(10)

Income Taxes

Income Before Taxes consisted of the following (in thousands):


	2011		2010		2009
United States	$	137,040	$	170,466	$	103,929
Foreign		89,297		50,263		34,026

Total	$	226,337	$	220,729	$	137,955

The provision for income taxes is summarized as follows (in thousands):


	2011		2010		2009
Current
Federal	$	41,624	$	44,742	$	16,583
State		5,709		6,348		2,387
Foreign		18,719		14,265		12,588

		66,052		65,355		31,558
Deferred		2,265		690		7,718

Total	$	68,317	$	66,045	$	39,276

A reconciliation of the statutory Federal income tax rate and the effective tax rate reflected in the consolidated statements of income follows:


	2011			2010			2009
Federal statutory tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit		1.7			2.2			2.3
Domestic production activities deduction		(1.7	)		(1.0	)		(0.7	)
Foreign rate differential		(5.6	)		(3.9	)		(4.2	)
Adjustments to tax accruals and reserves		0.7			(0.9	)		(1.7	)
Other, net		0.1			(1.5	)		(2.2	)

Effective tax rate		30.2	%		29.9	%		28.5	%

Deferred taxes arise primarily from differences in amounts reported for tax and financial statement purposes. The Company's net deferred tax liability as of December 31, 2011 of $51.6 million is classified on the consolidated balance sheet as a net current deferred income tax benefit of $48.6 million and a net non-current deferred income tax liability of $100.2 million. The components of this net deferred tax liability are as follows (in thousands):


	December 31, 2011			January 1, 2011
Accrued employee benefits	$	31,525		$	31,682
Bad debt reserve		2,913			2,007
Warranty reserve		6,711			5,836
Inventory		6,911			5,318
Accrued liabilities		12,548			14,225
Derivative instruments		30,873			—
Other		7,956			10,514

Deferred tax assets		99,437			69,582
Property related		(37,387	)		(35,432	)
Intangible items		(113,621	)		(100,264	)
Derivative instruments		—			(1,821	)

Deferred tax liabilities		(151,008	)		(137,517	)

Net deferred tax liability	$	(51,571	)	$	(67,935	)

Following is a reconciliation of the beginning and ending amount of unrecognized tax benefits (in millions):


	December 31, 2011			January 1, 2011			January 2, 2010
Unrecognized tax benefits — beginning of year	$	5.5		$	6.6		$	7.1
Gross increases — tax positions in prior periods		1.6			0.8			4.1
Gross increases — tax positions in the current period		0.2			0.1			0.4
Settlements with taxing authorities		(0.2	)		—			(0.4	)
Lapse of statute of limitations		—			(2.0	)		(4.6	)

Unrecognized tax benefits — end of year	$	7.1		$	5.5		$	6.6

Unrecognized tax benefits as of December 31, 2011 amount to $7.1 million, all of which would impact the effective income tax rate if recognized.

Potential interest and penalties related to unrecognized tax benefits are recorded in income tax expense. During fiscal 2011, 2010 and 2009, the Company recognized approximately zero, $0.1 million and $0.7 million in net interest expense, respectively. The Company had approximately $1.1 million, $1.0 million and $1.0 million of accrued interest included in the tax contingency reserve as of December 31, 2011, January 1, 2011 and January 2, 2010, respectively.

Due to statute expirations, approximately $0.4 million of the unrecognized tax benefits, including accrued interest, could reasonably change in the coming year.

With few exceptions, the Company is no longer subject to U.S. Federal and state/local income tax examinations by tax authorities for years prior to 2008, and the Company is no longer subject to non-U.S. income tax examinations by tax authorities for years prior to 2006.

At December 31, 2011 the Company had approximately $4.9 million of net operating losses in various jurisdictions which expire over a period up to 15 years.

At December 31, 2011 the estimated amount of total unremitted non-U.S. subsidiary earnings was $221.6 million. No U.S. deferred taxes have been provided on the undistributed non-U.S. subsidiary earnings because they are considered to be permanently invested given the Company's acquisition and growth initiatives. Determination of the amount of unrecognized deferred income tax liability related to these earnings is not practicable.