Income Taxes

The components of the provision for income taxes are as follows:



Fiscal Years	2013		2012		2011
Current:
Federal	$	16,325	$	3,250	$	(1,447	)
State and local	3,413		1,163		949
Foreign	5,653		4,854		4,861
	25,391		9,267		4,363
Deferred	1,059		2,775		17,612
Provision for Income Taxes	$	26,450	$	12,042	$	21,975

The following table reconciles the United States statutory income tax rate with our effective income tax rate:



Fiscal Years	2013		2012		2011
United States statutory rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal tax benefit	3.8		2.8		2.7
Foreign earnings taxed at different rates	(0.4	)	(2.8	)	1.1
Change in tax contingency reserve	(1.7	)	2.8		0.4
Share-based compensation	—		0.1		0.6
Disposition of subsidiary	—		(3.8	)	—
Permanent differences and other, net	(0.6	)	(0.8	)	0.1
Effective income tax rate	36.1	%	33.3	%	39.9	%

The change in tax contingency reserve in fiscal year 2013 was the result of the expiration of certain statutes and the favorable resolution of other tax matters, offset by reserve additions during the year. The change in the tax contingency reserve in fiscal year 2012 was the result of reserve additions related to a Canadian transfer pricing assessment which is being appealed, offset by the expiration of certain statutes. The change in the tax contingency reserve in fiscal year 2011 was the result of the expiration of certain statutes and the favorable resolution of other tax matters, offset by reserve additions during the year.

The tax effects of temporary differences that give rise to deferred tax assets and liabilities are as follows:



Fiscal Years	2013			2012
Deferred tax liabilities:
Inventory	$	(18,190	)	$	(20,699	)
Depreciation	(18,819		)	(20,182		)
Intangibles	(44,757		)	(40,944		)
Derivative financial instruments	(563		)	—
Other	(2,707		)	(14		)
Total deferred tax liabilities	(85,036		)	(81,839		)
Deferred tax assets:
Compensation and employees benefits	44,577			47,367
Accruals and reserves	9,208			13,127
Share-based payments	3,778			5,645
Derivative financial instruments	—			552
Other	5,293			5,955
Gross deferred tax assets	62,856			72,646
Less valuation allowance	(3,876		)	(4,719		)
Total deferred tax assets	58,980			67,927
Net deferred tax liabilities	$	(26,056	)	$	(13,912	)

The deferred tax assets include $4,298 and $4,844 related to state net operating loss carry-forwards which expire between fiscal year 2013 and fiscal year 2033, and $391 and $363 related to foreign net operating loss carry-forwards at June 29, 2013 and June 30, 2012, respectively.

We recognize a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. The valuation allowance of $3,876 and $4,719 at June 29, 2013 and June 30, 2012, respectively, relates to state net operating loss carry-forwards and foreign net operating loss carry-forwards.

We have foreign tax credit carry-forwards of $435, generated during fiscal year 2011, which expire in fiscal year 2021. We have determined that no valuation allowance is necessary as of June 29, 2013.

We have not provided U.S. income taxes and foreign withholding taxes on undistributed earnings from our foreign subsidiaries of approximately $57,300 and $59,100 as of June 29, 2013 and June 30, 2012, respectively. These earnings are considered to be indefinitely reinvested in the operations of such subsidiaries. It is not practicable to estimate the amount of tax that may be payable upon distribution.

We continue to recognize interest and penalties related to uncertain tax positions as a component of income tax expense. Net tax-related interest and penalties were immaterial for the years reported. As of June 29, 2013 and June 30, 2012, we had $1,620 and $1,784, respectively, of accrued interest and penalties related to uncertain tax positions, of which $1,353 and $1,373 would favorably affect our effective tax rate in any future periods, if recognized.

We file income tax returns in the United States, Canada, Ireland and multiple state jurisdictions. We have substantially concluded on all U.S. Federal and Canadian income tax examinations through fiscal years 2010 and 2004, respectively. With few exceptions, we are no longer subject to state and local income tax examinations prior to fiscal year 2009.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



Fiscal Years	2013			2012
Beginning balance	$	11,328		$	14,157
Tax positions related to current year:
Gross increase	1,550			2,068
Gross decrease	—			—
Tax positions related to prior years:
Gross increase	170			1,605
Gross decrease	(161		)	(3,599		)
Settlements	(2,147		)	(47		)
Lapses in statutes of limitations	(1,402		)	(2,856		)
Ending balance	$	9,338		$	11,328

As of June 29, 2013 and June 30, 2012, the total amount of unrecognized tax benefits was $9,338 and $11,328, respectively, of which $2,665 and $3,683 would favorably affect the effective tax rate, if recognized. We are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next 12 months.