Income Taxes

12 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

Income Taxes

9. Income Taxes

The components of the provision for income taxes are as follows:

Fiscal Years	2012		2011			2010
Current:
Federal	$	3.2	$	(1.4	)	$	5.2
State and local		1.2		0.9			1.5
Foreign		4.8		4.9			5.2
		9.2		4.4			11.9
Deferred		2.8		17.6			5.3
Provision for Income Taxes	$	12.0	$	22.0		$	17.2

The following table reconciles the United States statutory income tax rate with our effective income tax rate:

Fiscal Years	2012			2011			2010
United States statutory rate		35.0	%		35.0	%		35.0	%
State taxes, net of federal tax benefit		2.8	%		2.7	%		2.3	%
Foreign earnings taxed at different rates		(2.8	)%		1.1	%		(3.8	)%
Change in tax contingency reserve		2.8	%		0.4	%		0.6	%
Share-based compensation		0.1	%		0.6	%		2.9	%
Disposition of subsidiary		(3.8	)%		—			—
Permanent differences and other, net		(0.8	)%		0.1	%		0.5	%
Effective income tax rate		33.3	%		39.9	%		37.5	%

The change in the tax contingency reserve in fiscal year 2012 was the result of reserve additions related to a Canadian transfer pricing assessment which is being appealed, offset by the expiration of certain statutes. The change in the tax contingency reserve in fiscal year 2011 was the result of the expiration of certain statutes and the favorable resolution of other tax matters, offset by reserve additions during the year. The change in the tax contingency reserve in fiscal year 2010 was the result of the expiration of certain statutes offset by reserve additions during the year.

The tax effects of temporary differences that give rise to deferred tax assets and liabilities are as follows:

	2012			2011
Deferred tax liabilities:
Inventory	$	(20.7	)	$	(20.8	)
Depreciation		(20.2	)		(16.5	)
Intangibles		(40.9	)		(32.4	)
Total deferred tax liabilities		(81.8	)		(69.7	)
Deferred tax assets:
Accruals and reserves		60.4			46.0
Share-based payments		5.6			5.1
Derivative financial instruments		0.6			0.9
Other		6.0			5.9
Gross deferred tax assets		72.6			57.9
Less valuation allowance		(4.7	)		(5.0	)
Total deferred tax assets		67.9			52.9
Net deferred tax liabilities	$	(13.9	)	$	(16.8	)

The deferred tax assets include $4.8 million and $4.5 million related to state net operating loss carry-forwards which expire between fiscal year 2013 and fiscal year 2032, and $0.4 million and $0.4 million related to foreign net operating loss carry-forwards at June 30, 2012 and July 2, 2011, respectively.

We recognize a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. The valuation allowance of $4.7 million and $5.0 million at June 30, 2012 and July 2, 2011, respectively, relates to state net operating loss carry-forwards and foreign net operating loss carry-forwards.

We have foreign tax credit carry-forwards of $3.1 million, generated during fiscal year 2011 and 2012, which expire in fiscal years 2021 and 2022. We have determined that no valuation allowance is necessary as of June 30, 2012.

We have not provided U.S. income taxes and foreign withholding taxes on undistributed earnings from our foreign subsidiaries of approximately $59.1 million as of both June 30, 2012 and July 2, 2011. These earnings are considered to be indefinitely reinvested in the operations of such subsidiaries.

We continue to recognize interest and penalties related to uncertain tax positions as a component of income tax expense. Net tax-related interest and penalties were immaterial for the years reported. As of June 30, 2012 and July 2, 2011, we had $1.8 million and $2.0 million, respectively, of accrued interest and penalties related to uncertain tax positions, of which $1.4 million and $1.5 million would favorably affect our effective tax rate in any future periods, if recognized.

We file income tax returns in the United States, Canada, Ireland and multiple state jurisdictions. We have substantially concluded on all U.S. Federal and Canadian income tax examinations through fiscal years 2008 and 2004, respectively. With few exceptions, we are no longer subject to state and local income tax examinations prior to fiscal year 2008.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	Fiscal Year 2012			Fiscal Year 2011
Beginning balance	$	14.2		$	12.8
Tax positions related to current year:
Gross increase		2.1			2.6
Gross decrease		—			—
Tax positions related to prior years:
Gross increase		1.6			3.7
Gross decrease		(3.6	)		(0.3	)
Settlements		(0.1	)		(1.6	)
Lapses in statutes of limitations		(2.9	)		(3.0	)
Ending balance	$	11.3		$	14.2

As of June 30, 2012 and July 2, 2011, the total amount of unrecognized tax benefits was $11.3 million and $14.2 million, respectively, of which $3.7 million and $3.0 million would favorably affect the effective tax rate, if recognized. We are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next 12 months.