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Income Taxes (Tables)

12 Months Ended

Dec. 29, 2012

U.S. and foreign income before taxes are set forth below:



	2012		2011		2010
U.S.	$	504	$	266	$	345
Foreign	1,641		1,393		1,249
	$	2,145	$	1,659	$	1,594

Details of income tax provision (benefit)

The details of our income tax provision (benefit) are set forth below:



		2012			2011			2010
Current:	Federal	$	160		$	78		$	155
	Foreign	314			374			356
	State	35			9			15
		$	509		$	461		526

Deferred:	Federal	91			(83		)	(82		)
	Foreign	(57		)	(40		)	(29		)
	State	(6		)	(14		)	1
		28			(137		)	(110		)
		$	537		$	324		$	416

Effective income tax and tax rate reconciliation

The reconciliation of income taxes calculated at the U.S. federal tax statutory rate to our effective tax rate is set forth below:



	2012					2011					2010
U.S. federal statutory rate	$	751		35.0	%	$	580		35.0	%	$	558		35.0	%
State income tax, net of federal tax benefit	4			0.2		2			0.1		12			0.7
Statutory rate differential attributable to foreign operations	(165		)	(7.7	)	(218		)	(13.1	)	(235		)	(14.7	)
Adjustments to reserves and prior years	(47		)	(2.2	)	24			1.4		55			3.5
Net benefit from LJS and A&W divestitures	—			—		(72		)	(4.3	)	—			—
Change in valuation allowances	14			0.6		22			1.3		22			1.4
Other, net	(20		)	(0.9	)	(14		)	(0.9	)	4			0.2
Effective income tax rate	$	537		25.0	%	$	324		19.5	%	$	416		26.1	%

Details of deferred tax assets (liabilities)

The details of 2012 and 2011 deferred tax assets (liabilities) are set forth below:



	2012			2011
Operating losses and tax credit carryforwards	$	495		$	592
Employee benefits	251			260
Share-based compensation	108			106
Self-insured casualty claims	50			47
Lease-related liabilities	115			134
Various liabilities	82			75
Property, plant and equipment	39			55
Deferred income and other	57			35
Gross deferred tax assets	1,197			1,304
Deferred tax asset valuation allowances	(358		)	(368		)
Net deferred tax assets	$	839		$	936
Intangible assets, including goodwill	$	(256	)	$	(167	)
Property, plant and equipment	(95		)	(121		)
Other	(48		)	(48		)
Gross deferred tax liabilities	$	(399	)	$	(336	)
Net deferred tax assets (liabilities)	$	440		$	600



Reported in Consolidated Balance Sheets as:
Deferred income taxes – current	$	111		$	112
Deferred income taxes – long-term	481			549
Accounts payable and other current liabilities	(5		)	(16		)
Other liabilities and deferred credits	(147		)	(45		)
	$	440		$	600

Loss carryforwards, by year of expiration

At December 29, 2012, the Company has foreign operating and capital loss carryforwards of $1.0 billion and U.S. state operating loss, capital loss and tax credit carryforwards of $1.0 billion and U.S. federal capital loss and tax credit carryforwards of $0.2 billion. These losses are being carried forward in jurisdictions where we are permitted to use tax losses from prior periods to reduce future taxable income and will expire as follows:



	Year of Expiration
	2013		2014-2017		2018-2032		Indefinitely		Total
Foreign	$	21	$	66	$	121	$	836	$	1,044
U.S. state	20		128		848		5		1,001
U.S. federal	—		107		103		—		210
	$	41	$	301	$	1,072	$	841	$	2,255

Unrecognized tax benefits reconciliation

The Company had $309 million and $348 million of unrecognized tax benefits at December 29, 2012 and December 31, 2011, respectively, $184 million and $197 million of which, if recognized, would impact the effective income tax rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:



	2012			2011
Beginning of Year	$	348		$	308
Additions on tax positions - current year	50			85
Additions for tax positions - prior years	23			38
Reductions for tax positions - prior years	(90		)	(58		)
Reductions for settlements	(6		)	(8		)
Reductions due to statute expiration	(16		)	(22		)
Foreign currency translation adjustment	—			5
End of Year	$	309		$	348

Summary of income tax examinations

The following table summarizes our major jurisdictions and the tax years that are either currently under audit or remain open and subject to examination:



Jurisdiction		Open Tax Years
U.S. Federal		2004 – 2012
China		2009 – 2012
United Kingdom		2003 – 2012
Mexico		2006 – 2012
Australia		2008 – 2012

In addition, the Company is subject to various U.S. state income tax examinations, for which, in the aggregate, we had significant unrecognized tax benefits at December 29, 2012, each of which is individually insignificant.

The accrued interest and penalties related to income taxes at December 29, 2012 and December 31, 2011 are set forth below:



	2012		2011
Accrued interest and penalties	$	50	$	53

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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- Definition

Tabular disclosure of income tax examinations that an enterprise is currently subject to or that have been completed in the current period typically including a description of the examination, the jurisdiction conducting the examination, the tax year(s) under examination, the likelihood of an unfavorable settlement, the range of possible losses, the liability recorded, the increase or decrease in the liability from the prior period, and any penalties and interest that have been recorded.

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