Income Taxes

12 Months Ended

Dec. 29, 2012

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Earnings before taxes is summarized as follows:

	2012		2011		2010
	(dollars in thousands)
Domestic	$	157,471	$	125,730	$	104,421
Foreign	16,969		14,719		9,815
Total	$	174,440	$	140,449	$	114,236

The provision for income taxes is summarized as follows:

	2012			2011		2010
	(dollars in thousands)
Federal	$	42,660		$	33,778	$	31,309
State and local	7,216			7,169		7,052
Foreign	3,867			4,028		3,008
Total	$	53,743		$	44,975	$	41,369
Current	$	53,826		$	39,554	$	39,949
Deferred	(83		)	5,421		1,420
Total	$	53,743		$	44,975	$	41,369

Reconciliation of the differences between income taxes computed at the federal statutory rate to the effective rate are as follows:

	2012		2011		2010
U.S. federal statutory tax rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal benefit	2.7		3.0		4.1
Tax relief for U.S. manufacturers	(2.4	)	(2.1	)	(1.9	)
Permanent book vs. tax differences	(1.6	)	(1.1	)	(1.3	)
U.S. taxes on foreign earnings and foreign tax rate differentials	(1.5	)	(1.5	)	(0.3	)
Reserve adjustments and other	(1.4	)	(1.3	)	0.6
Consolidated effective tax	30.8	%	32.0	%	36.2	%

At December 29, 2012 and December 31, 2011, the company had recorded the following deferred tax assets and liabilities, which were comprised of the following:

	2012			2011
	(dollars in thousands)
Deferred tax assets:
Federal net operating loss carryforwards	$	13,406		$	20,430
Compensation related	20,038			18,654
Accrued retirement benefits	7,105			8,780
Inventory reserves	5,241			4,611
Product liability and workers compensation reserves	6,351			5,052
Warranty reserves	5,122			4,490
Receivable related reserves	2,192			2,350
UNICAP	2,425			2,138
State net operating loss carryforwards	509			580
Interest rate swap	964			1,114
Other	10,501			10,802
Gross deferred tax assets	73,854			79,001
Valuation allowance	(740		)	—
Deferred tax assets	$	73,114		$	79,001
Deferred tax liabilities:
Intangible assets	$	(68,568	)	$	(69,998	)
Foreign tax earnings repatriation	(2,005		)	(1,546		)
LIFO reserves	(72		)	(161		)
Depreciation	(1,794		)	(2,547		)
Other	(2,148		)	(3,504		)
Deferred tax liabilities	$	(74,587	)	$	(77,756	)
Net deferred tax assets (liabilities)	$	(1,473	)	$	1,245
Current deferred asset	$	43,365		$	39,090
Long-term deferred liability	(44,838		)	(37,845		)
Net deferred tax assets (liabilities)	$	(1,473	)	$	1,245

The company does not provide for deferred taxes and foreign withholding taxes on the remaining undistributed earnings of certain international subsidiaries of approximately $38.1 million and $27.2 million as of December 29, 2012 and December 31, 2011, respectively, as these earnings are considered permanently invested. Upon repatriation of these earnings to the U.S. in the form of dividends or otherwise, the company may be subject to U.S. income taxes and foreign withholding taxes. The actual U.S. tax cost would depend on income tax laws and circumstances at the time of distribution. Determination of the related tax liability is not practicable because of the complexities associated with the hypothetical calculation.

As of December 29, 2012, the company has federal and state income tax net operating loss carryforwards of approximately $38.8 million which are subject to annual utilization limitations pursuant to Internal Revenue Code Section 382. If not utilized, the federal and state net operating loss carryforwards will expire at various dates beginning 2019 through 2028. In addition, the company has Australian income tax net operating loss carryforwards of approximately $5.2 million which have an indefinite carryforward life.

Although the company believes its tax returns are correct, the final determination of tax examinations may be different than what was reported on the tax returns. In the opinion of management, adequate tax provisions have been made for the years subject to examination. The company is currently under examination by the Internal Revenue Service for the fiscal years ended January 3, 2009, January 2, 2010 and January 1, 2011. The completion dates of these examinations have not been determined as of December 29, 2012.

As of December 29, 2012, the total amount of liability for unrecognized tax benefits related to federal, state and foreign taxes was approximately $12.1 million (of which $10.4 million would impact the effective tax rate if recognized) plus approximately $1.6 million of accrued interest and $1.6 million of penalties. The company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. Interest recognized in fiscal years 2012, 2011 and 2010 was $(0.2) million, $(0.3) million and $0.1 million, respectively. Penalties recognized in fiscal years 2012, 2011 and 2010 was $(0.4) million, $(0.5) million and $0.2 million, respectively.

The following table summarizes the activity related to the unrecognized tax benefits for the fiscal years ended January 1, 2011, December 31, 2011 and December 29, 2012 (dollars in thousands):

Balance at January 2, 2010	$	20,251
Increases to current year tax positions	3,524
Increase to prior year tax positions	1,700
Decrease to prior year tax positions	(7,689		)
Balance at January 1, 2011	$	17,786
Increases to current year tax positions	2,113
Increase to prior year tax positions	334
Decrease to prior year tax positions	(2,393		)
Settlements	(1,494		)
Lapse of statute of limitations	(755		)
Balance at December 31, 2011	$	15,591
Increases to current year tax positions	1,572
Increase to prior year tax positions	84
Decrease to prior year tax positions	(1,289		)
Settlements	(3,836		)
Balance at December 29, 2012	$	12,122

The company operates in multiple taxing jurisdictions; both within the United States and outside of the United States, and faces audits from various tax authorities. The company remains subject to examination until the statute of limitations expires for the respective tax jurisdiction. Within specific countries, the company and its operating subsidiaries may be subject to audit by various tax authorities and may be subject to different statute of limitations expiration dates.

It is reasonably possible that the amounts of unrecognized tax benefits associated with state, federal and foreign tax positions may decrease over the next twelve months due to expiration of a statute or completion of an audit. The company believes that it is reasonably possible that none of its remaining unrecognized tax benefits may be recognized by the end of 2013 as a result of settlements with taxing authorities or lapses of statutes of limitations.

A summary of the tax years that remain subject to examination in the company’s major tax jurisdictions are:

United States – federal	2008 – 2012
United States – states	2004 – 2012
Australia	2011 – 2012
Brazil	2010 – 2012
Canada	2009 – 2012
China	2003 – 2012
Denmark	2009 – 2012
France	2011 – 2012
Germany	2011 – 2012
Italy	2009 – 2012
Luxembourg	2011 – 2012
Mexico	2007 – 2012
Philippines	2008 – 2012
South Korea	2006 – 2012
Spain	2008 – 2012
Taiwan	2008 – 2012
United Kingdom	2008 – 2012