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:



	2014			2013			2012
Earnings before income taxes:
Domestic	$	107,395		$	83,962		$	120,158
Foreign	111,716			80,559			86,506
Eliminations	(188		)	485			2,177
Total	$	218,923		$	165,006		$	208,841
Computed expected tax expense	$	76,623		$	57,752		$	73,094
Increase (decrease) in income taxes resulting from:
Foreign and R&D tax credits	(1,105		)	(3,271		)	(1,029		)
Foreign tax rates	(13,034		)	(10,726		)	(11,126		)
Export and manufacturing incentives	(1,803		)	(3,400		)	(2,275		)
State taxes, net of federal benefit	2,236			1,921			3,346
Change in valuation allowance for deferred taxes	1,477			2,231			(4,030		)
Change in enacted tax rates	(1,160		)	—			(1,303		)
Other	(2,509		)	2			(298		)
Income taxes	$	60,725		$	44,509		$	56,379
Effective income tax rate	27.7		%	27.0		%	27.0		%

At September 27, 2014, various subsidiaries had tax benefit carryforwards totaling $39,158. 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 ($776,664 at September 27, 2014) 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:



	2014			2013			2012
Current:
Federal	$	25,325		$	29,345		$	34,361
Foreign	28,074			18,835			20,646
State	2,305			4,545			5,485
Total current	55,704			52,725			60,492
Deferred:
Federal	5,034			(7,542		)	1,239
Foreign	(1,148		)	914			(5,014		)
State	1,135			(1,588		)	(338		)
Total deferred	5,021			(8,216		)	(4,113		)
Income taxes	$	60,725		$	44,509		$	56,379

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 27, 2014			September 28, 2013
Deferred tax assets:
Benefit accruals	$	189,420		$	164,458
Inventory reserves	31,270			29,873
Tax benefit carryforwards	13,256			14,376
Contract loss reserves not currently deductible	9,943			10,885
Other accrued expenses	18,849			17,249
Total gross deferred tax assets	262,738			236,841
Less valuation allowance	(5,316		)	(4,006		)
Total net deferred tax assets	257,422			232,835
Deferred tax liabilities:
Differences in bases and depreciation of property, plant and equipment	164,817			174,743
Pension	70,124			55,157
Other	486			216
Total gross deferred tax liabilities	235,427			230,116
Net deferred tax assets	$	21,995		$	2,719

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



	September 27, 2014			September 28, 2013
Current assets	$	92,390		$	91,052
Other assets	14,083			16,583
Other accrued liabilities	(547		)	(539		)
Long-term liabilities	(83,931		)	(104,377		)
Net deferred tax assets	$	21,995		$	2,719

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 27, 2014			September 28, 2013
Balance at beginning of year	$	1,533		$	3,923
Decreases as a result of tax positions for prior years	338			—
Reductions as a result of lapse of statute of limitations	—			(1,969		)
Settlement of tax positions	(78		)	(421		)
Balance at end of year	$	1,793		$	1,533

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 2011. The statute of limitations in several jurisdictions will expire in the next twelve months and we have no unrecognized tax benefits to 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 $1,699 and $1,363 at September 27, 2014 and September 28, 2013, respectively. We expensed interest of $348 and $309 for 2014 and 2013, respectively.