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Income Taxes | 12 Months Ended
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Oct. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Note 8 — Income taxes Income tax expense includes the following:
|  | 2017 |  |  | 2016 |  |  | 2015 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  | $ | 54,878 |  |  | $ | 44,156 |  |  | $ | 36,875 |
State and local |  |  | 3,731 |  |  |  | 2,256 |  |  |  | 1,623 |
Foreign |  |  | 66,352 |  |  |  | 53,836 |  |  |  | 49,153 |
Total current |  |  | 124,961 |  |  |  | 100,248 |  |  |  | 87,651 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  |  | 3,596 |  |  |  | (2,334 | ) |  |  | 4,950 |
State and local |  |  | 1,164 |  |  |  | 563 |  |  |  | 1,031 |
Foreign |  |  | (5,232 | ) |  |  | (1,826 | ) |  |  | (3,881 | )
Total deferred |  |  | (472 | ) |  |  | (3,597 | ) |  |  | 2,100 |
|  | $ | 124,489 |  |  | $ | 96,651 |  |  | $ | 89,751 |
Earnings before income taxes of domestic operations, which are calculated after intercompany profit eliminations, were $181,840, $156,723 and $140,044 in 2017, 2016 and 2015, respectively. Our income tax provision for 2017 includes a discrete tax expense of $1,070 related to nondeductible acquisition costs. On December 18, 2015, the Protecting Americans from Tax Hikes Act of 2015 was enacted which retroactively reinstated the Federal Research and Development Tax Credit (Federal R&D Tax Credit) as of January 1, 2015, and made it permanent. As a result, our income tax provision for 2016 includes a discrete tax benefit of $2,200 related to 2015. The tax rate for 2016 also includes a discrete tax benefit of $6,154 related to dividends paid from previously taxed foreign earnings generated prior to 2015, and a benefit of $2,682 related to the effective settlement of a tax exam. On December 19, 2014, the Tax Increase Prevention Act of 2014 was enacted which retroactively reinstated the Federal Research and Development Tax Credit (Federal R&D Tax Credit) from January 1, 2014 to December 31, 2014 and extended certain other tax provisions. As a result, our income tax provision for 2015 included discrete tax benefits of $2,486 primarily related to 2014. A reconciliation of the U.S. statutory federal rate to the worldwide consolidated effective tax rate follows:
|  | 2017 |  |  | 2016 |  |  | 2015 |
Statutory federal income tax rate |  |  | 35.00 | % |  |  | 35.00 | % |  |  | 35.00 | %
Domestic Production Deduction |  |  | (1.48 | ) |  |  | (1.43 | ) |  |  | (1.47 | )
Foreign tax rate variances, net of foreign tax credits |  |  | (4.69 | ) |  |  | (4.59 | ) |  |  | (3.25 | )
State and local taxes, net of federal income tax benefit |  |  | 0.76 |  |  |  | 0.50 |  |  |  | 0.43 |
Amounts related to prior years |  |  | 0.03 |  |  |  | (1.20 | ) |  |  | (1.04 | )
Tax benefit from previously taxed dividends paid |  |  | — |  |  |  | (1.67 | ) |  |  | — |
Other – net |  |  | — |  |  |  | (0.38 | ) |  |  | 0.16 |
Effective tax rate |  |  | 29.62 | % |  |  | 26.23 | % |  |  | 29.83 | %
The Domestic Production Deduction, enacted by the American Jobs Creation Act of 2004, allows a deduction with respect to income from certain United States manufacturing activities. Earnings before income taxes of international operations, which are calculated before intercompany profit elimination entries, were $238,451, $211,771 and $160,818 in 2017, 2016 and 2015, respectively. Deferred income taxes are not provided on undistributed earnings of international subsidiaries that are intended to be permanently invested in their operations. These undistributed earnings represent the post-income tax earnings under U.S. GAAP not adjusted for previously taxed income which aggregated approximately $1,026,793 and $757,501 at October 31, 2017 and 2016, respectively. Should these earnings be distributed, applicable foreign tax credits, distributions of previously taxed income, and utilization of other attributes would substantially offset taxes due upon the distribution. It is not practical to estimate the amount of additional taxes that might be payable on such undistributed earnings. At October 31, 2017 and 2016, total unrecognized tax benefits were $3,781 and $3,336, respectively. The amounts that, if recognized, would impact the effective tax rate were $3,273 and $2,775 at October 31, 2017 and 2016, respectively. During 2016, unrecognized tax benefits related primarily to foreign positions and, as recognized, a substantial portion of the gross unrecognized tax benefits were offset against assets recorded in the Consolidated Balance Sheet. A reconciliation of the beginning and ending amount of unrecognized tax benefits for 2017, 2016 and 2015 is as follows:
|  | 2017 |  |  | 2016 |  |  | 2015 |
Balance at beginning of year |  | $ | 3,336 |  |  | $ | 6,258 |  |  | $ | 5,812 |
Additions based on tax positions related to the current year |  |  | 529 |  |  |  | 522 |  |  |  | 288 |
Additions for tax positions of prior years |  |  | 621 |  |  |  | 310 |  |  |  | 331 |
Reductions for tax positions of prior years |  |  | (150 | ) |  |  | (140 | ) |  |  | (28 | )
Settlements |  |  | — |  |  |  | (3,091 | ) |  |  | — |
Lapse of statute of limitations |  |  | (555 | ) |  |  | (523 | ) |  |  | (145 | )
Balance at end of year |  | $ | 3,781 |  |  | $ | 3,336 |  |  | $ | 6,258 |
At October 31, 2017 and 2016, we had accrued interest and penalty expense related to unrecognized tax benefits of $623 and $541, respectively. We include interest accrued related to unrecognized tax benefits in interest expense. Penalties, if incurred, would be recognized as other income (expense). We are subject to United States Federal income tax as well as income taxes in numerous state and foreign jurisdictions. We are subject to examination in the U.S. by the Internal Revenue Service (IRS) for the 2014 through 2017 tax years; tax years prior to the 2014 year are closed to further examination by the IRS. Generally, major state and foreign jurisdiction tax years remain open to examination for tax years after 2011. Within the next twelve months, it is reasonably possible that certain statute of limitations periods would expire, which could result in a minimal decrease in our unrecognized tax benefits. Significant components of deferred tax assets and liabilities are as follows:
|  | 2017 |  |  | 2016 |
Deferred tax assets: |  |  |  |  |  |  |  |
Employee benefits |  | $ | 84,109 |  |  | $ | 93,837 |
Other accruals not currently deductible for taxes |  |  | 28,579 |  |  |  | 16,861 |
Tax credit and loss carryforwards |  |  | 23,976 |  |  |  | 11,111 |
Inventory adjustments |  |  | 8,778 |  |  |  | 7,915 |
Total deferred tax assets |  |  | 145,442 |  |  |  | 129,724 |
Valuation allowance |  |  | (14,891 | ) |  |  | (8,304 | )
Total deferred tax assets |  |  | 130,551 |  |  |  | 121,420 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 252,489 |  |  |  | 171,209 |
Other - net |  |  | 1,132 |  |  |  | 1,366 |
Total deferred tax liabilities |  |  | 253,621 |  |  |  | 172,575 |
Net deferred tax liabilities |  | $ | (123,070 | ) |  | $ | (51,155 | )
At October 31, 2017, we had $5,493 of tax credit carryforwards of which $27 will expire in 2022, and $5,466 of which has an indefinite carryforward period. We also had $21,929 Federal, $78,320 state and $13,174 foreign operating loss carryforwards, and $20,149 capital loss carryforward, of which $120,950 will expire in 2018 through 2037, and $12,622 of which has an indefinite carryforward period. The net change in the valuation allowance was an increase of $6,587 in 2017 and a increase of $1,537 in 2016. The valuation allowance of $14,891 at October 31, 2017, related primarily to tax credits and loss carryforwards that may expire before being realized. We continue to assess the need for valuation allowances against deferred tax assets based on determinations of whether it is more likely than not that deferred tax benefits will be realized.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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