Hormel Foods 2015 Annual Report Download - page 58

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Reconciliation of the statutory federal income tax rate to the
Company’s effective tax rate is as follows:
2015 2014 2013
U.S. statutory rate 35.0% 35.0% 35.0%
State taxes on income,
net of federal tax benefi t 2.7 2.8 2.7
Domestic production
activities deduction (2.6) (2.7) (2.4)
All other, net (0.1) (0.8) (1.7)
Effective tax rate 35.0% 34.3% 33.6%
No provision has been made for U.S. federal income taxes on
certain undistributed earnings of foreign subsidiaries and joint
ventures that the Company intends to permanently invest or
that may be remitted substantially tax-free. The total of undis-
tributed earnings that would be subject to federal income tax
if remitted under existing law is approximately $109.3 million
as of October 25, 2015. Determination of the unrecognized
deferred tax liability related to these earnings is not practica-
ble because of the complexities with its hypothetical calcula-
tion. Upon distribution of these earnings, we will be subject
to U.S. taxes and withholding taxes payable to various foreign
governments. A credit for foreign taxes already paid would be
available to reduce the U.S. tax liability.
Total income taxes paid during fi scal years 2015, 2014, and
2013 were $296.5 million, $285.8 million, and $226.2 million,
respectively.
The following table sets forth changes in the unrecognized tax
benefi ts, excluding interest and penalties, for fi scal years 2014
and 2015.
(in thousands)
Balance as of October 27, 2013 $ 20,085
Tax positions related to the current period:
Increases 4,693
Decreases (670)
Tax positions related to prior periods:
Increases 4,455
Decreases (3,245)
Settlements (573)
Decreases related to a lapse of applicable
statute of limitations (2,137)
Balance as of October 26, 2014 $ 22,608
Tax positions related to the current period:
Increases 2,920
Decreases –
Tax positions related to prior periods:
Increases 1,629
Decreases (796)
Settlements (2,839)
Decreases related to a lapse of applicable
statute of limitations (2,185)
Balance as of October 25, 2015 $ 21,337
NOTE K
Income Taxes
The components of the provision for income taxes are as
follows:
(in thousands) 2015 2014 2013
Current:
U.S. Federal $ 299,557 $ 264,533 $ 231,359
State 39,817 34,034 30,671
Foreign 10,526 7,759 5,334
Total current 349,900 306,326 267,364
Deferred:
U.S. Federal 18,451 8,756 1,080
State 1,070 873 (194)
Foreign 458 171 181
Total deferred 19,979 9,800 1,067
Total provision for
income taxes $ 369,879 $ 316,126 $ 268,431
Deferred income taxes refl ect the net tax effects of temporary
differences between the carrying amounts of assets and lia-
bilities for fi nancial reporting purposes and the amounts used
for income tax purposes. The Company believes that, based
upon its lengthy and consistent history of profi table opera-
tions, it is more likely than not the net deferred tax assets of
$22.8 million will be realized on future tax returns, primarily
from the generation of future taxable income. Signifi cant
components of the deferred income tax liabilities and assets
are as follows:
October 25, October 26,
(in thousands) 2015 2014
Deferred tax liabilities:
Goodwill and intangible assets $ (213,312) $ (168,167)
Tax over book depreciation and
basis differences (94,496) (85,623)
Other, net (18,788) (30,252)
Deferred tax assets:
Pension and post-retirement benefi ts 154,306 152,392
Employee compensation
related liabilities 109,061 101,706
Marketing and promotional accruals 37,603 28,703
Other accruals not currently deductible – 13,010
Other, net 48,432 51,082
Net deferred tax assets $ 22,806 $ 62,851