Income Taxes

The provision for income taxes for continuing operations included in the Consolidated Statements of Operations consists of the following:



				As adjusted			As adjusted
In thousands	October 30, 2015			October 31, 2014			October 25, 2013
Current provision
Federal	$	23,673		$	82,618		$	127,030
State	937			5,888			7,113
Foreign	53,278			52,029			69,564
Total current provision	77,888			140,535			203,707
Deferred (benefit) provision
Federal	(59,088		)	2,821			34,391
State	(1,393		)	948			(1,335		)
Foreign	(16,532		)	(10,244		)	4,404
Total deferred (benefit) provision	(77,013		)	(6,475		)	37,460
Total provision for income taxes	$	875		$	134,060		$	241,167

The federal current provision includes a $41.8 million benefit for excess foreign tax credits from dividends paid during fiscal 2015. The foreign deferred provision reflects a charge of $34.0 million for the impact of valuation allowances on certain of the China deferred tax assets.

The federal deferred provision also includes $3.3 million of alternative minimum tax carryforwards used in fiscal 2013. During fiscal 2013, we recognized $0.3 million of current tax benefit relating to a tax holiday in China. The Company's Chinese tax holiday expired in fiscal 2014.

The domestic and foreign components of income from continuing operations before income taxes are as follows:



				As adjusted		As adjusted
In thousands	October 30, 2015			October 31, 2014		October 25, 2013
Domestic (loss) income from continuing operations	$	(73,408	)	$	304,060	$	490,850
Foreign (loss) income from continuing operations	(1,103,721		)	168,118		287,076
Pre-tax (loss) income from continuing operations	$	(1,177,129	)	$	472,178	$	777,926

The reconciliation between the income tax provision recognized in our Consolidated Statements of Operations and the income tax provision computed by applying the statutory federal income tax rate to the income from continuing operations are as follows:



			As adjusted		As adjusted
In thousands	October 30, 2015		October 31, 2014		October 25, 2013
Income tax computed at federal statutory tax rate	35.0	%	35.0	%	35.0	%
Sub-part F income and foreign dividends, net of foreign tax credits	3.5		0.1		0.2
Differences in foreign and U.S. tax rates	(8.1	)	(5.1	)	(4.5	)
State income taxes, net of federal tax impact	—		0.9		0.5
Valuation allowance	(3.5	)	2.2		1.1
IRC 199 manufacturing deduction	0.6		(2.0	)	(1.9	)
Non-deductible impairment charges	(26.6	)	—		—
Other items, net	(1.0	)	(2.7	)	0.6
Effective income tax rate	(0.1	)%	28.4	%	31.0	%

The components of the net deferred tax asset are as follows:



				As adjusted
In thousands	October 30, 2015			October 31, 2014
Deferred tax assets:
Employee benefit related items	$	154,183		$	135,567
Tax credit carryforwards	46,235			4,114
Tax loss carryforwards	149,024			138,334
Inventories	19,478			37,191
Other deferred tax assets, net	20,762			20,156
Valuation allowance, current assets	(66,543		)	(16,618		)
Valuation allowance, non-current assets	(110,182		)	(122,281		)
Total deferred tax assets	212,957			196,463
Deferred tax liabilities:
Depreciation and amortization in excess of book expense	51,830			60,548
Intangibles	31,410			42,315
Total deferred tax liabilities	83,240			102,863
Net deferred tax asset	$	129,717		$	93,600

The net deferred tax assets are reflected in the Consolidated Balance Sheets as follows:



				As adjusted
In thousands	October 30, 2015			October 31, 2014
Current deferred tax assets, included in Other current assets	$	39,464		$	78,102
Long-term deferred tax asset, included in Deferred income taxes	118,913			71,897
Current deferred tax liability, included in Other accrued liabilities	(1,672		)	(1,979		)
Long-term deferred tax liability, included in Other liabilities	(26,988		)	(54,420		)
Net deferred tax asset	$	129,717		$	93,600

The following table summarizes the components of our loss and credit carryforward:



Loss and Credit Carryforward Summary
	Amount
Description - In millions	Gross		Benefit		Valuation Allowance		Expiration Date(s)
Foreign capital losses	$	59.9	$	12.2	$	12.2	None
U.S. state operating losses	1,963.4		101.0		98.4		Various
Foreign operating losses	142.9		35.8		31.4		$33.5 - None $2.2 - 2015 to 2024
State tax credits	N/A		2.0		2.0		Various
Foreign tax credits	N/A		43.2		1.3		$1.3 - 2016 to 2018 $41.9 - 2025
Various international tax credits	N/A		—		—		None

At least annually, we reassess our need for valuation allowances and adjust the allowance balances where it is appropriate based on past, current and projected profitability in the various geographic locations in which we conduct business and the available tax strategies. Additionally, the U.S. carryforwards were reduced upon emergence from bankruptcy due to the rules and regulations in the Internal Revenue Code related to cancellation of indebtedness income that is excluded from taxable income. These adjustments are included in the net operating loss values detailed above.

During the year ended October 30, 2015, the Company determined that it was appropriate to establish $34.0 million of valuation allowances against the previously benefitted deferred tax assets of certain subsidiaries in China. During fiscal 2015, the Company recorded tax expense of $41.4 million relating to the establishment of valuation allowances, comprised of $41.7 million of expense for additions and $0.3 million of benefit for releases. During fiscal 2014, the Company recorded tax expense of $10.5 million relating to the establishment of valuation allowances, comprised of $10.7 million of expense for additions and $0.2 million of benefit for releases. During fiscal 2013, the Company recorded tax expense of $9.8 million relating to the establishment of valuation allowances, comprised of $10.1 million of expense for additions and $0.3 million of benefit for releases. Valuation allowances currently recorded that arose in pre-emergence years require us to apply fresh start accounting. As of October 30, 2015, there were $63.3 million of valuation reserves against pre-emergence net operating loss carryforwards.

As of October 30, 2015, U.S. income taxes, net of foreign taxes paid or payable, have not been provided on the undistributed profits of foreign subsidiaries, as all undistributed profits of foreign subsidiaries are deemed to be permanently reinvested outside of the U.S. It is not practical to determine the United States federal income tax liability, if any, which would be payable if such earnings were not permanently reinvested. Such unremitted earnings of subsidiaries, which have been or are intended to be permanently reinvested, are $604.8 million as of October 30, 2015.

Unrecognized tax benefits are as follows:



In thousands	October 30, 2015			October 31, 2014
Balance, beginning of year	$	77,766		$	77,418
Additions for current year tax positions and acquisition	3,490			794
Additions for prior year tax positions	3,207			3,353
Reductions for prior year tax positions	(1,876		)	(10,540		)
Reclassification to uncertain tax positions	—			6,741
Balance, end of year	$	82,587		$	77,766

As of October 30, 2015, $81.8 million of the net unrecognized tax benefit would affect the effective tax rate if recognized. As of October 30, 2015 and October 31, 2014, total interest of approximately $19.0 million and $15.8 million, respectively, are classified in the Consolidated Balance Sheets as Other liabilities, while penalties of approximately $42.3 million and $42.4 million are included in the ending net unrecognized tax benefit above. Interest and penalties are classified as Income tax provision in the Consolidated Statements of Operations. It is expected that the total amount of unrecognized tax benefit will decrease by $12.9 million within the next twelve months relating to reserves for which statutes will lapse during fiscal 2016.

With respect to tax years subject to examination by the U.S. taxing authorities, the Company’s tax years prior to 2012 have been audited by the Internal Revenue Service and are closed. Additionally, due to the existence of tax loss carryforwards, the same relative periods exist for U.S. state purposes, although some earlier years also remain open. From a non-U.S. perspective, the major locations in which we conduct business are as follows: United Kingdom – 2012 forward are open for examination; South Africa – 2010 forward are open for examination; Australia – 2012 forward are open for examination; Chile – 2011 forward are open for examination; China – 2010 forward are open for examination; and Canada – 2008 forward are open for examination (2008 through 2013 are currently under audit). There are a number of smaller entities in other countries that generally have open tax years ranging from 3 to 5 years.