Income Taxes

The Company's income before income taxes and income tax expense for continuing operations, each by tax jurisdiction, consisted of the following:



	Year ended December 31,
	2011			2010			2009
	(dollars in thousands)
Income before income taxes:
Domestic	$	49,060	34,700	$	29,980		$	2,360
Foreign	30,680		26,450	26,450			18,260
Total income before income taxes	$	79,740		$	56,430		$	20,620
Current income tax expense:
Federal	$	4,500		$	930		$	340
State and local	2,490			70			350
Foreign	9,890			8,800			5,320
Total current income tax expense	16,880			9,800			6,010
Deferred income tax expense (benefit):
Federal	10,390			9,930			5,600
State and local	830			(1,310		)	(3,750		)
Foreign	830			(920		)	320
Total deferred income tax expense	12,050			7,700			2,170
Income tax expense	$	28,930		$	17,500		$	8,180

The components of deferred taxes at December 31, 2011 and 2010 are as follows:



	2011			2010
	(dollars in thousands)
Deferred tax assets:
Accounts receivable	$	1,210		$	2,010
Inventories	5,730			8,020
Accrued liabilities and other long-term liabilities	32,110			28,470
Tax loss and credit carryforwards	5,190			20,850
Gross deferred tax asset	44,240			59,350
Valuation allowances	(2,950		)	(3,360		)
Net deferred tax asset	41,290			55,990
Deferred tax liabilities:
Property and equipment	(20,330		)	(22,210		)
Goodwill and other intangible assets	(63,490		)	(59,800		)
Other, principally deferred income	(2,120		)	(3,360		)
Gross deferred tax liability	(85,940		)	(85,370		)
Net deferred tax liability	$	(44,650	)	$	(29,380	)

The following is a reconciliation of income tax expense computed at the U.S. federal statutory rate to income tax expense allocated to income from continuing operations before income taxes:



	2011			2010			2009
	(dollars in thousands)
U.S. federal statutory rate	35		%	35		%	35		%
Tax at U.S. federal statutory rate	$	27,910		$	19,750		$	7,220
State and local taxes, net of federal tax benefit	2,440			650			(2,210		)
Differences in statutory foreign tax rates	(2,250		)	(1,720		)	(390		)
Intangible asset adjustments	—			—			1,120
Net valuation allowance	130			(1,300		)	1,660
Other, net	700			120			780
Income tax expense	$	28,930		$	17,500		$	8,180

During the year ended December 31, 2011, the Company exhausted the remaining U.S. federal net operating loss ("NOL") carryforwards of approximately $31.2 million. In addition, the Company has recorded a deferred tax asset of $3.0 million related to various state operating loss carryforwards. The majority of the state tax loss carryforwards expire between 2024 and 2027.

The Company has recorded valuation allowances of $3.0 million and $3.4 million as of December 31, 2011 and 2010, respectively, against certain deferred tax assets. Based on expected future taxable income due to the reversal of existing U.S. federal deferred tax liabilities, the Company believes it is more likely than not that all of the U.S. federal deferred tax assets will be realized.

In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations. As of December 31, 2011, the Company has not made a provision for U.S. or additional foreign withholding taxes on approximately $155.0 million of undistributed earnings of foreign subsidiaries that are considered to be permanently reinvested. Generally, such amounts become subject to U.S. taxation upon remittance of dividends and under certain other circumstances. It is not practicable to estimate the amount of deferred tax liability related to investments in these foreign subsidiaries.

Unrecognized tax benefits

The Company has approximately $13.4 million and $13.2 million of unrecognized tax benefits ("UTB's") as of December 31, 2011 and 2010, respectively. If the unrecognized tax benefits were recognized, the impact to the Company's effective tax rate would be to reduce reported income tax expense for the years ended December 31, 2011 and 2010 approximately $9.3 million and $9.7 million, respectively.

A reconciliation of the change in the UTB's and related accrued interest and penalties for the years ended December 31, 2011 and 2010 is as follows:



	Unrecognized Tax Benefits			Accrued Interest and Penalties
	(dollars in thousands)
Balance at December 31, 2009	$	7,130		$	860
Tax positions related to current year:
Additions	490			150
Tax positions related to prior years:
Additions	6,470			1,630
Reductions	—			—
Settlements	(30		)	(10		)
Lapses in the statutes of limitations	(910		)	(660		)
Balance at December 31, 2010	$	13,150		$	1,970
Tax positions related to current year:
Additions	1,340			240
Tax positions related to prior years:
Additions	870			30
Reductions	(475		)	(30		)
Settlements	—			—
Lapses in the statutes of limitations	(1,495		)	(430		)
Balance at December 31, 2011	$	13,390		$	1,780

The increase in UTB's and estimated liabilities for interest and penalties for tax positions related to prior years is primarily due to the Company's ongoing audit negotiations in foreign jurisdictions. The Company maintains an indemnification asset for certain acquired UTB's and corresponding interest and penalties.

The Company is subject to U.S. federal, state and local, and certain non-U.S. income tax examinations for tax years 2002 through 2011. There are currently one state and two foreign income tax examinations in process. The Company does not believe that the results of these examinations will have a significant impact on the Company's tax position or its effective tax rate.

Management monitors changes in tax statutes and regulations and the issuance of judicial decisions to determine the potential impact to unrecognized tax benefits and is not aware of, nor does it anticipate, any material subsequent events that could have a significant impact on the Company's financial position during the next twelve months.