Income Taxes

12 Months Ended

Sep. 30, 2012

Income Taxes

Income Taxes

13.    Income Taxes

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

	Successor					Predecessor
	2012		2011			2010
United States	$	76,096	$	(80,927	)	$	237,306
Foreign		158,687		124,615			91,986
	$	234,783	$	43,688		$	329,292

        Provision/(benefit) for income taxes consists of the following:

	Successor						Predecessor
	2012			2011			2010
Federal
Current	$	32,287		$	3,712		$	86,896
Deferred		(15,315	)		(29,177	)		(13,160	)
State
Current		5,261			3,637			12,459
Deferred		(2,275	)		(3,490	)		(1,045	)
Foreign
Current		44,773			34,574			27,915
Deferred		533			1,733			1,205
Total provision	$	65,264		$	10,989		$	114,270

        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
	2012						2011						2010
				Percent of pretax income						Percent of pretax income						Percent of pretax income
	Amount						Amount						Amount
Income tax expense at statutory rate	$	82,174			35.0	%	$	15,291			35.0	%	$	115,252			35.0	%
State income taxes, net of federal income tax benefit		1,566			0.6	%		(1,125	)		(2.6	%)		7,090			2.2	%
Change in valuation allowance		(539	)		(0.1	%)		786			1.8	%		1,556			0.5	%
Effect of international operations, including foreign export benefit and earnings indefinitely reinvested		(8,476	)		(3.6	%)		(3,625	)		(8.3	%)		(6,638	)		(2.0	%)
Domestic manufacturing deduction		(1,918	)		(0.8	%)		(1,874	)		(4.3	%)		(4,200	)		(1.3	%)
Transaction costs		—			0.0	%		1,164			2.7	%		2,745			0.8	%
Tax benefit attributable to Le Naturiste sale		(7,792	)		(3.3	%)
Other		249			0.0	%		372			0.8	%		(1,535	)		(0.5	%)
	$	65,264			27.8	%	$	10,989			25.1	%	$	114,270			34.7	%

        The difference in the effective rate in fiscal 2012 as compared to the statutory rate is mainly attributable to the benefit attributable to the sale of Le Naturiste, as well as the partial indefinite reinvestment of certain foreign earnings in the current year.

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

	Successor
	2012			2011
Deferred tax assets:
Inventory reserves and UNICAP	$	7,652		$	7,481
Accrued expenses and reserves not currently deductible		18,860			18,785
Other comprehensive income		13,522			11,386
Foreign and state tax credits		88,296			54,210
Foreign/State net operating losses		13,660			12,614
Valuation allowance		(14,867	)		(15,404	)
Total deferred income tax assets, net of valuation allowance		127,123			89,072
Deferred tax liabilities:
Property, plant and equipment		(45,515	)		(53,468	)
Intangibles		(696,814	)		(711,230	)
Undistributed foreign earnings		(84,958	)		(50,632	)
Total deferred income tax liabilities		(827,287	)		(815,330	)
Total net deferred income tax assets / (liabilities)		(700,164	)		(726,258	)
Less current deferred income tax assets		(26,242	)		(24,340	)
Long-term deferred income tax liabilities	$	(726,406	)	$	(750,598	)

        At September 30, 2012, we had foreign net operating losses, foreign tax credit and New York State ("NYS") investment tax credit carryforwards of $32,469, $84,810 and $3,486, respectively. 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, 2012 and 2011, we maintained a valuation allowance of $3,486 and $2,790, respectively, against the NYS investment tax credits that expire primarily between 2013 and 2016 and $11,381 and $12,614, 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, 2012, we had $108,249 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, 2012, 2011 and 2010 is as follows:

	Successor						Predecessor
	2012			2011			2010
Beginning balance	$	(15,404	)	$	(14,618	)	$	(13,063	)
NYS investment tax credit carryforwards (generated) /utilized		(694	)		319			342
Foreign net operating losses utilized/ (generated)—net		1,231			(1,105	)		(1,897	)
Balance at September 30	$	(14,867	)	$	(15,404	)	$	(14,618	)

        The following table summarizes the activity related to gross unrecognized tax benefits from October 1, 2010 to September 30, 2012:

	Successor					Predecessor
	2012		2011			2010
Beginning balance	$	10,687	$	9,210		$	9,229
Increases related to prior year tax positions		888		2,207			1,252
Increase based on tax positions related to the current year		1,313		—			—
Decreases related to settlements with taxing authorities		—		—			(669	)
Decreases related to lapsing of statute of limitations		—		(730	)		(602	)
Balance as of September 30	$	12,888	$	10,687		$	9,210

        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 $10,160 and $8,195 as of September 30, 2012 and 2011, 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, 2012, we had accrued $1,385 and $700 for the potential payment of interest and penalties, respectively. As of September 30, 2012, we were subject to U.S. Federal Income Tax examinations for the tax years 2007 through 2011, and to non-US examinations for the tax years of 2006–2011. In addition, we are generally subject to state and local examinations for fiscal years 2009–2011. There were no significant changes to accrued penalties and interest during the fiscal year ended September 30, 2012.

        The Company is under an Internal Revenue Service ("IRS") examination for tax years 2007-2011. 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.