(4) Income Taxes

Components of income tax expense (benefit) are as follows:

	Federal			State			Foreign			Total

2012:
Current	$	50,911		$	6,482		$	3,368		$	60,761
Deferred		(6,083	)		414			12			(5,657	)

	$	44,828		$	6,896		$	3,380		$	55,104

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

Foreign income before income taxes was $51,409, $108,738 and $43,327 during the years ended December 31, 2012, 2011 and 2010 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

	2012			2011			2010
Computed "expected" income taxes	$	64,282		$	99,842		$	87,517
State income taxes, net of federal income tax benefit		3,562			6,912			10,566
Foreign rate differential		(12,908	)		(24,783	)		(11,304	)
Other		168			1,433			2,953

	$	55,104		$	83,404		$	89,732

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

	2012			2011

Deferred tax assets (liabilities), current:
Uniform capitalization adjustment to inventory	$	6,870		$	5,271
Bad debt and other reserves		11,582			8,874
State taxes		799			1,729
Prepaid expenses		(1,961	)		(1,460	)

Total deferred tax assets, current		17,290			14,414

Deferred tax assets (liabilities), noncurrent:
Amortization and impairment of intangible assets		5,312			7,181
Depreciation of property and equipment		(8,524	)		(6,056	)
Share-based compensation		11,906			11,305
Foreign currency translation		244			(744	)
Deferred rent		3,247			169
Acquisition costs		834			808
Other		111			63
Net operating loss carryforwards		242			497

Total deferred tax assets, noncurrent		13,372			13,223

Net deferred tax assets	$	30,662		$	27,637

In order to fully realize the deferred tax assets, the Company will need to generate future taxable income of $80,480. The deferred tax assets are primarily related to the Company's domestic operations. The change in net deferred tax assets between December 31, 2012 and December 31, 2011 includes approximately $500 attributable to OCI, partially offset by approximately $3,000 of goodwill. Domestic taxable income for the years ended December 31, 2012 and 2011 was $141,660 and $141,368, 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 2012 or 2011.

As of December 31, 2012, withholding and US taxes have not been provided on approximately $234,000 of unremitted earnings of non-US subsidiaries because the earnings are expected to be reinvested outside of the US indefinitely. Repatriation of all foreign earnings would result in $70,860 of US income tax. Such earnings would become taxable upon the sale or liquidation of these subsidiaries or upon the remittance of dividends. As of December 31, 2012, the Company had approximately $37,000 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 2012, the Company generated approximately 21.0% 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, 2010	$	5,506
Gross decrease related to current year tax positions		(2,235	)

Balance at December 31, 2011	$	3,271
Gross decrease related to prior years' tax positions		—
Settlements		(3,271	)

Balance at December 31, 2012	$	—

For the year ended December 31, 2012, $144 of interest expense generated by income tax contingencies was recognized in the consolidated statements of income. As of December 31, 2012 and 2011, interest of $452 and $817, respectively, 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 were 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 October 2012, the Company executed a settlement agreement with the IRS on this matter. The related additional tax and interest approximated the Company's reserves; no penalties were assessed.

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.