Note 10 – Income Taxes

The components of income before income taxes were taxed under the following jurisdictions:

(In thousands)	2015		2014		2013

Domestic	$	121,614	$	135,445	$	262,220
Foreign		10,175		12,568		9,178

Income before income taxes	$	131,789	$	148,013	$	271,398

Income tax expense consists of the following:

(In thousands)	2015			2014			2013

Current tax expense:
Federal	$	50,272		$	45,723		$	69,565
Foreign		4,042			2,346			2,608
State and local		4,886			3,905			6,723

Current tax expense		59,200			51,974			78,896

Deferred tax (benefit) expense:
Federal		(13,739	)		(2,469	)		17,694
Foreign		(1,180	)		890			(376	)
State and local		(899	)		(4,916	)		1,895

Deferred tax (benefit) expense		(15,818	)		(6,495	)		19,213

Income tax expense	$	43,382		$	45,479		$	98,109

No provision is made for U.S. income taxes applicable to undistributed earnings of foreign subsidiaries that are indefinitely reinvested in foreign operations. It is not practicable to compute the potential deferred tax liability associated with these undistributed foreign earnings. The Company has approximately $81.0 million of undistributed foreign earnings for which it has not recorded deferred tax liabilities.

The difference between the reported income tax expense and a tax determined by applying the applicable U.S. federal statutory income tax rate to income before income taxes is reconciled as follows:

(In thousands)	2015			2014			2013

Expected income tax expense	$	46,126		$	51,805		$	94,989
State and local income tax, net of federal benefit		2,673			3,355			6,405
Effect of foreign statutory rate different from U.S. and other foreign adjustments		(654	)		(1,094	)		(1,026	)
Valuation allowance changes		—			(5,732	)		—
U.S. production activities deduction		(3,500	)		(4,025	)		(4,445	)
Goodwill disposition		646			—			1,790
Tax contingency changes		—			—			(140	)
Permanent adjustment to deferred tax liabilities		(4,218	)		—			—
Other, net		2,309			1,170			536

Income tax expense	$	43,382		$	45,479		$	98,109

During 2015, the Company had an adjustment to a deferred tax liability of $4.2 million, or seven cents per diluted share, resulting from the acquisition of a foreign subsidiary.

During 2014, the Company released a valuation allowance of $5.7 million, or ten cents per diluted share, related to certain state income tax credits. As a result of legislative changes enacted in 2014, the Company now expects to be able to use such credits within the foreseeable future.

The Company includes interest and penalties related to income tax matters as a component of income tax expense. The net reduction to income tax expense related to penalties and interest was immaterial in 2015, 2014, and 2013.

The Internal Revenue Service is currently auditing the Company's 2013 tax return and completed its audit of the Company's 2012 tax return during 2014, the result of which was immaterial to the consolidated financial statements. The Company is currently under audit in various other jurisdictions.

The statute of limitations is still open for the Company's federal tax return and most state income tax returns for 2012 and all subsequent years. The statutes of limitations for certain state and foreign returns are also open for some earlier tax years due to differing statute periods. While the Company believes that it is adequately reserved for possible audit adjustments, the final resolution of these examinations cannot be determined with certainty and could result in final settlements that differ from current estimates.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:

(In thousands)	2015			2014

Deferred tax assets:
Inventories	$	14,802		$	12,815
Other postretirement benefits and accrued items		15,294			14,550
Pension		2,349			4,792
Other reserves		9,823			10,262
Federal and foreign tax attributes		7,403			6,451
State tax attributes, net of federal benefit		21,716			22,928
Share-based compensation		3,397			3,016

Total deferred tax assets		74,784			74,814
Less valuation allowance		(17,650	)		(17,119	)

Deferred tax assets, net of valuation allowance		57,134			57,695

Deferred tax liabilities:
Property, plant, and equipment		43,592			57,089
Other		1,546			1,721

Total deferred tax liabilities		45,138			58,810

Net deferred tax asset (liability)	$	11,996		$	(1,115	)

As of December 26, 2015, after consideration of the federal impact, the Company had state income tax credit carryforwards of $3.3 million, all of which expire by 2018, and other state income tax credit carryforwards of $10.1 million with unlimited lives. The Company had state net operating loss (NOL) carryforwards with potential tax benefits of $8.4 million expiring between 2017 and 2030. The state tax credit and NOL carryforwards are offset by valuation allowances totaling $11.6 million.

As of December 26, 2015, the Company had foreign tax attributes with potential tax benefits of $7.3 million which have an unlimited life. These attributes were offset by valuation allowances of $3.7 million.

Income taxes paid were approximately $49.9 million in 2015, $47.3 million in 2014, and $80.1 million in 2013.