INCOME TAXES:

The Company accounts for income taxes using the asset and liability method. Under this method, the provision for income taxes represents income taxes payable or refundable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax bases of the Company’s assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Interest and penalties related to income tax matters are included in the provision for income taxes.

The components of income from continuing operations before income taxes by source of income are as follows (in thousands):



	Fiscal Year Ended		Fiscal Year Ended		Fiscal Year Ended
	September 28, 2012		September 30, 2011		October 1, 2010
United States	$	90,000	$	9,818	$	(63,122	)
Non-U.S.	90,470		112,131		96,108
	$	180,470	$	121,949	$	32,986

The provision for income taxes consists of (in thousands):



	Fiscal Year Ended			Fiscal Year Ended			Fiscal Year Ended
	September 28, 2012			September 30, 2011			October 1, 2010
Current:
Federal	$	63,856		$	7,244		$	10,722
State and local	9,327			9,511			8,325
Non-U.S.	32,301			34,356			29,037
	$	105,484		$	51,111		$	48,084
Deferred:
Federal	$	(42,515	)	$	(22,885	)	$	(31,125	)
State and local	(11,189		)	(8,946		)	(9,300		)
Non-U.S.	(12,909		)	(10,260		)	(6,996		)
	(66,613		)	(42,091		)	(47,421		)
	$	38,871		$	9,020		$	663

Current taxes receivable of $3.1 million at September 28, 2012 are included in “Prepayments and other current assets”. Current taxes payable of $8.4 million at September 30, 2011 are included in “Accrued expenses and other current liabilities”.

The provision for income taxes varies from the amount determined by applying the United States Federal statutory rate to pretax income as a result of the following (all percentages are as a percentage of pretax income):



	Fiscal Year Ended		Fiscal Year Ended		Fiscal Year Ended
	September 28, 2012		September 30, 2011		October 1, 2010
United States statutory income tax rate	35.0	%	35.0	%	35.0	%
Increase (decrease) in taxes, resulting from:
State income taxes, net of Federal tax benefit	1.1		2.2		(2.7	)
Foreign taxes	(7.7	)	(8.4	)	(24.2	)
Permanent book/tax differences	(0.4	)	1.0		2.2
Uncertain tax positions	(1.6	)	(13.9	)	7.2
Tax credits & other	(4.9	)	(8.5	)	(15.5	)
Effective income tax rate	21.5	%	7.4	%	2.0	%

The effective tax rate is based on expected income, statutory tax rates and tax planning opportunities available to the Company in the various jurisdictions in which it operates. Judgment is required in determining the effective tax rate and in evaluating the Company’s tax positions. The Company establishes reserves when, despite the belief that the Company’s tax return positions are supportable, the Company believes that certain positions are likely to be challenged and that the Company may not succeed. The Company adjusts these reserves in light of changing facts and circumstances, such as the progress of a tax audit. The effective tax rate includes the impact of reserve provisions and changes to the reserve that the Company considers appropriate, as well as related interest and penalties. During fiscal 2011, the Company recorded a reduction of approximately $17.0 million related to the remeasurement of an uncertain tax position. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was enacted on December 17, 2010. Under the Act, the Empowerment Zones and non-veteran targeted groups under the Work Opportunity Tax Credit were extended until December 31, 2011. The expiration of the tax credits at December 31, 2011 is reflected in the 2012 effective tax rate.

The effective tax rate is also applied to the quarterly operating results. In the event that there is a significant unusual or one-time item recognized in the Company’s operating results, the tax attributable to that item would be separately calculated and recorded at the same time as the unusual or one-time item.

A number of years may elapse before a particular tax reporting year is audited and finally resolved. The number of years with open tax audits varies depending on the tax jurisdiction. In the United States, the statutes for state income taxes for 1998 and forward remain open. The Company received final notification in November 2012 that the Internal Revenue Service has settled the 2007 and 2008 examination of the Company's tax returns. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, the Company believes that its income tax accruals reflect the probable outcome of known tax contingencies. Unfavorable settlement of any particular issue would require use of the Company’s cash.

As of September 28, 2012, certain subsidiaries have recorded deferred tax assets of $30.3 million associated with accumulated federal, state and foreign net operating loss carryforwards. The Company has approximately $15.2 million valuation allowance as of September 28, 2012 against these carryforwards due to the uncertainty of its realization. In addition, certain subsidiaries have accumulated state net operating loss carryforwards for which no benefit has been recorded as they are attributable to uncertain tax positions. The unrecognized tax benefits, as of September 28, 2012, attributable to these net operating losses was approximately $8.8 million. Due to the uncertain tax position, these net operating losses are not included as components of deferred tax assets as of September 28, 2012. The federal, state and foreign net operating loss carryforwards will expire from 2013 through 2032.

As of September 28, 2012, the Company has approximately $6.7 million of foreign tax credit carryforwards, which expire in 2022. The Company believes it is more likely than not that it will be able to generate taxable income in the future sufficient to utilize these carryforwards, and no valuation allowance is necessary.

As of September 28, 2012 and September 30, 2011, the components of deferred taxes are as follows (in thousands):



	September 28, 2012			September 30, 2011
Deferred tax liabilities:
Property and equipment	$	82,627		$	82,168
Investments	95,445			92,802
Other intangible assets, including goodwill	717,583			742,474
Other	13,095			10,988
Gross deferred tax liability	908,750			928,432
Deferred tax assets:
Insurance	41,443			38,927
Employee compensation and benefits	214,847			190,106
Accruals and allowances	43,781			32,313
Derivatives	31,879			56,207
Net operating loss/credit carryforwards and other	37,509			9,287
Gross deferred tax asset, before valuation allowances	369,459			326,840
Valuation allowances	(15,187		)	(10,426		)
Net deferred tax liability	$	554,478		$	612,018

Current deferred tax assets of $77.9 million and $93.5 million at September 28, 2012 and September 30, 2011 are included in “Prepayments and other current assets,” respectively. Deferred tax liabilities of $632.3 million and $705.5 million at September 28, 2012 and September 30, 2011 are included in “Deferred Income Taxes and Other Noncurrent Liabilities,” respectively.

The Company had approximately $32.0 million of total gross unrecognized tax benefits as of September 28, 2012, all of which, if recognized, would impact the effective tax rate. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits follows (in thousands):



	September 28, 2012
Gross unrecognized tax benefits at September 30, 2011	$	34,040
Additions based on tax positions taken in the current year	2,304
Reductions for tax positions taken in prior years	(254		)
Reductions for remeasurements, settlements and payments	(3,306		)
Reductions due to statute expiration	(807		)

Gross unrecognized tax benefits at September 28, 2012	$	31,977


	September 30, 2011
Gross unrecognized tax benefits at October 1, 2010	$	49,274
Additions based on tax positions taken in the current year	3,353
Additions for tax positions taken in prior years	1,312
Reductions for remeasurements, settlements and payments	(19,331		)
Reductions due to statute expiration	(568		)

Gross unrecognized tax benefits at September 30, 2011	$	34,040

The Company had approximately $8.4 million and $9.6 million accrued for interest and penalties as of September 28, 2012 and September 30, 2011, respectively, and recorded approximately ($1.0) million and ($2.5) million in interest and penalties during fiscal 2012 and fiscal 2011, respectively.

The Company is subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. The Company has substantially concluded all U.S. federal income tax matters for years through 2006, with the exception of certain Work Opportunity Tax Credits and Welfare to Work Tax Credits which are pending the outcome of Protective Refund Claims filed for 1998 through 2006.

The Company has significant operations in approximately 20 states and foreign taxing jurisdictions. The Company has open tax years in these jurisdictions ranging from 1 to 10 years. The Company does not anticipate that any adjustments resulting from tax audits would result in a material change to the results of operations or financial condition.

The Company does not expect the amount of unrecognized tax benefits to significantly change within the next 12 months.