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Income Taxes | 12 Months Ended
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Oct. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Note 7 — Income taxes Income tax expense includes the following:
|  | 2019 |  |  | 2018 |  |  | 2017 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  | $ | 40,012 |  |  | $ | 39,837 |  |  | $ | 54,878 |
State and local |  |  | 3,429 |  |  |  | 1,734 |  |  |  | 3,731 |
Foreign |  |  | 51,590 |  |  |  | 63,522 |  |  |  | 66,352 |
Total current |  |  | 95,031 |  |  |  | 105,093 |  |  |  | 124,961 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  |  | 1,470 |  |  |  | (32,829 | ) |  |  | 3,596 |
State and local |  |  | 633 |  |  |  | 891 |  |  |  | 1,164 |
Foreign |  |  | (3,121 | ) |  |  | (2,011 | ) |  |  | (5,232 | )
Total deferred |  |  | (1,018 | ) |  |  | (33,949 | ) |  |  | (472 | )
|  | $ | 94,013 |  |  | $ | 71,144 |  |  | $ | 124,489 |
Earnings before income taxes of domestic operations, which are calculated after intercompany profit eliminations, were $222,435 $192,643 and $181,840 in 2019, 2018 and 2017, respectively. On December 22, 2017 the U.S. Tax Cuts and Jobs Act ("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 was phased in, resulting in a U.S. statutory federal rate of 23.34 percent for our fiscal year ended October 31, 2018, and 21.00 percent for subsequent fiscal years. The statutory tax rate of 21.00 percent was applied to earnings in the current year. Our income tax provision for 2018 included 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. Subsequent to the enactment of the Act, the SEC staff issued SAB 118, which provided a measurement period of up to one year after the enactment date for companies to finalize the recognition of the income tax effects of the Act. As of January 31, 2019, our provisional accounting for the effects of the Act was complete. As a result, during 2019, and within the one year measurement period provided by SAB 118, we recorded tax expense of $4,866 to the provisional amounts recognized in 2018 due to changes in interpretations and assumptions and the finalizations of estimates. We are paying the transition tax in installments over the eight-year period allowable under the Act. The remaining transition tax is included in other long-term liabilities in the Consolidated Balance Sheet at October 31, 2019. Other provisions of the Act became effective for us in 2019. The Foreign-Derived Intangible Income provision generates a deduction against our U.S. taxable income for U.S. earnings derived offshore that utilize intangibles held in the U.S. Conversely, the Global Intangible Low-Taxed Income (“GILTI”) provision requires us to subject to U.S. taxation a portion of our foreign subsidiary earnings that exceed an allowable return. We elected to treat any GILTI inclusion as a period expense in the year incurred. A reconciliation of the U.S. statutory federal rate to the worldwide consolidated effective tax rate follows:
|  | 2019 |  |  | 2018 |  |  | 2017 |
Statutory federal income tax rate |  |  | 21.00 | % |  |  | 23.34 | % |  |  | 35.00 | %
Transition tax |  |  | 1.46 |  |  |  | 6.16 |  |  |  | — |
Tax rate change deferred tax remeasurement |  |  | — |  |  |  | (10.94 | ) |  |  | — |
Share-based and other compensation |  |  | (0.55 | ) |  |  | (1.45 | ) |  |  | — |
Domestic production deduction |  |  | — |  |  |  | (0.82 | ) |  |  | (1.48 | )
Foreign tax rate variances, net of foreign tax credits |  |  | 1.16 |  |  |  | (0.46 | ) |  |  | (4.69 | )
State and local taxes, net of federal income tax benefit |  |  | 0.74 |  |  |  | 0.45 |  |  |  | 0.76 |
Amounts related to prior years |  |  | (0.55 | ) |  |  | (0.21 | ) |  |  | 0.03 |
Foreign-Derived Intangible Income Deduction |  |  | (1.51 | ) |  |  | — |  |  |  | — |
Global Intangible Low-Taxed Income net of foreign tax credits |  |  | 0.85 |  |  |  | — |  |  |  | — |
Other – net |  |  | (0.79 | ) |  |  | (0.21 | ) |  |  | — |
Effective tax rate |  |  | 21.81 | % |  |  | 15.86 | % |  |  | 29.62 | %
Earnings before income taxes of international operations, which are calculated before intercompany profit elimination entries, were $208,669, $255,877 and $238,451 in 2019, 2018 and 2017, 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 $1,101,736 and $1,088,183 at October 31, 2019 and 2018, 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, 2019 and 2018, total unrecognized tax benefits were $2,909 and $2,891, respectively. The amounts that, if recognized, would impact the effective tax rate were $2,429 and $2,411 at October 31, 2019 and 2018, respectively. During 2019, unrecognized tax benefits related primarily to foreign positions and, as recognized, a 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 2019, 2018 and 2017 is as follows:
|  | 2019 |  |  | 2018 |  |  | 2017 |
Balance at beginning of year |  | $ | 2,891 |  |  | $ | 3,781 |  |  | $ | 3,336 |
Additions based on tax positions related to the current year |  |  | 370 |  |  |  | 310 |  |  |  | 529 |
Additions for tax positions of prior years |  |  | 547 |  |  |  | 40 |  |  |  | 621 |
Reductions for tax positions of prior years |  |  | — |  |  |  | (120 | ) |  |  | (150 | )
Lapse of statute of limitations |  |  | (899 | ) |  |  | (1,120 | ) |  |  | (555 | )
Balance at end of year |  | $ | 2,909 |  |  | $ | 2,891 |  |  | $ | 3,781 |
At October 31, 2019 and 2018, we had accrued interest and penalty expense related to unrecognized tax benefits of $593 and $538, 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 2016 through 2019 tax years; tax years prior to the 2016 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 2013. 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:
|  | 2019 |  |  | 2018 |
Deferred tax assets: |  |  |  |  |  |  |  |
Employee benefits |  | $ | 73,025 |  |  | $ | 56,622 |
Other accruals not currently deductible for taxes |  |  | 16,294 |  |  |  | 18,186 |
Tax credit and loss carryforwards |  |  | 18,074 |  |  |  | 16,652 |
Inventory adjustments |  |  | 5,269 |  |  |  | 4,451 |
Total deferred tax assets |  |  | 112,662 |  |  |  | 95,911 |
Valuation allowance |  |  | (15,301 | ) |  |  | (14,862 | )
Total deferred tax assets |  |  | 97,361 |  |  |  | 81,049 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 169,009 |  |  |  | 171,304 |
Other - net |  |  | 655 |  |  |  | 669 |
Total deferred tax liabilities |  |  | 169,664 |  |  |  | 171,973 |
Net deferred tax liabilities |  | $ | (72,303 | ) |  | $ | (90,924 | )
At October 31, 2019, we had $8,132 of tax credit carryforwards, $1,424 of which expires in 2028-2029 and $6,708 of which has an indefinite carryforward period. We also had $169 Federal, $61,136 state, $18,435 foreign operating loss carryforwards, and a $20,149 capital loss carryforward, of which $84,464 will expire in 2020 through 2039, and $15,425 of which has an indefinite carryforward period. The net change in the valuation allowance was an increase of $439 in 2019 and a decrease of $29 in 2018. The valuation allowance of $15,301 at October 31, 2019, 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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