Income Taxes

12 Months Ended

Sep. 29, 2012

Income Taxes

Income Taxes

13.Income Taxes

Income before income taxes and the provision for income taxes for fiscal years 2012, 2011 and 2010, consist of the following (in thousands):

	Fiscal 2012			Fiscal 2011			Fiscal 2010
Income before income taxes:
United States	$	486,258		$	248,108		$	118,494
Foreign	89,883			54,639			14,715
Total income before income taxes	$	576,141		$	302,747		$	133,209
Income tax expense:
United States federal:
Current	$	75,932		$	75,225		$	41,770
Deferred	74,042			(3,327		)	(3,694		)
	149,974			71,898			38,076
State and local:
Current	40,270			13,939			11,921
Deferred	(712		)	(1,758		)	(3,235		)
	39,558			12,181			8,686
Total United States	189,532			84,079			46,762
Foreign:
Current	26,860			21,306			6,941
Deferred	(3,751		)	(3,686		)	—
Total foreign	23,109			17,620			6,941
Total income tax expense	$	212,641		$	101,699		$	53,703

Net deferred tax liabilities consist of the following (in thousands) as of:

	September 29, 2012			September 24, 2011
Deferred tax assets:
Section 263A capitalized expenses	$	2,150		$	5,650
Deferred hedging losses	3,919			3,969
Deferred compensation	11,534			7,299
Net operating loss carryforward	1,017			616
Capital loss carryforward	1,418			10,682
Valuation allowance—capital loss carryforward	(1,418		)	(4,488		)
Warranty, obsolete inventory and bad debt allowance	27,421			16,747
Tax credit carryforwards	3,301			5,032
Other reserves and temporary differences	12,412			5,180
Gross deferred tax assets	61,754			50,687
Deferred tax liabilities:
Prepaid expenses	(2,367		)	(2,098		)
Depreciation	(123,044		)	(135,065		)
Intangible assets	(144,329		)	(67,173		)
Other reserves and temporary differences	(10,994		)	—
Gross deferred tax liabilities	(280,734		)	(204,336		)
Net deferred tax liabilities	$	(218,980	)	$	(153,649	)

A reconciliation for continuing operations between the amount of reported income tax expense and the amount computed using the U.S. Federal Statutory rate of 35% is as follows (in thousands):

	Fiscal 2012			Fiscal 2011			Fiscal 2010
Tax at U.S. Federal Statutory rate	$	201,692		$	105,961		$	46,623
Increase (decrease) in rates resulting from:
Foreign tax rate differential	(18,072		)	(9,289		)	(589		)
Non-deductible stock compensation expense	1,024			1,761			632
State taxes, net of federal benefit	27,114			11,276			5,776
Provincial taxes	10,591			6,309			—
Domestic production activities deduction	(9,245		)	(7,831		)	(3,055		)
Acquisition costs	—			4,158			5,380
Federal tax credits	(282		)	(962		)	—
Release of capital loss valuation allowance	(3,071		)	(6,194		)	—
Other	2,890			(3,490		)	(1,064		)
Tax at effective rates	$	212,641		$	101,699		$	53,703

As of September 29, 2012, the Company had a $17.7 million state capital loss carryforward and a state net operating loss carryforward of $11.5 million available to be utilized against future taxable income for years through fiscal 2015 and 2029, respectively, subject to annual limitation pertaining to change in ownership rules under the Internal Revenue Code of 1986, as amended (the “Code”).  Based upon earnings history, the Company concluded that it is more likely than not that the net operating loss carryforward will be utilized prior to its expiration but that the capital loss carryforward will not.  The Company has recorded a valuation allowance against the entire deferred tax asset balance for the capital loss carryforward

The total amount of unrecognized tax benefits as of September 29, 2012 and September 24, 2011 was $24.0 million and $24.4 million, respectively.  The amount of unrecognized tax benefits at September 29, 2012 that would impact the effective tax rate if resolved in favor of the Company is $20.4 million.  As a result of prior acquisitions, the Company is indemnified for up to $16.6 million of the total reserve balance, and the indemnification is capped at CDN $37.9 million.  If these unrecognized tax benefits are resolved in favor of the Company, the associated indemnification receivable, recorded in other long-term assets would be reduced accordingly.  As of September 29, 2012 and September 24, 2011, accrued interest and penalties of $0.6 million and $0.5 million, respectively, were included in the Consolidated Balance Sheets.  The Company recognizes interest and penalties in income tax expense.  Income tax expense for fiscal 2012 included $0.2 million of interest and penalties.

A reconciliation of increases and decreases in unrecognized tax benefits, including interest and penalties, is as follows (in thousands):

	Fiscal 2012			Fiscal 2011			Fiscal 2010
Gross tax contingencies—balance, beginning of year	$	24,419		$	5,480		$	444
Increases from positions taken during prior periods	2,864			—			—
Decreases from positions taken during prior periods	(4,093		)	(236		)	—
Increases from positions taken during current periods	906			19,175			5,036
Decreases resulting from the lapse of the applicable statute of limitations	(140		)	—			—
Gross tax contingencies—balance, end of year	$	23,956		$	24,419		$	5,480

The Company expects to release $3.6 million of unrecognized tax benefits during fiscal 2013 due to the expiration of the statute of limitations.

As of September 29, 2012, the Company had approximately $108.6 million of undistributed international earnings, most of which are Canadian-sourced.  All earnings of the Company’s foreign subsidiaries are considered indefinitely reinvested and no U.S. deferred taxes have been provided on those earnings.  If these amounts were distributed to the U.S. in the form of dividends or otherwise, the Company would be subject to additional U.S. income taxes, which could be material.

Determination of the amount of any unrecognized deferred income tax on these earnings is not practicable because such liability, if any, is dependent on circumstances existing if and when remittance occurs.

The Company is subject to income tax in many jurisdictions both inside and outside of the United States and is currently under routine audit by various jurisdictions for fiscal years 2006 through 2011.  The Company is no longer subject to U.S. federal examination for years prior to fiscal year 2006.