NOTE 10 – INCOME TAXES

Income (loss) before income taxes consisted of the following:


	2012		2011			2010
Domestic	$	265,681	$	(109,281	)	$	170,505
Foreign		151,543		6,127			148,692
Total Income (Loss) Before Income Taxes	$	417,224	$	(103,154	)	$	319,197

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


	2012			2011			2010
Current
Federal	$	66,957		$	39,274		$	50,698
State		7,696			6,803			(934	)
Foreign		37,753			25,276			44,137
Total Current		112,406			71,353			93,901
Deferred
Federal		15,927			(19,681	)		1,646
State		2,230			(3,822	)		561
Foreign		(5,836	)		(12,403	)		1,033
Total Deferred		12,321			(35,906	)		3,240
Total Income Taxes	$	124,727		$	35,447		$	97,141

Significant components of our deferred tax assets and liabilities are as follows:


	2012			2011			2010
Deferred tax assets
Insurance	$	11,026		$	8,781		$	7,271
Compensation		39,018			36,082			31,891
Deferred revenue		10,273			10,400			9,772
Pension		12,669			15,001			17,734
Accrued expenses		26,697			28,960			26,629
Tax credits and carryforwards		18,803			18,308			15,242
Other		7,692			9,821			11,957
Total Deferred Tax Assets		126,178			127,353			120,496
Deferred tax liabilities
Tax in excess of book depreciation		(49,609	)		(55,157	)		(50,582	)
LIFO		(15,257	)		(4,975	)		(4,567	)
Amortization		(223,216	)		(223,091	)		(261,584	)
Other		(8,609	)		(8,373	)		(8,569	)
Total Deferred Tax Liabilities		(296,691	)		(291,596	)		(325,302	)
Net Deferred Tax Liabilities	$	(170,513	)	$	(164,243	)	$	(204,806	)

A reconciliation of income tax computed at the U.S. federal statutory tax rate to the effective income tax rate is as follows:


	2012			2011			2010
Tax (benefit) at U.S. statutory rate		35.0	%		(35.0	%)		35.0	%
State income taxes, net of federal benefit		1.3	%		5.7	%		(1.0	%)
Non-U.S. taxes		(5.1	%)		(18.0	%)		(2.1	%)
Non-deductible impairment charges		—			94.2	%		—
Other		(1.3	%)		(12.5	%)		(1.5	%)
Total Effective Income Tax Rate		29.9	%		34.4	%		30.4	%

The tax rate for fiscal 2011 reflects the impact of goodwill and intangible asset impairment charges, the majority of which are nondeductible for income tax purposes. Excluding the impact of the impairment charges, our fiscal 2011 effective tax rate was 26.7%.

No provision has been made for U.S. federal income taxes on certain undistributed earnings of foreign subsidiaries that we intend to permanently invest or that may be remitted substantially tax-free. The total of undistributed earnings that would be subject to federal income tax if remitted under existing law is approximately $400,021 at October 26, 2012. Determination of the unrecognized deferred tax liability related to these earnings is not practicable because of the complexities with its hypothetical calculation. Upon distribution of these earnings, we will be subject to U.S. taxes and withholding taxes payable to various foreign governments. A credit for foreign taxes already paid would be available to reduce the U.S. tax liability.

Income taxes paid during 2012, 2011 and 2010 are $110,124, $83,051 and $74,882, respectively.

At each period end, it is necessary for us to make certain estimates and assumptions to compute the provision for income taxes including but not limited to the expected operating income (or loss) for the year, projections of the proportion of income (or loss) earned and taxed in the foreign jurisdictions and the extent to which this income (or loss) may also be taxed in the United States, permanent and temporary differences, the likelihood of deferred tax assets being realized and the outcome of uncertain tax positions. Our income tax returns, like those of most companies, are periodically audited by domestic and foreign tax authorities. These audits include questions regarding our tax filing positions, including the timing and amount of deductions and the allocation of income among various tax jurisdictions. At any one time, multiple tax years are subject to audit by the various tax authorities. We record an accrual for uncertain tax positions after evaluating the positions associated with our various income tax filings. A number of years may elapse before a particular matter for which we have established an accrual is audited and fully resolved or clarified. We adjust our tax contingencies accrual and income tax provision in the period in which matters are effectively settled with tax authorities at amounts different from our established accrual, the statute of limitations expires for the relevant taxing authority to examine the tax position or when more information becomes available.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (excluding interest and penalties) for fiscal year 2010 through 2012 is as follows:


Gross unrecognized tax benefits at October 30, 2009	$	33,397
Increases in tax positions for prior years		211
Increases in tax positions for current year		2,857
Settlements		(11,424	)
Lapse in statute of limitations		(7,224	)
Gross unrecognized tax benefits at October 29, 2010	$	17,817
Increases in tax positions for prior years		323
Decreases in tax positions for prior years		(505	)
Increases in tax positions for current year		2,164
Settlements		(171	)
Lapse in statute of limitations		(6,680	)
Gross unrecognized tax benefits at October 28, 2011	$	12,948
Increases in tax positions for prior years		159
Decreases in tax positions for prior years		(447	)
Increases in tax positions for current year		2,165
Settlements		(2,957	)
Lapse in statute of limitations		(1,903	)
Gross unrecognized tax benefits at October 26, 2012	$	9,965

We recognize interest and penalties related to unrecognized tax benefits in income tax expense. We had recognized accrued interest and penalties relating to unrecognized tax benefits of $2,582, $4,620 and $5,907 as of October 26, 2012, October 28, 2011 and October 29, 2010, respectively. The gross amount of interest expense/(income) and penalties included in tax expense for the year ended October 26, 2012, October 28, 2011 and October 29, 2010 was $(2,038), $(1,287) and $(7,289), respectively.

The total amount of unrecognized tax benefits that would affect our effective tax rate if recognized was $8,718, $12,203 and $15,646 as of October 26, 2012, October 28, 2011 and October 29, 2010, respectively.

The company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and numerous state and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2007. The Internal Revenue Service (IRS) concluded its examination of our U.S. federal tax returns for the fiscal years ended 2009 and 2010 in October 2012. There were no material adjustments to our income tax expense or balance of unrecognized tax benefits as a result of the IRS examination. We are currently under audit in several state and foreign jurisdictions. We also expect various statutes of limitation to expire during the next 12 months. Due to the uncertain response of taxing authorities, a range of outcomes cannot be reasonably estimated at this time.