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Income Taxes | 12 Months Ended
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Oct. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Note 7 — Income taxes Income tax expense includes the following:
|  | 2018 |  |  | 2017 |  |  | 2016 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  | $ | 39,837 |  |  | $ | 54,878 |  |  | $ | 44,156 |
State and local |  |  | 1,734 |  |  |  | 3,731 |  |  |  | 2,256 |
Foreign |  |  | 63,522 |  |  |  | 66,352 |  |  |  | 53,836 |
Total current |  |  | 105,093 |  |  |  | 124,961 |  |  |  | 100,248 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  |  | (32,829 | ) |  |  | 3,596 |  |  |  | (2,334 | )
State and local |  |  | 891 |  |  |  | 1,164 |  |  |  | 563 |
Foreign |  |  | (2,011 | ) |  |  | (5,232 | ) |  |  | (1,826 | )
Total deferred |  |  | (33,949 | ) |  |  | (472 | ) |  |  | (3,597 | )
|  | $ | 71,144 |  |  | $ | 124,489 |  |  | $ | 96,651 |
Earnings before income taxes of domestic operations, which are calculated after intercompany profit eliminations, were $192,643, $181,840 and $156,723 in 2018, 2017 and 2016, respectively. On December 22, 2017 the Act was enacted. It reduces the U.S. federal corporate income tax rate from 35 percent to 21 percent. We have an October 31 fiscal year end, therefore the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of 23.34 percent for our fiscal year ending October 31, 2018, and 21 percent for subsequent fiscal years. The statutory tax rate of 23.34 percent was applied to earnings in the current year. The Act requires us to revalue our existing U.S. deferred tax balance to reflect the lower statutory tax rate and pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred from U.S. taxes. As a result, during 2018, we recorded a provisional tax benefit of $49,082 to reflect the revaluation of our tax assets and liabilities at the reduced corporate tax rate. We also recorded a provisional tax expense of $27,618 to reflect the transition tax on previously deferred foreign earnings. The net tax effect of these discrete items resulted in a decrease of $21,464 in income tax expense for 2018. We intend to pay the transition tax in installments over the eight-year period allowable under the Act. The transition tax is primarily included in other long-term liabilities in the Consolidated Balance Sheet at October 31, 2018. The amounts recorded are considered a provisional estimate under the U.S. Securities and Exchange Commission Staff Accounting Bulletin No. 118. The provisional calculations may change after various components of the computation are finalized. Furthermore, we are still analyzing certain aspects of the Act and related interpretive guidance and refining our calculations which could potentially affect the measurement of these balances or potentially give rise to new or additional deferred tax amounts. Certain provisions of the Act will impact the Company starting in 2019. These provisions include, but are not limited to, the creation of the base erosion anti-abuse tax, a general limitation of U.S. federal income taxes on dividends from foreign subsidiaries, a new provision designed to tax global intangible low-taxed income and the repeal of the domestic production activities deduction. We continue to evaluate the future impacts of these provisions and, as of October 31, 2018, have not recorded any impact of any of these future provisions. As discussed in Note 2, in the first quarter of 2018 we adopted a new standard which simplifies the accounting for share-based payment transactions of which excess tax benefits of $9,498 were reported as net cash provided by operating activities in 2018 and $7,079 and $3,476 of excess tax benefits were reclassified from net cash used in financing activities to net cash provided by operating activities in 2017 and 2016, respectively. This guidance requires that excess tax benefits and tax deficiencies be recognized as income tax expense or benefit in the Consolidated Statements of Income rather than as additional paid-in capital. Our income tax provision for 2018 includes a favorable adjustment to unrecognized tax benefits of $1,120 related to the lapse of statute of limitations. Our income tax provision for 2017 includes a discrete tax expense of $1,070 related to nondeductible acquisition costs. Our income tax provision for 2016 also includes discrete tax benefits. 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. A reconciliation of the U.S. statutory federal rate to the worldwide consolidated effective tax rate follows:
|  | 2018 |  |  | 2017 |  |  | 2016 |
Statutory federal income tax rate |  |  | 23.34 | % |  |  | 35.00 | % |  |  | 35.00 | %
Transition Tax |  |  | 6.16 |  |  |  | — |  |  |  | — |
Tax Rate Change Deferred Tax Remeasurement |  |  | (10.94 | ) |  |  | — |  |  |  | — |
Share-Based and Other Compensation |  |  | (1.45 | ) |  |  | — |  |  |  | — |
Domestic Production Deduction |  |  | (0.82 | ) |  |  | (1.48 | ) |  |  | (1.43 | )
Foreign tax rate variances, net of foreign tax credits |  |  | (0.46 | ) |  |  | (4.69 | ) |  |  | (4.59 | )
State and local taxes, net of federal income tax benefit |  |  | 0.45 |  |  |  | 0.76 |  |  |  | 0.50 |
Amounts related to prior years |  |  | (0.21 | ) |  |  | 0.03 |  |  |  | (1.20 | )
Tax benefit from previously taxed dividends paid |  |  | — |  |  |  | — |  |  |  | (1.67 | )
Other – net |  |  | (0.21 | ) |  |  | — |  |  |  | (0.38 | )
Effective tax rate |  |  | 15.86 | % |  |  | 29.62 | % |  |  | 26.23 | %
Earnings before income taxes of international operations, which are calculated before intercompany profit elimination entries, were $255,877, $238,451 and $211,771 in 2018, 2017 and 2016, 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 $1,088,183 and $1,026,793 at October 31, 2018 and 2017, 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 these basis differences because of the multiple methods by which these differences could reverse and the impact of withholding, US state and local taxes and currency translation considerations. At October 31, 2018 and 2017, total unrecognized tax benefits were $2,891 and $3,781, respectively. The amounts that, if recognized, would impact the effective tax rate were $2,411 and $3,273 at October 31, 2018 and 2017, 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 2018, 2017 and 2016 is as follows:
|  | 2018 |  |  | 2017 |  |  | 2016 |
Balance at beginning of year |  | $ | 3,781 |  |  | $ | 3,336 |  |  | $ | 6,258 |
Additions based on tax positions related to the current year |  |  | 310 |  |  |  | 529 |  |  |  | 522 |
Additions for tax positions of prior years |  |  | 40 |  |  |  | 621 |  |  |  | 310 |
Reductions for tax positions of prior years |  |  | (120 | ) |  |  | (150 | ) |  |  | (140 | )
Settlements |  |  | — |  |  |  | — |  |  |  | (3,091 | )
Lapse of statute of limitations |  |  | (1,120 | ) |  |  | (555 | ) |  |  | (523 | )
Balance at end of year |  | $ | 2,891 |  |  | $ | 3,781 |  |  | $ | 3,336 |
At October 31, 2018 and 2017, we had accrued interest and penalty expense related to unrecognized tax benefits of $538 and $623, 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 2015 through 2018 tax years; tax years prior to the 2015 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 2012. 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:
|  | 2018 |  |  | 2017 |
Deferred tax assets: |  |  |  |  |  |  |  |
Employee benefits |  | $ | 56,622 |  |  | $ | 84,109 |
Other accruals not currently deductible for taxes |  |  | 18,186 |  |  |  | 28,579 |
Tax credit and loss carryforwards |  |  | 16,652 |  |  |  | 23,976 |
Inventory adjustments |  |  | 4,451 |  |  |  | 8,778 |
Total deferred tax assets |  |  | 95,911 |  |  |  | 145,442 |
Valuation allowance |  |  | (14,862 | ) |  |  | (14,891 | )
Total deferred tax assets |  |  | 81,049 |  |  |  | 130,551 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 171,304 |  |  |  | 252,489 |
Other - net |  |  | 669 |  |  |  | 1,132 |
Total deferred tax liabilities |  |  | 171,973 |  |  |  | 253,621 |
Net deferred tax liabilities |  | $ | (90,924 | ) |  | $ | (123,070 | )
At October 31, 2018, we had $6,804 of tax credit carryforwards of which have an indefinite carryforward period. We also had $2,751 Federal, $64,899 state and $15,678 foreign operating loss carryforwards, and $20,149 capital loss carryforward, of which $89,635 will expire in 2019 through 2038, and $13,842 of which has an indefinite carryforward period. The net change in the valuation allowance was a decrease of $29 in 2018 and an increase of $6,587 in 2017. The valuation allowance of $14,862 at October 31, 2018, 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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