six months ended September 27, 2013, the Company recorded an income tax expense of $10 million related to the previous restructuring of an operating subsidiary. This expense increased the ETR for the second quarter and six months ended September 27, 2013 by 4.2% and 2.1%, respectively.

There were no material changes to uncertain tax positions as of the second quarter of fiscal 2015 compared to the fiscal 2014 year-end.

The Internal Revenue Service (IRS) examined several issues for the fiscal years 2008 through 2010 that resulted in audit adjustments to the Company's federal income tax returns. The Company does not agree with many of the proposed adjustments and has filed an Appeals brief. As a result, the Company expects to reach a resolution no earlier than fiscal year 2016. The significant items subject to appeal primarily relate to foreign exchange losses and other U.S. international tax issues. In addition, the Company may settle certain other tax examinations, have lapses in statutes of limitations, or voluntarily settle income tax positions in negotiated settlements for different amounts than the Company has accrued as uncertain tax positions. The Company may need to accrue and ultimately pay additional amounts for tax positions that previously met a more likely than not standard if such positions are not upheld. Conversely, the Company could settle positions with the tax authorities for amounts lower than those that have been accrued or extinguish a position through payment. The Company believes the outcomes which are reasonably possible within the next twelve months may result in a reduction in the liability for uncertain tax positions of up to $28 million, excluding interest, penalties, and tax carryforwards.

Significant management judgment is required in determining the Company's provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against deferred tax assets. A valuation allowance has been recorded against certain deferred tax assets due to uncertainties related to the ability to utilize these assets. The valuation allowance is based on historical earnings, estimates of taxable income by jurisdiction and the period over which the deferred tax assets will be recoverable. Valuation allowances are evaluated periodically and will be subject to change in each future reporting period as a result of changes in various factors. Based on recent earnings in certain jurisdictions there is a reasonable possibility that, within fiscal 2015, sufficient positive evidence may become available to reach a conclusion that a portion of the valuation allowance will no longer be needed. As such, the Company may release a portion of its valuation allowance against its deferred taxes, which would result in the recognition of certain deferred tax assets and an income tax benefit for the period in which such release is recorded. Any such adjustment could result in a favorable impact that could be material to the Company's financial position and results of operations.