INCOME TAXES

The Company's income tax expense was $100.5 million, $49.6 million and $94.5 million for the years 2015, 2014 and 2013, respectively. The Company's effective income tax rate was 32.4%, 32.2%, and 29.3% for 2015, 2014 and 2013, respectively.

The increase in income tax expense in 2015 as compared to 2014 is primarily due to an increase in income before income taxes. The effective tax rate increased in 2015 as compared to 2014 primarily due to a one-time, incremental annual tax benefit associated with multi-year California Enterprise Zone credits recognized in 2014, partially offset by a $8.0 million discrete tax benefit recognized in 2015 attributable to the deductions for losses on the investments in a consolidated subsidiary.

The decrease in income tax expense in 2014 as compared to 2013 is primarily due to a decrease in income before income taxes. The effective tax rate increased in 2014 as compared to 2013 primarily due to a $15.2 million discrete tax benefit recognized in 2013, attributable to the finalization in July 2013 of the U.S. federal tax audit of tax years 2003 – 2008, and an unfavorable impact in the mix of foreign earnings, partially offset by a $3.7 million tax benefit that was recorded during the year ended November 30, 2014, as a result of reversing a deferred tax liability associated with undistributed foreign earnings.

The Company's income tax expense differed from the amount computed by applying the U.S. federal statutory income tax rate of 35% to income before income taxes as follows:



	Year Ended
	November 29, 2015					November 30, 2014					November 24, 2013
	(Dollars in thousands)
Income tax expense at U.S. federal statutory rate	$	108,639		35.0	%	$	53,849		35.0	%	$	112,914		35.0	%
State income taxes, net of U.S. federal impact	8,938			2.9	%	7			—		3,994			1.2	%
Change in valuation allowance	—			—		—			—		5,169			1.6	%
Impact of foreign operations	(7,286		)	(2.3	)%	(5,296		)	(3.4	)%	(17,160		)	(5.3	)%
Reassessment of tax liabilities	(7,577		)	(2.4	)%	(3,466		)	(2.3	)%	(15,215		)	(4.7	)%
Deduction for investment in subsidiary	(8,060		)	(2.6	)%	—			—		—			—
Write-off of deferred tax assets	1,718			0.6	%	4,899			3.2	%	4,289			1.3	%
Other, including non-deductible expenses	4,135			1.2	%	(448		)	(0.3	)%	486			0.2	%
Total	$	100,507		32.4	%	$	49,545		32.2	%	$	94,477		29.3	%

Impact of foreign operations. The reduction of tax rate benefit in 2015 as compared to 2014 is primarily due to an unfavorable change in the mix of earnings in jurisdictions with lower effective tax rate as compared to 2014.

Reassessment of tax liabilities. In 2015, the tax benefit is primarily attributable to remeasurement of a tax position and the lapse of statues of limitations in various jurisdictions. In 2014, the $3.5 million tax benefit primarily related to the lapse of statutes of limitations in various jurisdictions.

The U.S. and foreign components of income before income taxes were as follows:



	Year Ended
	November 29, 2015		November 30, 2014		November 24, 2013
	(Dollars in thousands)
Domestic	$	194,540	$	31,733	$	86,167
Foreign	115,858		122,121		236,446
Total income before income taxes	$	310,398	$	153,854	$	322,613

Income tax expense (benefit) consisted of the following:



	Year Ended
	November 29, 2015			November 30, 2014			November 24, 2013
	(Dollars in thousands)
U.S. Federal
Current	$	3,299		$	15,470		$	11,294
Deferred	56,155			(1,983		)	20,597
	$	59,454		$	13,487		$	31,891
U.S. State
Current	$	1,334		$	4,096		$	3,732
Deferred	7,604			(4,089		)	3,607
	$	8,938		$	7		$	7,339
Foreign
Current	$	37,488		$	58,156		$	41,931
Deferred	(5,373		)	(22,105		)	13,316
	$	32,115		$	36,051		$	55,247
Consolidated
Current	$	42,121		$	77,722		$	56,957
Deferred	58,386			(28,177		)	37,520
Total income tax expense	$	100,507		$	49,545		$	94,477

Deferred Tax Assets and Liabilities

The Company's deferred tax assets and deferred tax liabilities were as follows:



	November 29, 2015			November 30, 2014
	(Dollars in thousands)
Deferred tax assets
Foreign tax credit carryforwards	$	116,862		$	120,793
State net operating loss carryforwards	12,412			13,014
Foreign net operating loss carryforwards	91,235			87,062
Employee compensation and benefit plans	255,458			272,970
Advance royalties	69,881			99,649
Restructuring and related charges	31,915			49,654
Sales returns and allowances	26,461			33,078
Inventory	17,196			14,533
Property, plant and equipment	16,459			14,966
Other	17,528			45,155
Total gross deferred tax assets	655,407			750,874
Less: Valuation allowance	(75,753		)	(89,814		)
Deferred tax assets, net of valuation allowance	579,654			661,060
Deferred tax liabilities
Unrealized gains or losses on investments	(344		)	(196		)
Total net deferred tax assets	$	579,310		$	660,864

Net deferred tax assets	$	655,063		$	750,678
Valuation allowance	(75,753		)	(89,814		)
Total net deferred tax assets	$	579,310		$	660,864

Foreign tax credit carryforwards. The foreign tax credit carryforwards at November 29, 2015, are subject to expiration through 2021 if not utilized.

Foreign net operating loss carryforwards. As of November 29, 2015, the Company had a deferred tax asset of $91.2 million for foreign net operating loss carryforwards of $316.3 million. Approximately $166.3 million of these operating losses are subject to expiration through 2024 if not utilized, including $4.3 million in 2016. The remaining $150.0 million are available as indefinite carryforwards under applicable tax law.

Valuation Allowance. The following table details the changes in valuation allowance during the year ended November 29, 2015:



		Valuation Allowance at November 30, 2014		Changes in Related Gross Deferred Tax Asset			Charge		Valuation Allowance at November 29, 2015
	(Dollars in thousands)
U.S. state net operating loss carryforwards		$	3,500	$	—		$	—	$	3,500
Foreign net operating loss carryforwards and other foreign deferred tax assets		86,314		(14,061		)	—		72,253
		$	89,814	$	(14,061	)	$	—	$	75,753

At November 29, 2015, the Company's valuation allowance primarily related to its gross deferred tax assets for state and foreign net operating loss carryforwards, which reduced such assets to the amount that will more likely than not be realized.

Unremitted earnings of certain foreign subsidiaries. For the year ended November 29, 2015, management asserted indefinite reinvestment on $100.0 million of undistributed foreign earnings, as management determined that this amount is required to meet ongoing working capital needs in certain foreign subsidiaries; no U.S. income taxes have been provided for such earnings. If the Company were to repatriate such foreign earnings to the United States, the deferred tax liability associated with such earnings would have been approximately $26.5 million.

Uncertain Income Tax Positions

As of November 29, 2015, the Company’s total gross amount of unrecognized tax benefits was $32.7 million, of which $20.6 million could impact the effective tax rate, if recognized, as compared to November 30, 2014, when the Company’s total gross amount of unrecognized tax benefits was $41.6 million, of which $21.9 million could have impacted the effective tax rate, if recognized.

The following table reflects the changes to the Company's unrecognized tax benefits for the year ended November 29, 2015, and November 30, 2014:



	November 29, 2015			November 30, 2014
	(Dollars in thousands)

Unrecognized tax benefits beginning balance	$	41,571		$	37,836
Increases related to current year tax positions	3,687			3,863
Increases related to tax positions from prior years	—			4,858
Decreases related to tax positions from prior years	(4,723		)	—
Settlement with tax authorities	—			—
Lapses of statutes of limitation	(7,576		)	(4,715		)
Other, including foreign currency translation	(255		)	(271		)
Unrecognized tax benefits ending balance	$	32,704		$	41,571

The Company believes that it is reasonably possible that unrecognized tax benefits could decrease within the next twelve months by as much as $2.0 million due to the lapse of statutes of limitations in various jurisdictions.

As of November 29, 2015, and November 30, 2014, accrued interest and penalties primarily relating to non-U.S. jurisdictions were $6.7 million and $9.6 million, respectively.

The Company's income tax returns are subject to examination in the U.S. federal and state jurisdictions and numerous foreign jurisdictions. The following table summarizes the tax years that are either currently under audit or remain open and subject to examination by the tax authorities in the major jurisdictions in which the Company operates:



	Jurisdiction	Open Tax Years
	U.S. federal	2009 – 2015
	California	2006 – 2015
	Belgium	2012 – 2015
	United Kingdom	2013 – 2015
	Spain	2011 – 2015
	Mexico	2010 – 2015
	Canada	2004 – 2015
	China	2011 – 2015
	Hong Kong	2011 – 2015
	India	2008 – 2015
	Italy	2007 – 2015
	France	2012 – 2015
	Japan	2011 – 2015
	Russia	2014 – 2015
	Germany	2009 – 2015