Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

(5) Income Taxes

        Components of income taxes are as follows:

	Federal			State			Foreign			Total
2011:
Current	$	63,758		$	12,226		$	7,487		$	83,471
Deferred		1,003			(1,067	)		(3	)		(67	)
	$	64,761		$	11,159		$	7,484		$	83,404
2010:
Current	$	71,032		$	16,764		$	3,648		$	91,444
Deferred		(2,182	)		377			93			(1,712	)
	$	68,850		$	17,141		$	3,741		$	89,732
2009:
Current	$	48,523		$	10,350		$	2,123		$	60,996
Deferred		4,752			587			(31	)		5,308
	$	53,275		$	10,937		$	2,092		$	66,304

        Foreign income before income taxes was $108,738, $43,327 and $27,912 during the years ended December 31, 2011, 2010 and 2009, respectively.

        Actual income taxes differed from that obtained by applying the statutory federal income tax rate to income before income taxes as follows:

	Years Ended December 31
	2011			2010			2009
Computed "expected" income taxes	$	99,842		$	87,517		$	64,105
State income taxes, net of federal income tax benefit		6,912			10,566			7,600
Foreign rate differential		(24,783	)		(11,304	)		(7,878	)
Other		1,433			2,953			2,477
	$	83,404		$	89,732		$	66,304

        The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are presented below:

	2011			2010
Deferred tax assets (liabilities), current:
Uniform capitalization adjustment to inventory	$	5,271		$	3,127
Bad debt and other reserves		8,874			7,365
State taxes		1,729			4,360
Prepaid expenses		(1,460	)		(2,850	)
Total deferred tax assets, current		14,414			12,002
Deferred tax assets (liabilities), noncurrent:
Amortization and impairment of intangible assets		7,181			6,262
Depreciation of property and equipment		(6,056	)		(3,230	)
Share-based compensation		11,305			11,105
Foreign currency translation		(744	)		(1,062	)
Deferred rent		169			1,245
Acquisition costs		808			—
Other		63			63
Net operating loss carryforwards		497			738
Total deferred tax assets, noncurrent		13,223			15,121
Net deferred tax assets	$	27,637		$	27,123

        In order to fully realize the deferred tax assets, the Company will need to generate future taxable income of $73,863. The deferred tax assets are primarily related to the Company's domestic operations. The change in net deferred tax assets between December 31, 2011 and December 31, 2010 includes $448 attributable to OCI. Domestic taxable income for the years ended December 31, 2011 and 2010 was $141,368 and $194,228, respectively. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets and, accordingly, no valuation allowance was recorded in 2011 or 2010.

        As of December 31, 2011, withholding and US taxes have not been provided on approximately $186,000 of unremitted earnings of non-US subsidiaries because the earnings are expected to be reinvested outside of the US indefinitely. Such earnings would become taxable upon the sale or liquidation of these subsidiaries or upon the remittance of dividends. As of December 31, 2011, the Company had approximately $43,000 of cash and cash equivalents outside the US that would be subject to additional income taxes if it were to be repatriated. If the Company were to repatriate foreign cash, the Company would record the US tax liability net of any foreign income taxes previously paid on this cash. The Company has no plans to repatriate any of its foreign cash. For the full year 2011, the Company generated approximately 28.0% of its pre-tax earnings from a country which does not impose a corporate income tax.

        When tax returns are filed, some positions taken are subject to uncertainty about the merits of the position taken or the amount that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which management believes it is more likely than not that the position will be sustained upon examination. Tax positions that meet the more likely than not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement. The portion of the benefits that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. A reconciliation of the beginning and ending amounts of total unrecognized tax benefits is as follows:

Balance at December 31, 2009	$	5,011
Gross increase related to current year tax positions		2,235
Settlements		(1,740	)
Balance at December 31, 2010	$	5,506
Gross decrease related to prior years' tax positions		(2,235	)
Balance at December 31, 2011	$	3,271

        The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of December 31, 2011 was $3,175. Also, included in the balance of unrecognized tax benefits at December 31, 2011 was $96 that, if recognized, would be recorded as an adjustment to long term deferred tax assets. For the year ended December 31, 2011, $83 of interest expense generated by income tax contingencies was recognized in the consolidated statements of income. As of December 31, 2011 and 2010, $817 and $734, respectively, of interest was accrued in the consolidated balance sheets.

        The Company files income tax returns in the US federal jurisdiction and various state, local, and foreign jurisdictions. With few exceptions, the Company is no longer subject to US federal, state, local, or non-US income tax examinations by tax authorities for years before 2007. The Company's federal income tax returns for the years ended December 31, 2006 through December 31, 2009 are under examination by the Internal Revenue Service (IRS). In connection with the examination, the Company has received notices of proposed adjustments (NOPAs), which the Company agreed with and recorded in its consolidated financial statements. In addition, in March 2011, the Company received a NOPA related to transfer pricing arrangements with the Company's subsidiaries in which adjustments were asserted totaling approximately $55,000 of additional taxable income, representing additional federal taxes and penalties of approximately $27,000, excluding interest. The Company responded to this NOPA indicating that it disagrees with the proposed adjustments and will appeal the NOPA if the Company is unable to reach a resolution at the exam level. The matter has now been sent to IRS Appeals and is scheduled for a hearing in April 2012. The Company does not know if the hearing at IRS Appeals will result in a material effect to the Company's consolidated financial statements. It is reasonably possible that the Company's unrecognized tax benefit could change; however, the Company believes its unrecognized tax benefits are adequate.

        Although the Company believes its tax estimates are reasonable and prepares its tax filings in accordance with all applicable tax laws, the final determination with respect to any tax audits, and any related litigation, could be materially different from the Company's estimates or from its historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on operating results or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, or interest assessments.

        The Company has on-going income tax examinations under various state tax jurisdictions. It is the opinion of management that these audits and inquiries will not have a material impact on the Company's consolidated financial statements.