Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

Note 7 — Income Taxes

Income tax expense (benefit) on continuing operations was as follows:

	2011			2010			2009
	(In thousands)
Current
Federal, state and local	$	1,293		$	1,809		$	308
Foreign		28,643			17,216			24,684
		29,936			19,025			24,992
Deferred
Federal, state and local		(51,300	)		4,032			(2,151	)
Foreign		4,172			(74	)		4,037
		(47,128	)		3,958			1,886
Non-current income tax expense (benefit)		23,713			(9,589	)		(4,194	)
	$	6,521		$	13,394		$	22,684

Pretax income (loss) attributable to foreign operations including earnings from discontinued operations, equity method investments and noncontrolling interests were $106.4 million, ($18.7) million and $208 million for the years ended December 31, 2011, January 1, 2011 and January 2, 2010, respectively. Dole has not provided for U.S. federal income and foreign withholding taxes on approximately $2.4 billion of the excess of the amount for financial reporting over the tax basis of investments that are essentially permanent in duration. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances. It is currently not practicable to estimate the amount of deferred tax liability related to investments in these foreign subsidiaries.

Dole’s reported income tax expense (benefit) on continuing operations differed from the expense calculated using the U.S. federal statutory tax rate for the following reasons:

	2011			2010			2009
	(In thousands)
Expense (benefit) computed at U.S. federal statutory income tax rate of 35%	$	14,926		$	(9,702	)	$	34,185
Foreign income taxed at different rates*		(6,637	)		24,535			(16,569	)
State and local income tax, net of federal income taxes		(28,381	)		(323	)		(6,626	)
Valuation allowances		1,514			5,108			12,708
Changes in liabilities for uncertain tax positions, net of tax benefits		24,000			(6,526	)		(4,036	)
Non-deductible goodwill, permanent items and other		1,099			302			3,022
Income tax expense	$	6,521		$	13,394		$	22,684

* Included in foreign income taxed at different rates in 2011, above, are certain immaterial corrections of prior year items related to foreign locations.

Deferred tax assets (liabilities) comprised the following:

	December 31, 2011			January 1, 2011
	(In thousands)
Intangibles	$	(276,172	)	$	(296,944	)
Property, plant and equipment		(128,312	)		(129,103	)
Investment and other asset basis differences		4,156			11,805
Postretirement benefits		84,104			81,290
Operating accruals		56,135			57,405
Tax credit carryforwards		10,491			26,099
Net operating loss and other carryforwards		210,138			187,919
Valuation allowances		(167,842	)		(195,066	)
Other, net		61,628			67,767
	$	(145,674	)	$	(188,828	)

Dole has gross federal, state and foreign net operating loss carryforwards of $301.2 million, $820.6 million and $236.1 million, respectively, at December 31, 2011. Dole has recorded deferred tax assets of $106.2 million for federal net operating loss and other carryforwards, which, if unused, will expire between 2023 and 2031. Dole has recorded deferred tax assets of $40.3 million for state operating loss carryforwards with varying expiration rules, which, if unused, approximately $14.4 million will expire between 2012 and 2021. Dole has recorded deferred tax assets of $0.4 million for state capital loss carryforwards primarily relating to the sale of its fresh-cut flowers operations, which if unused expires in 2014. Dole has recorded deferred tax assets of $63.2 million for foreign net operating loss carryforwards which are subject to varying expiration rules. Tax credit carryforwards of $10.5 million include U.S. general business credit carryforwards of $0.7 million which will expire between 2023 and 2031, $0.5 million of alternative minimum tax credit carryforwards which can be carried forward indefinitely, state tax credit carryforwards of $4.5 million of which $0.9 million expires in 2026 and $3.6 million can be carried forward indefinitely, and foreign minimum tax credit carryovers of $4.8 million which will expire in 2014. Dole has recorded a U.S. deferred tax asset of $53.3 million for disallowed interest expense which, although subject to certain limitations, can be carried forward indefinitely.

A valuation allowance has been established to offset a portion of the federal net operating loss carryforwards and certain deferred tax assets, certain state net operating loss carryforwards, state capital loss carryforwards and certain other state deferred tax assets, certain foreign net operating loss carryforwards, minimum tax credit carryforwards, and certain other deferred tax assets in foreign jurisdictions. Dole has deemed it more likely than not that future taxable income in the relevant taxing jurisdictions will be insufficient to realize all of the related income tax benefits for these assets. The increase in valuation allowances in 2011 for equity related items was $2.4 million and $2.1 million for deferred taxes acquired in the acquisition of 100% of the capital stock of HCE Corporation and its subsidiaries (“SunnyRidge”).

Total deferred tax assets and deferred tax liabilities were as follows:

	December 31, 2011			January 1, 2011
	(In thousands)
Deferred tax assets	$	618,126		$	611,191
Deferred tax asset valuation allowance		(167,842	)		(195,066	)
		450,284			416,125
Deferred tax liabilities		(595,958	)		(604,953	)
Net deferred tax liabilities	$	(145,674	)	$	(188,828	)
Total net current deferred tax assets consist of:
Net current deferred tax assets	$	26,184		$	36,810
Net current deferred tax liabilities*		(21,539	)		(9,143	)
Total net current deferred tax assets		4,645			27,667
Total net non-current deferred tax liabilities consist of:
Net non-current deferred tax assets*		31,358			27,829
Net non-current deferred tax liabilities		(181,677	)		(244,324	)
Total net non-current deferred tax liabilities		(150,319	)		(216,495	)
Total net deferred tax liabilities	$	(145,674	)	$	(188,828	)

* Net current deferred tax liabilities are included in accrued liabilities in the consolidated balance sheet and the net non-current deferred tax assets are classified in other assets, net in the consolidated balance sheet.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits was as follows:

	December 31, 2011			January 1, 2011			January 2, 2010
	(In thousands)
Unrecognized tax benefits — opening balance	$	106,420		$	109,308		$	115,868
Gross increases — tax positions in prior period		29,275			4,807			15,444
Gross decreases — tax positions in prior period		(6,184	)		(1,746	)		(22,721	)
Gross increases — tax positions in current period		9,660			1,774			3,866
Settlements*		(41,155	)		—			(278	)
Lapse of statute of limitations		(589	)		(7,723	)		(2,871	)
Unrecognized tax benefits — ending balance	$	97,427		$	106,420		$	109,308

* 2011 activity represents a $41 million reduction in gross unrecognized tax benefits due to the settlement of the federal income tax audit for the years 2002 – 2005 of which $20 million represents a cash payment.

The total for unrecognized tax benefits, including interest and penalties, was $108 million and $132 million at December 31, 2011 and January 1, 2011, respectively. If recognized, approximately $104 million, net of federal and state tax benefits, would be recorded as a component of income tax expense and accordingly impact the effective tax rate. At this time, Dole believes that it is reasonably possible that the total amount of unrecognized tax benefits could decrease in 2012 by approximately $17 million relating to transfer pricing items as a result of expiration of the statute of limitations.

Dole recognizes accrued interest and penalties related to its unrecognized tax benefits as a component of income taxes in the accompanying consolidated statements of operations. Accrued interest and penalties before tax benefits were $10.6 million and $25.3 million at December 31, 2011 and January 1, 2011, respectively, and are included as a component of other long-term liabilities in the consolidated balance sheets. Interest and penalties recorded in Dole’s consolidated statements of operations for 2011, 2010 and 2009 were ($3.9) million, ($3) million, and $1.7 million, respectively.

Dole Food Company, Inc. or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, Dole is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to 2006.

Income Tax Audits:    Dole believes its tax positions comply with the applicable tax laws and that it has adequately provided for all tax related matters. Matters raised upon audit may involve substantial amounts and could result in material cash payments if resolved unfavorably. Management considers it unlikely that the resolution of these matters will have a material adverse effect on Dole’s results of operations.

Internal Revenue Service Audit:    On August 27, 2009, the IRS completed its examination of Dole’s U.S. federal income tax returns for the years 2002-2005 and issued a Revenue Agent’s report (“RAR”) that included various proposed adjustments, including with respect to the 2003 going-private merger transactions. The IRS proposed that certain funding used in the going-private merger was taxable and that some related investment banking fees were not deductible. The net tax deficiency associated with the RAR was $122 million, plus interest. On October 27, 2009, Dole filed a protest letter challenging the proposed adjustments contained in the RAR and pursued resolution of these issues with the IRS Appeals Division. During the quarter ended October 8, 2011, Dole reached a final settlement with the Appeals Division on all issues. As a result, Dole’s total amount of unrecognized tax benefits decreased by $41 million, of which $20 million represents a cash payment. The tax of $20 million was paid in the fourth quarter of 2011, along with interest of $11 million. The matter is now closed.