Income Taxes

The provision for income taxes consisted of the following (U.S. dollars in millions):



	Year ended
	December 30, 2016			January 1, 2016			December 26, 2014
Current:
U.S. federal income tax	$	7.6		$	4.7		$	3.1
State	1.4			0.5			0.9
Non-U.S.	11.0			7.6			5.6
	20.0			12.8			9.6
Deferred:
U.S. federal income tax	(3.3		)	1.6			3.1
State	(0.6		)	0.3			0.4
Non-U.S.	(4.3		)	(1.0		)	1.2
	(8.2		)	0.9			4.7
	$	11.8		$	13.7		$	14.3

Income (loss) before income taxes consisted of the following (U.S. dollars in millions):



	Year ended
	December 30, 2016		January 1, 2016			December 26, 2014
U.S.	$	16.0	$	(49.4	)	$	19.9
Non-U.S.	221.4		129.5			139.0
	$	237.4	$	80.1		$	158.9

10. Income Taxes (continued)

The differences between the reported provision for income taxes and income taxes computed at the U.S. statutory federal income tax rate are explained in the following reconciliation (U.S. dollars in millions):



	Year ended
	December 30, 2016			January 1, 2016			December 26, 2014
Income tax provision (benefit) computed at the U.S. statutory federal rate	$	83.1		$	28.0		$	55.6
Effect of tax rates on non-U.S. operations	(98.8		)	(112.9		)	(50.8		)
Provision for uncertain tax positions	(0.5		)	0.6			0.2
Non-deductible interest	2.0			—			(0.1		)
Foreign exchange	15.1			(17.2		)	(5.6		)
Non-deductible intercompany charges	1.2			(0.3		)	0.4
Non-deductible differences	1.7			0.6			2.1
Non-taxable income/loss	11.8			(2.2		)	(2.4		)
Non-deductible goodwill impairment	0.4			23.1			—
Adjustment to deferred balances	—			(1.2		)	(0.2		)
Other	0.9			(0.4		)	(1.2		)
Other taxes in lieu of income	1.9			1.3			—
Change in deferred rate	(3.4		)	1.4			(0.8		)
Tax credits	—			—			(0.3		)
Increase (decrease) in valuation allowance ⁽¹⁾	(3.6		)	92.9			17.4
Provision for income taxes	$	11.8		$	13.7		$	14.3

_____________

⁽¹⁾ The increase in valuation allowance includes effects of foreign exchange and adjustments to deferred tax balances which were fully offset by valuation allowance.

10. Income Taxes (continued)

Deferred income tax assets and liabilities consisted of the following (U.S. dollars in millions):



		December 30,			January 1,
Deferred tax liabilities:		2016			2016
Current:
	Allowances and other accrued liabilities	$	—		$	(0.9	)
	Inventories	—			(14.0		)
	Total current deferred tax liabilities	—			(14.9		)

Noncurrent:
	Allowances and other accrued liabilities	(2.1		)	—
	Inventories	(14.8		)	—
	Property, plant and equipment	(63.9		)	(64.6		)
	Equity in earnings of unconsolidated companies	(0.2		)	(0.2		)
	Pension	(2.6		)	(2.9		)
	Other noncurrent deferred tax liabilities	(8.1		)	(6.4		)

	Total noncurrent deferred tax liabilities	(91.7		)	(74.1		)
Total current and noncurrent deferred tax liabilities		$	(91.7	)	$	(89.0	)

Deferred tax assets:
Current:
	Net operating loss carryforwards	$	—		$	6.8
	Allowances and other accrued assets	—			11.3
	Inventories	—			5.0
	Total current deferred tax assets	—			23.1
	Valuation allowance	—			(11.2		)
Total net current deferred tax assets		—			11.9

Noncurrent:
	Allowances and other accrued assets	12.8			—
	Inventories	7.1			—
	Pension liability	22.9			21.1
	Property, plant and equipment	1.6			2.0
	Post-retirement benefits other than pension	1.1			0.7
	Net operating loss carryforwards	225.5			209.1
	Capital loss carryover	2.4			3.0
	Other noncurrent assets	24.9			21.3
	Total noncurrent deferred tax assets	298.3			257.2
	Valuation allowance	(232.1		)	(214.6		)
Total net noncurrent deferred tax assets		66.2			42.6

Total deferred tax assets, net		$	66.2		$	54.5

Net deferred tax liabilities		$	(25.5	)	$	(34.5	)

10. Income Taxes (continued)

The valuation allowance increased by $6.3 million in 2016 and by $46.3 million in 2015. The increase in 2016 and 2015 relates primarily to valuation allowance on additional net operating loss carryforwards offset by the effect of a change in judgment about our ability to realize deferred tax assets in future years, due to our current and foreseeable operations.

At December 30, 2016, the valuation allowance includes $0.1 million for which subsequently recognized tax benefits will be recognized directly in contributed capital.

At December 30, 2016, undistributed earnings of the Company’s foreign subsidiaries amounted to $1,453.6 million. Those earnings are considered to be either indefinitely reinvested, or the earnings could be distributed tax free. Accordingly, no taxes have been provided thereon. To the extent the earnings are considered indefinitely reinvested, determination of the amount of unrecognized deferred tax liability is not practicable due to the complexities associated with its hypothetical calculation.

At December 30, 2016, we had approximately $787.3 million of federal and foreign tax operating loss carry-forwards expiring as follows (U.S. dollars in millions):



Expires:
2017	$	11.6
2018	1.4
2019	3.9
2020	0.3
2021 and beyond	39.0
No expiration	731.1
	$	787.3

A reconciliation of the beginning and ending amount of uncertain tax positions excluding interest and penalties is as follows (U.S. dollars in millions):



	December 30, 2016			January 1, 2016			December 26, 2014
Beginning balance	$	3.9		$	3.5		$	3.0
Gross decreases - tax position in prior period	—			—			—
Gross increases - current-period tax positions	0.1			0.8			0.5
Settlements	—			—			—
Lapse of statute of limitations	(0.8		)	(0.4		)	—
Ending balance	$	3.2		$	3.9		$	3.5

We had accrued $3.6 million in 2016 and $3.5 million in 2015, for uncertain tax positions, that, if recognized would affect the effective income tax rate.

The tax years 2012-2016 remain subject to examination by taxing authorities throughout the world in major jurisdictions, such as Costa Rica, Luxembourg, Switzerland and the United States.

We classify interest and penalties on uncertain tax positions as a component of income tax expense in the Consolidated Statements of Income. Accrued interest and penalties related to uncertain tax positions as of December 30, 2016 is $0.9 million and is included in other noncurrent liabilities.