8.	Income Taxes

The provision for income taxes for continuing operations included in the Consolidated Statement of Income consisted of the following:


In thousands	2012			2011			2010
Current provision
Federal	$	159,294		$	94,024		$	32,679
State		16,410			7,357			4,889
Foreign		105,073			86,647			91,889

Total current		280,777			188,028			129,457


Deferred provision (benefit)
Federal		74,966			75,663			83,357
State		399			5,567			2,346
Foreign		(18,272	)		(4,427	)		2,365

Total deferred		57,093			76,803			88,068


Total provision for income taxes	$	337,870		$	264,831		$	217,525

The Federal deferred provision includes $10.0 million of net operating losses, $4.9 million of general business credits, and $1.1 million of alternative minimum tax carryforwards used in fiscal 2012 and $16.0 million of net operating losses used in fiscal 2011 and 2010. The foreign deferred provision includes $0.1 million, $0.8 million, and $0.2 million, respectively, of net operating losses used in fiscal 2012, 2011, and 2010, respectively. The Federal deferred provision also includes foreign tax credit carryover of $14.2 million utilized in fiscal 2012. During 2012, 2011, and 2010, we recognized $0.8 million, $1.8 million, and $1.9 million, respectively, of current tax benefit relating to a tax holiday in China. The tax holiday will expire in 2013.

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


In thousands	2012		2011		2010
Domestic income	$	724,132	$	531,888	$	386,913
Foreign income		380,999		363,945		292,111

Pre-tax income from continuing operations	$	1,105,131	$	895,833	$	679,024

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


In thousands	2012			2011			2010
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		0.3			(0.9	)		(0.1	)
Differences in foreign and U.S. tax rates		(4.2	)		(4.3	)		(3.7	)
State income taxes, net of federal tax impact		1.0			0.7			0.7
Resolution of prior years’ tax matters		—			0.9			(1.2	)
Valuation allowance		0.1			0.1			0.2
IRC 199 manufacturing deduction		(1.7	)		(1.4	)		(0.8	)
Other items, net		0.1			(0.5	)		1.2

		30.6	%		29.6	%		31.3	%

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


In thousands	2012			2011
Deferred tax assets:
Employee benefit related items	$	156,034		$	136,387
Tax credit carryforwards		5,665			26,861
Tax loss carryforwards		122,895			134,088
Inventories		29,952			26,553
Other, net		63,266			20,065
Valuation allowance - Current Assets		(5,281	)		—
Valuation allowance - Other Assets		(117,354	)		(123,052	)

Total deferred tax assets		255,177			220,902

Deferred tax liabilities:
Depreciation and amortization in excess of book expense		56,218			33,114
Other, net		—			11,712
Intangibles		109,788			44,782

Total deferred tax liabilities		166,006			89,608

Net deferred tax asset	$	89,171		$	131,294

The net deferred tax assets are reflected in the accompanying balance sheets as follows:


In thousands	2012			2011

Current deferred tax assets, included in Other current assets	$	90,510		$	74,295
Long-term deferred tax asset		67,101			73,123
Current deferred tax liability, included in Other current liabilities		(2,247	)		(3,001	)
Long-term deferred tax liability, included in Other (non-current liabilities)		(66,193	)		(13,123	)

Net deferred tax asset	$	89,171		$	131,294

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		61.9		14.3		14.3		None
U.S. state operating losses		1,952.0		100.7		97.5		Various
Foreign losses		31.0		7.9		7.9	$	3.9 - 2014 to 2017
							$	4.0 - None

Alternative minimum tax credits		N/A		3.2		—		None

State tax credits		N/A		0.4		0.4		2026
Foreign tax credits		N/A		1.5		—	$	1.5 - 2016 to 2018
Various international tax credits		N/A		0.5		0.3		None

Because our Plan of Reorganization provided for substantial changes in our ownership, there were annual limitations on all of U.S. federal net operating loss carryforwards, all of which have been fully utilized as of October 26, 2012. The U.S. state limitations vary by taxing jurisdiction.

At least annually, we reassess our need for valuation allowances and adjust the allowance balances where it is appropriate based upon past, current, and projected profitability in the various geographic locations in which we conduct business and 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.

Valuation allowances currently recorded that arose in pre-emergence years requires us to apply fresh start accounting. As of October 26, 2012, there were $62.4 million of valuation reserves against pre-emergence net operating loss carryforwards.

As of October 26, 2012, 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 were $723.3 million at October 26, 2012.

Unrecognized tax benefits are as follows:


In thousands	2012			2011
Balance, beginning of year	$	10,370		$	6,746
Interest included in the beginning balance		(1,271	)		—
Additions for current year tax positions and acquisition		25,735			4,984
Additions for prior year tax positions		167			255
Reductions for prior year tax positions		(1,530	)		(765	)
Reductions for changes in judgments		—			(850	)

Balance, end of year	$	33,471		$	10,370

As of October 26, 2012, $8.4 million of the net unrecognized tax benefit would affect the effective tax rate if recognized. As of October 28, 2011, total interest and penalties of approximately $1.7 million were recorded as part of unrecognized tax benefits on the Consolidated Balance Sheet. As of October 26, 2012, total interest of approximately $2.8 million was reclassified in the Company’s Consolidated Balance Sheet to “other liabilities,” while penalties of approximately $1.0 million are included in the ending net unrecognized tax benefit above. It is not expected that the total amount of unrecognized tax benefit will decrease within the next twelve months.

With respect to tax years subject to examination by the domestic taxing authorities, the Company’s tax years prior to 2009 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-domestic perspective, the major locations in which we conduct business are as follows: United Kingdom – 2010 forward is open for examination; South Africa – 2009 forward is open for examination; Australia – 2008 forward is open for examination; Chile – 2007 forward is open for examination; China – 2007 forward is open for examination; and Canada – 2008 forward is open for examination. There are a number of smaller entities in other countries that generally have open tax years ranging from 3 to 5 years.