Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

10.               Income Taxes

The provision for income taxes from continuing operations consisted of the following:

(in thousands)

	Years Ended December 31,
	2011			2010		2009
Current
Federal	$	21,040		$	20,310	$	15,521
State	4,427			3,896		3,111
Foreign	4,582			3,417		(18		)
Deferred
Federal	(574		)	3,673		14
State	(358		)	1,726		49
Foreign	(1,231		)	217		(1,321		)
	$	27,886		$	33,239	$	17,356

Income and loss from continuing operations before income taxes for the years ended December 31, 2011, 2010 and 2009, consisted of the following:

(in thousands)

	Years Ended December 31,
	2011		2010			2009
Domestic	$	68,961	$	78,183		$	49,934
Foreign	9,825		(146		)	(18,457		)
	$	78,786	$	78,037		$	31,477

Reconciliations between the statutory federal income tax rates and the Company’s effective income tax rates as a percentage of income before income taxes for its continuing operations were as follows:

(in thousands)

	Years Ended December 31,
	2011		2010		2009
Federal tax rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal benefit	3.4	%	4.9	%	7.0	%
Tax benefit of domestic manufacturing deduction	(2.5	)%	(2.3	)%	(2.9	)%
Change in valuation allowance	(0.3	)%	3.3	%	7.6	%
Difference between United States statutory and foreign local tax rates	0.3	%	2.0	%	7.6	%
Change in uncertain tax position	(0.0	)%	(0.7	)%	(1.7	)%
Other	(0.5	)%	0.4	%	2.5	%
Effective income tax rate	35.4	%	42.6	%	55.1	%

The tax effects of the significant temporary differences that constitute the deferred tax assets and liabilities at December 31, 2011, 2010 and 2009, were as follows:

(in thousands)

	December 31,
	2011			2010			2009
Current deferred tax assets
State tax	$	1,586		$	1,197		$	1,061
Workers’ compensation	2,123			1,816			1,719
Health claims	549			519			391
Vacation liability	865			786			843
Allowance for doubtful accounts	291			351			1,614
Inventories	4,796			5,141			7,150
Sales incentive and advertising allowances	408			399			781
State tax credit carry forward	—			125			126
Accrued rent reserves	—			—			5
Intangible rights write-off	194			—			—
Acquisition expenses	477			—			—
Unrealized foreign exchange gain or loss	57			86			96
Other, net	428			271			549
	11,774			10,691			14,335
Less valuation allowances	—			(502		)	(365		)
	$	11,774		$	10,189		$	13,970
Long-term deferred tax assets (liabilities)
Depreciation	$	(3,067	)	$	(1,614	)	$	259
Goodwill and other intangibles amortization	(314		)	(1,447		)	(3,704		)
Deferred compensation related to stock options	5,485			4,841			6,562
Uncertain tax positions’ unrecognized tax benefits	1,115			1,438			1,250
Keymark investments basis difference	—			663			447
Non-United States tax loss carry forward	5,912			5,548			5,011
Tax effect on cumulative translation adjustment	(812		)	(826		)	(799		)
Other	811			641			1,095
	9,130			9,244			10,121
Less valuation allowances	(6,279		)	(6,665		)	(4,523		)
	$	2,851		$	2,579		$	5,598

The total deferred tax assets for the years ended December 31, 2011, 2010 and 2009, were $21.4 million, $19.2 million and $25.0 million, respectively. The total deferred tax liabilities for the years ended December 31, 2011, 2010, and 2009, were $6.7 million, $6.5 million and $5.5 million, respectively.

At December 31, 2011, the Company had $29.5 million of tax loss carryforwards in various non-United States taxing jurisdictions. Tax loss carryforwards of $0.9 million, $2.9 million, $0.7 million and $0.8 million will expire in 2013, 2014, 2015 and 2016, respectively, if not utilized. The remaining tax losses can be carried forward indefinitely.

At December 31, 2011, 2010 and 2009, the Company had deferred tax valuation allowances of $6.3 million, $7.2 million and $4.9 million, respectively. The valuation allowance decreased $0.9 million for the year ended December 31, 2011, and increased $2.3 million and $2.5 million for the years ended December 31, 2010 and 2009, respectively.

The Company does not provide for federal income taxes on the undistributed earnings of its international subsidiaries because such earnings are reinvested and, in the Company’s opinion, will continue to be reinvested indefinitely. At December 31, 2011, 2010 and 2009, the Company had not provided for federal income taxes on undistributed earnings of $28.5 million, $14.6 million and $12.9 million, respectively, from its international subsidiaries. Should these earnings be distributed in the form of dividends or otherwise, the Company would be subject to both United States income taxes and withholding taxes in various international jurisdictions. These taxes may be partially offset by United States foreign tax credits. Determination of the related amount of unrecognized deferred United States income taxes is not practicable because of the complexities associated with this hypothetical calculation. United States federal income taxes are provided on the earnings of the Company’s foreign branches, which are included in the United States federal income tax return.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits in 2011, 2010 and 2009 was as follows:*

(in thousands)

	2011			2010			2009
Balance at January 1	$	5,862		$	6,422		$	6,705
Additions based on tax positions related to prior years	18			1,236			640
Reductions based on tax positions related to prior years	(681		)	(537		)	(632		)
Additions for tax positions of the current year	570			951			902
Settlements	(362		)	(59		)	—
Lapse of statute of limitations	(724		)	(2,151		)	(1,193		)
Balance at December 31	$	4,683		$	5,862		$	6,422

* Foreign currency translation amounts are included within each line as applicable.

Included in the balance of unrecognized tax benefits at December 31, 2011, 2010 and 2009, are tax positions of $1.1 million, $1.2 million and $1.5 million, respectively, which, if recognized, would reduce the effective tax rate. The Company does not believe it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next 12 months.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense, which is a continuation of the Company’s historical accounting policy. During the years ended December 31, 2011, 2010 and 2009, accrued interest decreased by $48 thousand, $463 thousand and $88 thousand, respectively, as a result of the reversal of accrued interest associated with the lapse of statutes of limitations. At December 31, 2011, 2010 and 2009, the Company had accrued $1.1 million, $1.1 million and $1.6 million, respectively, for the potential payment of interest, before income tax benefits.

At December 31, 2011, the Company remained subject to United States federal income tax examinations for the tax years 2008 through 2011. In addition, the Company remained subject to state, local and foreign income tax examinations primarily for the tax years 2006 through 2011.