Income Taxes

For income tax purposes, the domestic and foreign components of income (loss) before taxes were as follows:



(In millions)	2014			2013			2012
Domestic	$	(35.5	)	$	(18.9	)	$	(57.5	)
Foreign	333.7			379.3			330.3
Total	$	298.2		$	360.4		$	272.8

The domestic and foreign components of income (loss) before taxes reflect adjustments as required under certain advanced pricing agreements and exclude repatriation of foreign earnings to the United States.

The provision (benefit) for income taxes was as follows:



(In millions)	2014			2013			2012
Current:
Federal	$	11.5		$	2.5		$	19.3
Foreign	114.8			106.3			110.3
State	1.5			0.7			0.9
	127.8			109.5			130.5
Deferred:
Federal	(40.6		)	4.6			(50.4		)
Foreign	(1.9		)	(28.0		)	0.2
State	(1.5		)	0.1			(0.5		)
	(44.0		)	(23.3		)	(50.7		)
Total	$	83.8		$	86.2		$	79.8

The differences between the provision for income taxes and income taxes computed using the U.S. federal statutory rate were as follows:



(In millions)	2014			2013			2012
Amount computed using statutory rate	$	104.4		$	126.1		$	95.5
Increase (reduction) in taxes resulting from:
Net impact from repatriating foreign earnings and direct foreign tax credits	(17.7		)	(14.7		)	(21.5		)
Foreign income taxes	(20.6		)	(26.1		)	(26.4		)
Impact of non-deductible intangible impairments	—			—			23.7
Impact of non-deductible currency translation losses	19.0			1.3			5.7
Impact of changes in Mexican legislation and revaluation of tax assets	—			(6.8		)	—
Other changes in valuation allowances for deferred tax assets	(0.5		)	4.6			2.7
Foreign and domestic tax audit settlement and adjustments	—			(1.4		)	(2.0		)
Other	(0.8		)	3.2			2.1
Total	$	83.8		$	86.2		$	79.8

The effective tax rates are below the U.S. statutory rate, primarily reflecting the availability of excess foreign tax credits, as well as lower foreign effective tax rates. During 2014, the tax rate was impacted by the devaluation of the Venezuelan bolivar for which there was no tax benefit.

During 2013, a change in Mexican tax law resulted in additional foreign tax costs that were offset by tax credit benefits resulting in a net benefit of $6.8 million. Additionally, the Company entered into a statutory restructuring transaction in a foreign jurisdiction during the fourth quarter of 2013, which resulted in a reduction in valuation allowance balances of $59.3 million, of which $19.0 million related to a write off in net operating losses for which a valuation allowance had already been recorded. The restructuring transaction also resulted in the incurrence of repatriation costs of $43.5 million.

During 2012, the Company recognized a benefit from repatriating current foreign earnings that resulted in an excess credit benefit. The Company also incurred charges related to impairment of goodwill and intangible assets and currency translation adjustments, for which there was no tax benefit.

Deferred tax assets (liabilities) were composed of the following:



(In millions)	2014			2013
Purchased intangibles	$	(32.2	)	$	(38.5	)
Other	(9.9		)	(11.5		)
Gross deferred tax liabilities	(42.1		)	(50.0		)
Credit and net operating loss carry forwards (net of unrecognized tax benefits)	284.4			302.9
Employee benefits accruals	65.2			62.4
Deferred costs	107.5			51.7
Fixed assets basis differences	33.1			31.2
Capitalized intangibles	31.5			29.7
Other accruals	28.0			25.7
Accounts receivable	11.3			13.0
Post-retirement benefits	8.2			11.7
Depreciation	11.2			9.8
Inventory	12.9			9.7
Gross deferred tax assets	593.3			547.8
Valuation allowances	(40.2		)	(34.8		)
Net deferred tax assets	$	511.0		$	463.0

At December 27, 2014, the Company had domestic federal and state net operating loss carry forwards of $52.7 million, separate state net operating loss carry forwards of $110.7 million, and foreign net operating loss carry forwards of $373.7 million, of which the Company had included in recognized net deferred tax assets $12.9 million, $0.4 million and $59.0 million, respectively. Of the total foreign and domestic net operating loss carry forwards, $467.4 million expire at various dates from 2015 to 2034, while the remainder have unlimited lives. This balance included net deferred tax assets of $10.7 million for federal net operating losses, which would expire in the years 2020 through 2034 if not utilized, $38.2 million of foreign net operating losses which would expire in 2023 if not utilized and $4.3 million of foreign net operating losses which would expire in 2015 if not utilized. During 2014, the Company realized net cash benefits of $20.7 million related to foreign net operating loss carry forwards. At December 27, 2014 and December 28, 2013, the Company had estimated gross foreign tax credit carry forwards of $174.7 million and $202.6 million, respectively, most of which would expire in 2018 through 2023 if not utilized. Deferred costs in 2014 include assets of $107.9 million related to advanced payment agreements entered into by the Company with its foreign subsidiaries, which are expected to reverse over the next three years.

At December 27, 2014 and December 28, 2013, the Company had valuation allowances against certain deferred tax assets totaling $40.2 million and $34.8 million, respectively. These valuation allowances relate to tax assets in jurisdictions where it is management's best estimate that there is not a greater than 50 percent probability that the benefit of the assets will be realized in the associated tax returns. This assessment is based upon expected future domestic results, future foreign dividends from then current year earnings and cash flows and other foreign source income, including rents and royalties, as well as anticipated gains related to future sales of land held for development near the Company's Orlando, Florida headquarters. In addition, certain tax planning transactions may be entered into to facilitate realization of these benefits. The likelihood of realizing the benefit of deferred tax assets is assessed on an ongoing basis. Consequently, future material changes in the valuation allowance are possible. The credit and net operating loss carry forwards decreased by $18.5 million, primarily due to a reduction in the balance of federal foreign tax credits. The increase in deferred costs of $55.8 million is due to additional advanced payment agreements entered into during the year.

The Company paid income taxes in 2014, 2013 and 2012 of $117.0 million, $102.7 million and $106.4 million, respectively. The Company has a foreign subsidiary which receives a tax holiday that expires in 2020. The net benefit of this and other expired tax holidays was $3.4 million, $2.6 million and $4.1 million in 2014, 2013 and 2012, respectively.

As of December 27, 2014 and December 28, 2013, the Company's gross unrecognized tax benefit was $22.5 million and $27.4 million, respectively. The Company estimates that approximately $20.4 million of the unrecognized tax benefits, if recognized, would impact the effective tax rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



(In millions)	2014			2013			2012
Balance, beginning of year	$	27.4		$	24.9		$	28.6
Additions based on tax positions related to the current year	3.9			6.0			2.1
Additions for tax positions of prior year	1.2			4.4			2.7
Reduction for tax positions of prior years	(3.1		)	(1.9		)	(2.6		)
Settlements	(1.9		)	(1.3		)	(1.7		)
Reductions for lapse in statute of limitations	(3.7		)	(4.4		)	(4.5		)
Impact of foreign currency rate changes versus the U.S. dollar	(1.3		)	(0.3		)	0.3
Balance, end of year	$	22.5		$	27.4		$	24.9

Interest and penalties related to uncertain tax positions in the Company's global operations are recorded as a component of the provision for income taxes. Accrued interest and penalties were $6.5 million and $5.9 million as of December 27, 2014 and December 28, 2013, respectively. Interest and penalties included in the provision for income taxes totaled $0.9 million, $0.5 million and $0.3 million for 2014, 2013 and 2012, respectively.

During the year ended December 27, 2014, the accrual for uncertain tax positions decreased by $1.9 million primarily as a result of the Company agreeing to a transfer pricing settlement in various foreign jurisdictions and entering into an Advanced Pricing Agreement, as well as a $3.7 million decrease of accruals for uncertain tax positions due to the expiration of the statute of limitations in various jurisdictions. During the year, increases in uncertain positions being taken in various foreign tax jurisdictions were partially offset by the impact of foreign exchange rate translation.

During the year ended December 28, 2013, the accrual for uncertain tax positions primarily increased due to uncertain positions being taken during the year in various foreign tax jurisdictions, partially offset by a $4.4 million decrease of accruals for uncertain tax positions due to the expiration of the statute of limitations in various jurisdictions. The accrual was further impacted by changes in foreign exchange rates.

During the year ended December 29, 2012, the accrual for uncertain tax positions decreased $4.5 million due to the expiration of the statute of limitations in various jurisdictions. The accrual also increased for positions being taken during the year in various tax filings. The accrual is further impacted by changes in foreign exchange rates.

The Company operates globally and files income tax returns in the United States federal, various state, and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The Company is no longer subject to income tax examination in the following major jurisdictions: for U.S. federal tax for years before 2002, Australia (2009), Brazil (2005), China (2003), France (2010), Germany (2011), Greece (2008), India (2002), Indonesia (2007), Malaysia (2007), Mexico (2008), South Africa (2008) and Venezuela (2009), with limited exceptions.

The Company estimates that it may settle one or more foreign audits in the next twelve months that may result in a decrease in the amount of accrual for uncertain tax positions of up to $2.4 million. For the remaining balance as of December 27, 2014, the Company is not able to reliably estimate the timing or ultimate settlement amount. While the Company does not currently expect material changes, it is possible that the amount of unrecognized benefit with respect to the uncertain tax positions will significantly increase or decrease related to audits in various foreign jurisdictions that may conclude during that period or new developments that could also, in turn, impact the Company's assessment relative to the establishment of valuation allowances against certain existing deferred tax assets. At this time, the Company is not able to make a reasonable estimate of the range of impact on the balance of unrecognized tax benefits or the impact on the effective tax rate related to these items.

As of December 27, 2014, the Company had foreign undistributed earnings of $1.25 billion where it is the Company's intent that the earnings be reinvested indefinitely. Consequently, the Company has not provided for U.S. deferred income taxes on these undistributed earnings. The determination of the amount of unrecognized deferred U.S. income tax liability associated with these undistributed earnings is not practicable because of the complexities associated with the calculation.

The Company recognized $6.3 million, $14.5 million and $13.7 million of benefits for deductions associated with the exercise of employee stock options in 2014, 2013 and 2012, respectively. These benefits were added directly to paid-in capital, and were not reflected in the provision for income taxes.