Income Taxes

12 Months Ended

Sep. 30, 2011

Income Taxes

Income Taxes

15. Income Taxes

        Income before provision for income taxes consists of the following components:

	Successor			Predecessor
	2011			2010		2009
United States	$	(80,927	)	$	237,306	$	170,279
Foreign		120,836			90,409		58,689
	$	39,909		$	327,715	$	228,968

        Provision for income taxes consists of the following:

		Successor			Predecessor
		2011			2010			2009
Federal
	Current	$	3,712		$	86,896		$	47,260
	Deferred		(29,177	)		(13,160	)		6,141
State
	Current		3,637			12,459			8,185
	Deferred		(3,490	)		(1,045	)		622
Foreign
	Current		33,575			27,690			20,799
	Deferred		1,733			1,205			232
Total provision		$	9,990		$	114,045		$	83,239

        The following is a reconciliation of the income tax expense computed using the statutory Federal income tax rate to the actual income tax expense and the effective income tax rate.

	Successor						Predecessor
	2011						2010						2009
	Amount			Percent of pretax income			Amount			Percent of pretax income			Amount			Percent of pretax income
Income tax expense at statutory rate	$	13,968			35.0	%	$	114,701			35.0	%	$	80,139			35.0	%
State income taxes, net of federal income tax benefit		(1,125	)		(2.8	)%		7,090			2.2	%		5,725			2.5	%
Change in valuation allowance		786			2.0	%		1,556			0.5	%		4,309			1.9	%
Effect of international operations, including foreign export benefit and earnings indefinitely reinvested		(3,625	)		(9.1	)%		(6,638	)		(2.0	)%		(4,193	)		(1.8	)%
Domestic manufacturing deduction		(1,874	)		(4.7	)%		(4,200	)		(1.3	)%		(2,580	)		(1.1	)%
Transaction costs		1,164			2.9	%		2,745			0.8	%
Other		696			1.7	%		(1,209	)		(0.4	)%		(161	)		(0.1	)%
	$	9,990			25.0	%	$	114,045			34.8	%	$	83,239			36.4	%

        The difference in the effective rate in fiscal 2011 as compared to the statutory rate is mainly attributable to certain foreign benefits and other deductions that became higher in proportion to the net tax expense and thus decreased the effective tax rate for fiscal 2011.

        The difference in the effective rate in fiscal 2009 as compared to the statutory rate is mainly attributable to higher state income taxes resulting from an increase in domestic income and losses attributable to certain foreign subsidiaries for which no benefit has been recognized.

        The components of deferred tax assets and liabilities are as follows as of September 30:

			Successor			Predecessor
			2011			2010
Deferred tax assets:
	Inventory reserves and UNICAP		$	7,481		$	11,829
	Accrued expenses and reserves not currently deductible			18,785			32,678
	Other comprehensive income			11,386			2,244
	Foreign and state tax credits			54,210			23,530
	Foreign net operating losses			12,614			11,509
	Valuation allowance			(15,404	)		(14,618	)
		Total deferred income tax assets, net of valuation allowance		89,072			67,172
Deferred tax liabilities:
	Property, plant and equipment			(51,748	)		(15,123	)
	Intangibles			(711,230	)		(29,763	)
	Undistributed foreign earnings			(50,632	)		(20,331	)
		Total deferred income tax liabilities		(813,610	)		(65,217	)
Total net deferred income tax assets / (liabilities)				(724,538	)		1,955
Less current deferred income tax assets				(24,340	)		(40,130	)
Long-term deferred income tax liabilities			$	(748,878	)	$	(38,175	)

        At September 30, 2011, we had foreign net operating losses, foreign tax credit and New York State ("NYS") investment tax credit carryforwards of $35,878, $50,316 and $3,393, respectively. At September 30, 2010, we had foreign net operating losses, foreign tax credit and NYS investment tax credit carryforwards of $32,727, $20,059 and $3,472, respectively. At September 30, 2011 and 2010, we maintained a valuation allowance of $2,792 and 3,112, respectively, against the NYS investment tax credits that expire primarily between 2013 and 2016 and $12,614 and $11,509, respectively, against foreign loss carryforwards which expire in accordance with applicable tax law. We provide a valuation allowance for these credit and loss carryforwards because we do not consider realization of such assets to be more likely than not. We continue to monitor the need for these valuation allowances on an on-going basis.

        At September 30, 2011, we had $83,249 of undistributed international earnings on which we have not provided any U.S. tax expense as we intend to permanently reinvest these earnings outside of the U.S.

        The change in the valuation allowance for the fiscal years ended September 30, 2011 and 2010 is as follows:

	Successor			Predecessor
	2011			2010			2009
Beginning balance	$	(14,618	)	$	(13,063	)	$	(8,400	)
NYS investment tax credit carryforwards utilized		319			342			212
Foreign net operating losses generated		(1,105	)		(1,897	)		(4,521	)
Foreign net operating losses acquired		—			—			(354	)
Balance at September 30	$	(15,404	)	$	(14,618	)	$	(13,063	)

        The following table summarizes the activity related to gross unrecognized tax benefits from October 1, 2009 to September 30, 2011:

	Successor			Predecessor
	2011			2010			2009
Beginning balance	$	9,210		$	9,229		$	10,007
Increases related to prior year tax positions		2,207			1,252			385
Decreases related to settlements with taxing authorities		—			(669	)		(465	)
Decreases related to lapsing of statute of limitations		(730	)		(602	)		(698	)
Balance as of September 30	$	10,687		$	9,210		$	9,229

        These liabilities are primarily included as a component of other liabilities in our consolidated balance sheet because we generally do not anticipate that settlement of the liabilities will require payment of cash within the next twelve months.

        Our total unrecognized tax benefits that, if recognized, would affect our effective tax rate were $8,195 and $6,588 as of September 30, 2011 and 2010, respectively. We do not believe that the amount will significantly change in the next 12 months.

        We accrue interest and penalties related to unrecognized tax benefits in income tax expense. This methodology is consistent with previous periods. At September 30, 2011, we had accrued $1,204 and $535 for the potential payment of interest and penalties, respectively. As of September 30, 2011, we were subject to U.S. Federal Income Tax examinations for the tax years 2007 through 2010, and to non-US examinations for the tax years of 2005–2010. In addition, we are generally subject to state and local examinations for fiscal years 2008–2010. There were no significant changes to accrued penalties and interest during the fiscal year ended September 30, 2011.

        The Company is under an Internal Revenue Service ("IRS") examination for tax years 2007–2009. Among other issues, the IRS has questioned the values used by the Company to transfer product and provide services to an international subsidiary. The Company believes it has appropriately valued such product transfers and services and intends to continue to support this position as the IRS examination continues to progress.