Income Taxes

12 Months Ended

Dec. 01, 2012

Income Taxes Disclosure [Abstract]

Income Taxes Disclosure

Note 9: Income Taxes
Income from continuing operations before income taxes and income from equity method investments			2012		2011		2010
United States		$	69,287	$	48,782	$	50,271
Non-U.S.			20,261		53,638		26,347
Total		$	89,548	$	102,420	$	76,618
Components of the provision for income tax expense (benefit)			2012		2011		2010
Current:
	U.S. federal	$	25,637	$	6,286	$	3,678
	State		2,663		1,191		(586)
	Non-U.S.		18,999		17,994		7,779
			47,299		25,471		10,871
Deferred:
	U.S. federal		(12,314)		7,515		9,345
	State		(398)		676		811
	Non-U.S.		(4,108)		(2,451)		(694)
			(16,820)		5,740		9,462
Total		$	30,479	$	31,211	$	20,333
Reconciliation of effective income tax			2012		2011		2010
Statutory U.S. federal income tax rate		$	31,342	$	35,847	$	26,816
State income taxes, net of federal benefit			1,472		1,202		1,486
Foreign dividend repatriation			(9,004)		(536)		-
Foreign operations			(7,911)		(3,028)		(4,265)
Interest income not taxable in the U.S.			(1,802)		(1,784)		(2,402)
Reduction in unrecognized tax benefits			-		-		(3,231)
Change in valuation allowance			5,502		-		615
Tax impact of special charges, net			10,209		-		-
Other			671		(490)		1,314
Total		$	30,479	$	31,211	$	20,333
Deferred income tax balances at each year-end related to					2012		2011
Depreciation and amortization				$	(32,731)	$	(8,829)
Employee benefit costs					71,100		39,917
Foreign tax credit carryforward					13,510		2,259
Tax loss carryforwards					12,355		9,641
Other					22,669		9,316
					86,903		52,304
Valuation allowance					(12,325)		(3,737)
Net deferred tax assets				$	74,578	$	48,567
The difference between the change in the deferred tax assets in the balance sheet and the deferred tax provision is primarily due to the defined benefit pension adjustments.

Valuation allowances principally relate to foreign net operating loss carryforwards where the future potential benefits do not meet the more-likely-than-not realization test. The increase in the valuation allowance of $8,588 during 2012 is primarily due to recording a valuation allowance on deferred tax assets in one of our legacy non-U.S. entities, as well as some of our purchased non-U.S. entities, that do not meet the more-likely-than-not realization test.

Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those deferred tax assets and liabilities are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more-likely-than-not to be realized. We believe it is more-likely-than-not that forecasted income, together with the tax effects of the deferred tax liabilities and tax planning strategies, will be sufficient to fully recover the net deferred tax assets. In the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made.

U.S. income taxes have not been provided on approximately $388,540 undistributed earnings of non-U.S. subsidiaries. We intend to indefinitely reinvest these undistributed earnings. In the event these earnings are later distributed to the U.S., such distributions would likely result in additional U.S. tax that may be offset, at least in part by associated foreign tax credits.

While non-U.S. operations have been profitable overall, there are cumulative tax losses of $40,027 in twenty different countries. These tax losses can be carried forward to offset the income tax liabilities on future income in these countries. Cumulative tax losses of $24,894 can be carried forward indefinitely, while the remaining $15,133 of tax losses must be utilized during 2013 to 2020.

The U.S. has a foreign tax credit carryforward of $13,510 which will expire between 2019 and 2022.

The table below sets forth the changes to our gross unrecognized tax benefit as a result of uncertain tax positions, excluding accrued interest, for fiscal year ended December 1, 2012.  We do not anticipate that the total unrecognized tax benefits will change significantly within the next twelve months.

		2012
Balance at beginning of year	$	5,584
Tax positions related to the current year:
Additions		1,215
Tax positions related to prior years:
Additions		297
Reductions		(1,844)
Settlements		(67)
Lapses in applicable statutes of limitation		(299)
Balance at end of year	$	4,886

Included in the balance of unrecognized tax benefits as of December 1, 2012, are potential benefits of $4,310 that, if recognized, would affect the effective tax rate.

We report accrued interest and penalties related to unrecognized tax benefits in income tax expense. For the fiscal year ended December 1, 2012, we recognized a net expense for interest and penalties of $25 relating to unrecognized tax benefits and had net accumulated accrued interest and penalties of $666 as of December 1, 2012. For the fiscal year ended December 3, 2011, we recognized net benefit for interest and penalties of $400 relating to unrecognized tax benefits and had net accumulated accrued interest and penalties of $709 as of December 3, 2011.

We are subject to U.S. federal income tax as well as income tax in numerous state and foreign jurisdictions. We are no longer subject to U.S. federal tax examination for years prior to 2008 or Swiss income tax examination for years prior to 2008. There have been no Swiss income tax examinations for 2008 and subsequent years. We are in various stages of examination and appeal in several state and other foreign jurisdictions. Although the final outcomes of these examinations cannot currently be determined, we believe that we have adequate reserves with respect to these examinations.