Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.8.0.1
Income Taxes
12 Months Ended
Sep. 30, 2017
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
 
 
Year Ended September 30,
 
2017
 
2016
 
2015
Domestic
$
108.2

 
$
99.3

 
$
110.0

Foreign
80.1

 
64.8

 
52.3

Total earnings before income taxes
$
188.3

 
$
164.1

 
$
162.3

 
 
 
 
 
 
Income tax expense:
 

 
 

 
 

Current provision:
 

 
 

 
 

Federal
$
0.5

 
$
28.9

 
$
35.0

State
(0.4
)
 
5.1

 
4.4

Foreign
22.7

 
18.0

 
10.2

Total current provision
22.8

 
52.0

 
49.6

 
 
 
 
 
 
Deferred provision (benefit):
 

 
 

 
 

Federal
32.0

 
3.2

 
(0.5
)
State
5.0

 
(0.7
)
 
1.6

Foreign
0.1

 
(7.2
)
 
(1.6
)
Total deferred provision (benefit)
37.1

 
(4.7
)
 
(0.5
)
Income tax expense
$
59.9

 
$
47.3

 
$
49.1


 
 
Year Ended September 30,
 
2017
 
2016
 
2015
Federal statutory rates
35.0
 %
 
35.0
 %
 
35.0
 %
Adjustments resulting from the tax effect of:
 

 
 

 
 

State income taxes, net of federal benefit
1.6

 
2.0

 
2.3

Foreign income tax rate differential
(5.8
)
 
(6.7
)
 
(6.2
)
Domestic manufacturer’s deduction
(0.3
)
 
(1.9
)
 
(2.2
)
Share-based compensation
(1.1
)
 
(1.5
)
 

Unremitted Earnings
2.7

 

 

Valuation allowance
(1.3
)
 
1.7

 
0.3

Other, net
1.0

 
0.2

 
1.0

Effective income tax rate
31.8
 %
 
28.8
 %
 
30.2
 %

 
September 30,
 
2017
 
2016
Deferred tax assets:
 

 
 

Employee benefit accruals
$
46.0

 
$
90.1

Loss and tax credit carryforwards
43.7

 
40.6

Rebates and other discounts
5.8

 
5.7

Self-insurance reserves
4.6

 
4.6

Casket pricing obligation
1.3

 
1.6

Allowance for doubtful accounts
1.0

 
1.1

Inventory, net
3.1

 
3.2

Other, net
10.3

 
11.9

Total deferred tax assets before valuation allowance
115.8

 
158.8

Less valuation allowance
(3.1
)
 
(5.5
)
Total deferred tax assets, net
112.7

 
153.3

Deferred tax liabilities:
 

 
 

Depreciation
(11.6
)
 
(9.7
)
Amortization
(134.9
)
 
(134.9
)
Long-term contracts and customer prepayments
(28.9
)
 
(21.2
)
Unremitted earnings of foreign operations
(4.2
)
 
(0.2
)
Other, net
(5.1
)
 
(8.8
)
Total deferred tax liabilities
(184.7
)
 
(174.8
)
Deferred tax liabilities, net
$
(72.0
)
 
$
(21.5
)
 
 
 
 
Amounts recorded in the balance sheets:
 

 
 

Deferred tax assets, current
$

 
$
23.9

Deferred tax assets, non-current
3.7

 

Deferred tax liabilities, current

 
(22.8
)
Deferred tax liabilities, non-current
(75.7
)
 
(22.6
)
Total
$
(72.0
)
 
$
(21.5
)

 
At September 30, 2017, we had $4.7 of deferred tax assets related to U.S. federal and state net operating losses and tax credit carryforwards, which will begin to expire in 2018, and $39.0 of deferred tax assets related to foreign net operating loss carryforwards, which will begin to expire in 2018. Deferred tax assets as of September 30, 2017, were reduced by a valuation allowance of $3.1 relating to foreign net operating loss carryforwards and foreign tax credit carryforwards.  At September 30, 2017 and 2016, we had $18.3 and $16.6 of current income tax payable classified as other current liabilities on our balance sheets.
 
We establish a valuation allowance for deferred tax assets when it is determined that the amount of expected future taxable income is not likely to support the use of the deduction or credit.
 
As of September 30, 2017 and 2016, U.S. federal and state income taxes have not been provided on accumulated undistributed earnings of substantially all our foreign subsidiaries, as these earnings were considered permanently reinvested.  However, as of September 30, 2017, $4.0 of deferred tax liability on unremitted earnings of foreign subsidiaries was recognized, representing the assumed tax on the distribution of such earnings among certain of our foreign subsidiaries. The total permanently reinvested earnings were $241.2 and $172.7 for 2017 and 2016.  These amounts represent book earnings translated at historical rates. It is not practicable to estimate the tax liabilities that would be incurred upon full repatriation of undistributed earnings due to foreign tax credit limitation uncertainty and uncertainty on applicable withholding tax rate on certain foreign to foreign distributions.
  
A reconciliation of the unrecognized tax benefits is as follows:
 
September 30,
 
2017
 
2016
 
2015
Balance at September 30
$
7.7

 
$
7.8

 
$
8.4

Additions for tax positions related to the current year
0.7

 
0.2

 
0.6

Additions for tax positions of prior years
3.4

 
1.7

 
0.8

Reductions for tax positions of prior years
(1.5
)
 
(2.0
)
 
(2.0
)
Settlements
(0.4
)
 

 

Balance at September 30
$
9.9

 
$
7.7

 
$
7.8



The gross unrecognized tax benefit included $9.9 and $7.7 at September 30, 2017 and 2016, which, if recognized, would impact the effective tax rate in future periods.
 
We recognize accrued interest and penalties related to unrecognized tax benefits as income tax expense.  During 2017 and 2016, we recognized $0.7 in additional interest and penalties.  Excluded from the reconciliation were $1.3 and $1.3 of accrued interest and penalties at September 30, 2017 and 2016.
 
We operate in multiple income tax jurisdictions both inside and outside the U.S. and are currently under examination in various federal, state, and foreign jurisdictions. Specifically, we are currently under examination in the U.S. for 2016 and under examination in Germany for 2009 through 2013. In addition, there are other ongoing audits in various stages of completion in several state and foreign jurisdictions.
 
It is possible that the liability associated with the unrecognized tax benefits will increase or decrease within the next 12 months.  These changes may be the result of ongoing audits or the expiration of statutes of limitations and could range up to $1.0 based on current estimates.  Audit outcomes and the timing of audit settlements are subject to significant uncertainty.  Although we believe that adequate provision has been made for such issues, it is possible that their ultimate resolution could affect our earnings.  Conversely, if these issues are resolved favorably in the future, the related provision would be reduced and yield a positive impact on earnings.  We do not expect that the outcome of these audits will significantly impact the financial statements.