INCOME TAXES

12 Months Ended

Dec. 31, 2011

INCOME TAXES

INCOME TAXES

Note 16 — INCOME TAXES

(in thousands)	2011		2010		2009
U.S. income before income taxes	$	188,641	$	221,576	$	148,447
Non-U.S. income before income taxes	103,582		105,708		91,863
Income before income taxes	$	292,223	$	327,284	$	240,310
Income tax expense consists of the following components:
Current tax expense:
U.S. federal	$	49,310	$	70,894	$	51,921
Foreign	31,225		28,689		26,019
State and local	859		9,925		4,904
Total current tax expense	81,394		109,508		82,844
Deferred tax expense:
U.S. federal	13,267		2,017		(22		)
Foreign	5,126		5,734		4,232
State and local	5,113		341		746
Total deferred tax expense	23,506		8,092		4,956
Total income tax expense	$	104,900	$	117,600	$	87,800

The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities are presented below.

(in thousands)	2011			2010
Deferred Tax Assets:
Accounts receivable, principally due to allowances for returns and doubtful accounts	$	9,511		$	7,458
Inventories, principally due to additional costs inventoried for tax purposes	25,890			17,949
Employee compensation and benefits accrued for financial reporting purposes	141,228			99,487
Foreign net operating losses	22,524			18,910
Foreign tax credits	9,001			6,650
Other	4,583			3,706
Total deferred tax assets	212,737			154,160
Less valuation allowance	(31,590		)	(29,682		)
Total deferred tax assets, after valuation allowance	$	181,147		$	124,478

(in thousands)	2011		2010
Deferred Tax Liabilities:
Plant and equipment, principally due to differences in depreciation, capitalized interest, and capitalized overhead	$	149,002	$	137,560
Goodwill and intangible assets, principally due to differences in amortization	129,205		86,313
Other	3,546		60
Total deferred tax liabilities	281,753		223,933
Deferred tax liabilities, net	$	100,606	$	99,455

The net deferred tax liabilities are reflected in the balance sheet as follows:

(in thousands)	2011		2010
Deferred tax assets (included in prepaid expense and other current assets)	$	74,979	$	58,834
Deferred tax liabilities	175,585		158,289
Net deferred tax liabilities	$	100,606	$	99,455

The Company’s effective tax rate differs from the federal statutory rate due to the following items:

	2011					2010					2009
				% of					% of					% of
				Income					Income					Income
(dollars in thousands)	Amount			Before Tax		Amount			Before Tax		Amount			Before Tax
Computed “expected” tax expense on income before taxes at federal statutory rate	$	102,278		35.0	%	$	114,549		35.0	%	$	84,109		35.0	%
Increase (decrease) in taxes resulting from:
State and local income taxes net of federal income tax benefit	3,881			1.3		6,673			2.0		3,672			1.5
Foreign tax rate differential	(626		)	(0.2	)	(3,383		)	(1.0	)	(2,181		)	(0.9	)
Manufacturing tax benefits	(4,200		)	(1.4	)	(5,775		)	(1.8	)	(3,710		)	(1.5	)
Other	3,567			1.2		5,536			1.7		5,910			2.4
Actual income tax expense	$	104,900		35.9	%	$	117,600		35.9	%	$	87,800		36.5	%

As of December 31, 2011, the Company had foreign net operating loss carryovers of approximately $69.6 million that are available to offset future taxable income.  Approximately $21.1 million of the carryover expires over the period 2014-2023.  The balance has no expiration.  In addition, the Company had $9.0 million of foreign tax credit carryover that is available to offset future tax.  This carryover expires in the year 2018.

Current authoritative guidance issued by the FASB requires that a valuation allowance be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.  The Company has, and continues to generate, both net operating losses and deferred tax assets in certain jurisdictions for which a valuation allowance is required.  The Company’s management determined that a valuation allowance of $31.6 million and $29.7 million against deferred tax assets primarily associated with the foreign net operating loss carryover and the foreign tax credit carryover was necessary at December 31, 2011 and 2010, respectively.

Provision has not been made for U.S. or additional foreign taxes on $305.4 million of undistributed earnings of foreign subsidiaries because those earnings are considered to be indefinitely reinvested in the operations of those subsidiaries.  It is not practical to estimate the amount of tax that might be payable on the eventual remittance of such earnings.

The Company had total unrecognized tax benefits of $25.6 million and $24.0 million for the years ended December 31, 2011 and 2010 respectively. The approximate amount of unrecognized tax benefits that would impact the effective income tax rate if recognized in any future periods was $18.5 million and $16.8 million for the years ended December 31, 2011 and 2010, respectively.

A reconciliation of the beginning and ending amount of unrecognized tax benefits, in millions, is as follows:

	2011			2010
Balance at beginning of year	$	24.0		$	11.6
Additions based on tax positions related to the current year	2.0			1.3
Additions for tax positions of prior years	5.9			13.0
Reductions for tax positions of prior years	(1.2		)	(0.7		)
Reductions due to a lapse of the statute of limitations	(1.2		)	(0.8		)
Settlements	(3.9		)	(0.4		)
Balance at end of year	$	25.6		$	24.0

The Company recognizes interest and penalties related to unrecognized tax benefits as components of income tax expense. The Company had approximately $6.9 million and $7.8 million accrued for interest and penalties, net of tax benefits, at December 31, 2011 and 2010, respectively.

As a result of the 2010 acquisition of the Food Americas operations of Alcan Packaging, the Company recorded $7.7 million of unrecognized tax benefits and $6.7 million of interest and penalties as of December 31, 2010 related to pre-acquisition tax positions of prior years.  A corresponding asset related to the indemnity provisions was also recorded for these amounts.

During the next 12 months it is reasonably possible that a reduction of gross unrecognized tax benefits will occur in an amount of up to $6.0 million as a result of the resolution of positions taken on previously filed returns.

The Company and its subsidiaries are subject to U.S. federal and state income tax as well as income tax in multiple international jurisdictions.  The Company’s U.S. federal income tax returns prior to 2010 have been audited and settled.  With few exceptions, the Company is no longer subject to examinations by tax authorities for years prior to 2006 in the significant jurisdictions in which it operates.