Hormel Foods 2013 Annual Report Download - page 52

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primarily from the generation of future taxable income.
Significant components of the deferred income tax liabilities
and assets are as follows:
October 27, October 28,
(in thousands) 2013 2012
Deferred tax liabilities:
Tax over book depreciation $ (89,823) $ (91,545)
Book/tax basis difference
from acquisitions (25,442) (26,295)
Other, net (92,813) (76,851)
Deferred tax assets:
Post-retirement benefits 127,093 147,278
Stock options 32,036 32,210
Deferred compensation 25,089 23,115
Insurance accruals 19,007 16,728
Vacation accruals 15,073 14,905
Promotional accruals 10,779 7,524
Federal benefit of state tax 7,786 9,965
Pension benefits 5,249 96,641
Other, net 64,595 59,130
Net deferred tax assets $ 98,629 $ 212,805
Reconciliation of the statutory federal income tax rate to the
Company’s effective tax rate is as follows:
2013 2012 2011
U.S. statutory rate 35.0% 35.0% 35.0%
State taxes on income,
net of federal tax benefit 2.7 2.5 2.7
Domestic production
activities deduction (2.4) (2.6) (2.6)
All other, net (1.7) (1.5) (1.8)
Effective tax rate 33.6% 33.4% 33.3%
No provision has been made for U.S. federal income taxes
on certain undistributed earnings of foreign subsidiaries and
joint ventures that we intend 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 $69.2 million
as of October 27, 2013. Determination of the unrecognized
deferred tax liability related to these earnings is not practi-
cable because of the complexities with its hypothetical calcu-
lation. 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 fiscal 2013, 2012, and 2011
were $226.2 million, $226.7 million, and $227.3 million,
respectively.
A reconciliation of the beginning and ending balance of the
investments measured at fair value using significant unob-
servable inputs (Level 3) is as follows:
(in thousands) 2013 2012
Beginning Balance $ 33,668 $ 21,847
Purchases, issuances, and
settlements (net) 7,288 9,316
Unrealized gains 2,718 478
Realized gains 1,471 1,812
Interest and dividend income 638 215
Ending Balance $ 45,783 $ 33,668
The Company has commitments totaling $85.0 million for the
private equity investments within the pension plans, of which
$42.1 million and $53.2 million remain unfunded at fiscal year
end 2013 and 2012, respectively. These commitments include
$27.1 million and $15.0 million for domestic and foreign equity
investments, respectively, for fiscal year end 2013 compared
to the $34.5 million and $18.7 million for domestic and foreign
equity investments, respectively, for fiscal year end 2012.
Funding for future private equity capital calls will come from
existing pension plan asset investments and not from additional
cash contributions into the Company’s pension plans.
NOTE J
INCOME TAXES
The components of the provision for income taxes are as
follows:
(in thousands) 2013 2012 2011
Current:
U.S. Federal $ 231,359 $ 216,620 $ 202,084
State 30,671 26,303 26,978
Foreign 5,334 5,783 3,826
Total current 267,364 248,706 232,888
Deferred:
U.S. Federal 1,080 4,443 6,358
State (194) 225 394
Foreign 181 – –
Total deferred 1,067 4,668 6,752
Total provision for
income taxes $ 268,431 $ 253,374 $ 239,640
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. The Company believes that,
based upon its lengthy and consistent history of profitable
operations, it is more likely than not that the net deferred tax
assets of $98.6 million will be realized on future tax returns,