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INCOME TAXES | 12 Months Ended
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Oct. 31, 2012
INCOME TAXES | NOTE 12—INCOME TAXES The Company files income tax returns in the U.S. federal jurisdiction, various U.S. state and local jurisdictions, and various non-U.S. jurisdictions. The provision for income taxes consists of the following (Dollars in millions):
For the years ended October 31, |  | 2012 |  |  | 2011 |  |  | 2010 |
Current |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 19.7 |  |  | $ | 25.6 |  |  | $ | 15.2 |
State and local |  |  | 5.4 |  |  |  | 4.4 |  |  |  | 5.8 |
Non-U.S. |  |  | 11.5 |  |  |  | 25.2 |  |  |  | 14.9 |
|  |  | 36.6 |  |  |  | 55.2 |  |  |  | 35.9 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 10.3 |  |  |  | 11.0 |  |  |  | (0.4 | )
State and local |  |  | 2.7 |  |  |  | 5.0 |  |  |  | 0.7 |
Non-U.S. |  |  | 7.2 |  |  |  | (6.2 | ) |  |  | 7.3 |
|  |  | 20.2 |  |  |  | 9.8 |  |  |  | 7.6 |
|  | $ | 56.8 |  |  | $ | 65.0 |  |  | $ | 43.5 |
Non-U.S. income before income tax expense was $76.5 million, $130.7 million and $155.5 million in 2012, 2011, and 2010, respectively. The following is a reconciliation of the provision for income taxes based on the federal statutory rate to the Company’s effective income tax rate:
For the years ended October 31, |  | 2012 |  |  | 2011 |  |  | 2010 |
United States federal tax rate |  |  | 35.00 | % |  |  | 35.00 | % |  |  | 35.00 | %
Non-U.S. tax rates |  |  | -1.40 | % |  |  | -10.00 | % |  |  | -15.00 | %
State and local taxes, net of federal tax benefit |  |  | 2.20 | % |  |  | 1.90 | % |  |  | 1.30 | %
United States tax credits |  |  | -0.70 | % |  |  | -0.80 | % |  |  | -4.00 | %
Unrecognized tax benefits |  |  | -5.60 | % |  |  | 12.40 | % |  |  | -1.50 | %
Valuation allowance |  |  | 1.50 | % |  |  | -14.40 | % |  |  | 1.90 | %
Withholding tax |  |  | 1.10 | % |  |  | 1.10 | % |  |  | 1.30 | %
Foreign partnerships |  |  | -4.20 | % |  |  | -1.00 | % |  |  | — |
Other items |  |  | 2.50 | % |  |  | 2.80 | % |  |  | -1.50 | %
|  |  | 30.40 | % |  |  | 27.00 | % |  |  | 17.50 | %
The components of the Company’s deferred tax assets and liabilities as of October 31 for the years indicated were as follows (Dollars in millions):
|  | 2012 |  |  | 2011 |
Deferred Tax Assets |  |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 89.5 |  |  | $ | 132.3 |
Minimum pension liabilities |  |  | 61.9 |  |  |  | 51.0 |
Insurance operations |  |  | 9.1 |  |  |  | 9.7 |
Incentives |  |  | 4.1 |  |  |  | 6.6 |
Environmental reserves |  |  | 7.4 |  |  |  | 7.1 |
Inventories |  |  | 2.7 |  |  |  | — |
State income tax |  |  | 9.2 |  |  |  | 9.0 |
Postretirement |  |  | 7.4 |  |  |  | 9.5 |
Other |  |  | 5.7 |  |  |  | 4.1 |
Derivatives instruments |  |  | 0.5 |  |  |  | — |
Interest |  |  | 6.2 |  |  |  | 7.0 |
Allowance for doubtful accounts |  |  | 4.5 |  |  |  | 3.3 |
Restructuring reserves |  |  | 1.1 |  |  |  | 2.6 |
Deferred compensation |  |  | 2.5 |  |  |  | 2.9 |
Foreign tax credits |  |  | 1.8 |  |  |  | 1.8 |
Vacation accruals |  |  | 1.4 |  |  |  | 1.2 |
Stock options |  |  | 1.4 |  |  |  | 2.1 |
Severance |  |  | 0.2 |  |  |  | — |
Workers compensation accruals |  |  | 2.5 |  |  |  | 1.0 |
Total Deferred Tax Assets |  |  | 219.1 |  |  |  | 251.2 |
Valuation allowance |  |  | (56.6 | ) |  |  | (45.0 | )
Net Deferred Tax Assets |  |  | 162.5 |  |  |  | 206.2 |
Deferred Tax Liabilities |  |  |  |  |  |  |  |
Properties, plants and equipment |  |  | 121.6 |  |  |  | 108.4 |
Goodwill and other intangible assets |  |  | 96.4 |  |  |  | 80.0 |
Inventories |  |  | — |  |  |  | 1.0 |
Derivative instruments |  |  | — |  |  |  | 0.3 |
Foreign exchange |  |  | 7.8 |  |  |  | 1.2 |
Timberland transactions |  |  | 95.7 |  |  |  | 95.7 |
Pension |  |  | 13.6 |  |  |  | 22.6 |
Total Deferred Tax Liabilities |  |  | 335.1 |  |  |  | 309.2 |
Net Deferred Tax Liability |  | $ | (172.6 | ) |  | $ | (103.0 | )
As of October 31, 2012, the Company had tax benefits from non-U.S. net operating loss carryforwards of approximately $89.0 million and approximately $0.5 million of state net operating loss carryfowards. During 2012, the change in net operating loss carryforwards was primarily related to a settlement with the Dutch taxing authorities and to offset a Dutch taxable gain. The company has recorded valuation allowances of $56.6 million and $45.0 million as of October 31, 2012 and 2011, respectively against the tax benefits from non-U.S. net deferred tax assets. As of October 31, 2012, the Company had undistributed earnings from certain non-U.S. subsidiaries that are intended to be permanently reinvested in non-U.S. operations. Because these earnings are considered permanently reinvested, no U.S. tax provision has been accrued related to the repatriation of these earnings. It is not practicable to determine the additional tax, if any, which would result from the remittance of these amounts. A reconciliation of the beginning and ended amount of unrecognized tax benefits is as follows:
|  | 2012 |  |  | 2011 |  |  | 2010 |
Balance at November 1 |  | $ | 79.6 |  |  | $ | 35.4 |  |  | $ | 45.5 |
Increases in tax provisions for prior years |  |  | 6.8 |  |  |  | 49.7 |  |  |  | 0.1 |
Decreases in tax provisions for prior years |  |  | (2.1 | ) |  |  | (1.6 | ) |  |  | (2.7 | )
Increases in tax positions for current years |  |  | 3.9 |  |  |  | — |  |  |  | 1.5 |
Settlements with taxing authorities |  |  | (32.5 | ) |  |  | (4.5 | ) |  |  | (6.7 | )
Lapse in statute of limitations |  |  | (0.3 | ) |  |  | — |  |  |  | — |
Currency translation |  |  | (6.6 | ) |  |  | 0.6 |  |  |  | (2.3 | )
Balance at October 31 |  | $ | 48.8 |  |  | $ | 79.6 |  |  | $ | 35.4 |
The 2012 decrease in settlements with taxing authorities is primarily related to a settlement with the Dutch tax authorities relative to the application of Dutch Article 13(a) participation exemption. The Company files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various foreign jurisdictions. With a few exceptions, the Company is subject to audit by various taxing authorities for 2008 through the current fiscal year. The company has completed its U.S. federal tax audit for the tax years through 2009. The Company has open tax years in the Netherlands for the fiscal period 2001 through the current fiscal period. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense net of tax, as applicable. As of October 31, 2012 and October 31, 2011, the Company had $1.7 million and $0.9 million, respectively, accrued for the payment of interest and penalties. The Company has estimated the reasonably possible expected net change in unrecognized tax benefits through October 31, 2013 based on lapses of the applicable statutes of limitations of unrecognized tax benefits. The estimated net decrease in unrecognized tax benefits for the next 12 months ranges from $0 to $28.0 million. Actual results may differ materially from this estimate. The Company paid income taxes of $56.9 million, $64.9 million and $29.3 million in 2012, 2011, and 2010, respectively.

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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 Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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