Income Taxes

The reconciliation of the provision for income taxes to the amount computed by applying the U.S. federal statutory tax rate to earnings before income taxes is as follows:



	2013			2012			2011
Earnings before income taxes:
Domestic	$	83,962		$	120,158		$	89,409
Foreign	80,559			86,506			96,801
Eliminations	485			2,177			(2,425		)
Total	$	165,006		$	208,841		$	183,785
Computed expected tax expense	$	57,752		$	73,094		$	64,325
Increase (decrease) in income taxes resulting from:
Foreign and R&D tax credits	(3,271		)	(1,029		)	(7,578		)
Foreign tax rates	(10,726		)	(11,126		)	(6,704		)
Export and manufacturing incentives	(3,400		)	(2,275		)	(1,680		)
State taxes, net of federal benefit	1,921			3,346			2,396
Change in valuation allowance for deferred taxes	2,231			(4,030		)	(3,100		)
Change in enacted tax rates	—			(1,303		)	(277		)
Other	2			(298		)	382
Income taxes	$	44,509		$	56,379		$	47,764
Effective income tax rate	27.0		%	27.0		%	26.0		%

At September 28, 2013, various subsidiaries had tax benefit carryforwards totaling $42,489. Much of these tax benefit carryforwards do not expire and can be used to reduce current taxes otherwise due on future earnings of those subsidiaries. The change in the valuation allowance relates to tax benefit carryforwards reflecting recent and projected financial performance, tax planning strategies and statutory tax carryforward periods.

No provision has been made for U.S. federal or foreign taxes on that portion of certain foreign subsidiaries’ undistributed earnings ($672,625 at September 28, 2013) considered to be permanently reinvested. It is not practicable to determine the amount of tax that would be payable if these amounts were repatriated to the U.S.

The components of income taxes are as follows:



	2013			2012			2011
Current:
Federal	$	29,345		$	34,361		$	14,307
Foreign	18,835			20,646			27,746
State	4,545			5,485			2,788
Total current	52,725			60,492			44,841
Deferred:
Federal	(7,542		)	1,239			7,449
Foreign	914			(5,014		)	(5,424		)
State	(1,588		)	(338		)	898
Total deferred	(8,216		)	(4,113		)	2,923
Income taxes	$	44,509		$	56,379		$	47,764

Realization of deferred tax assets is dependent, in part, upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers projected future taxable income and tax planning strategies in making its assessment of the recoverability of deferred tax assets.

The tax effects of temporary differences that generated deferred tax assets and liabilities are as follows:



	September 28, 2013			September 29, 2012
Deferred tax assets:
Benefit accruals	$	164,458		$	219,396
Inventory reserves	29,873			30,953
Tax benefit carryforwards	14,376			14,928
Contract loss reserves not currently deductible	10,885			12,124
Other accrued expenses	17,249			14,563
Total gross deferred tax assets	236,841			291,964
Less valuation allowance	(4,006		)	(1,746		)
Total net deferred tax assets	232,835			290,218
Deferred tax liabilities:
Differences in bases and depreciation of property, plant and equipment	174,743			172,253
Pension	55,157			49,293
Foreign currency	—			1,963
Other	216			415
Total gross deferred tax liabilities	230,116			223,924
Net deferred tax assets	$	2,719		$	66,294

Net deferred tax assets and liabilities are included in the balance sheet as follows:



	September 28, 2013			September 29, 2012
Current assets	$	91,052		$	87,780
Other assets	16,583			16,280
Other accrued liabilities	(539		)	(1,311		)
Long-term liabilities	(104,377		)	(36,455		)
Net deferred tax assets	$	2,719		$	66,294

We have unrecognized tax benefits which, if ultimately recognized, will reduce our annual effective tax rate. A reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties, is as follows:



	September 28, 2013			September 29, 2012
Balance at beginning of year	$	3,923		$	6,696
Decreases as a result of tax positions for prior years	—			(151		)
Reductions as a result of lapse of statute of limitations	(1,969		)	(2,622		)
Settlement of tax positions	(421		)	—
Balance at end of year	$	1,533		$	3,923

We are subject to income taxes in the U.S. and in various states and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require the application of significant judgment. 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 2010. The statute of limitations in several jurisdictions will expire in the next twelve months and we have unrecognized tax benefits of $78, which would be recognized if the statute of limitations expires without the relevant taxing authority examining the applicable returns.

We record interest and penalties related to unrecognized tax benefits in income tax expense. We had accrued interest and penalties of $1,363 and $1,473 at September 28, 2013 and September 29, 2012, respectively. We expensed interest of $309 and $368 for 2013 and 2012, respectively.