Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

Note 8 - Income Taxes

Income before income taxes and equity earnings (losses) is attributable to the following jurisdictions (in thousands):

		Year Ended December 31,
	2011		2010		2009
United States	$	111,376	$	92,108	$	76,941
Foreign		5,727		2,518		1,832
Total	$	117,103	$	94,626	$	78,773

The provision for income taxes consisted of the following (in thousands):

	Year Ended December 31,
	2011		2010		2009
Current:
Federal	$	32,850	$	29,040	$	24,422
State and other		7,675		5,682		4,998
Total current provision for income taxes		40,525		34,722		29,420
Deferred:
Federal		4,754		1,715		1,659
State and other		40		656		(122	)
Total deferred provision for income taxes		4,794		2,371		1,537
Provision for income taxes	$	45,319	$	37,093	$	30,957

A reconciliation of the U.S. federal statutory tax rate to our effective tax rate on Income before income taxes and equity earnings (losses) is as follows:

	Year Ended December 31,
	2011		2010		2009
Federal statutory rate	35.00	%	35.00	%	35.00	%
Other, primarily state income tax rate	3.70		4.20		4.30
Total effective tax rate	38.70	%	39.20	%	39.30	%

We recorded a reduction in the deferred tax liability of $1.4 million in 2009 related to our equity losses in LAC.  This amount is not reflected in the tables above.

The components of the deferred tax assets and liabilities are as follows (in thousands):

		December 31,
		2011			2010
Deferred tax assets:
Product inventories	$	8,075		$	8,085
Accrued expenses		2,885			1,272
Allowance for doubtful accounts		777			854
Total current		11,737			10,211
Leases		1,866			1,676
Share-based compensation		17,740			17,321
Uncertain tax positions		1,650			1,387
Net operating losses		3,972			3,537
Interest rate swaps		164			1,316
Equity losses in unconsolidated investments		5,653			5,653
Other		1,037			1,079
Total non-current		32,082			31,969
Less: Valuation allowance		(9,625	)		(9,190	)
Total non-current, net		22,457			22,779
Total deferred tax assets		34,194			32,990
Deferred tax liabilities:
Trade discounts on purchases		1,944			2,159
Prepaid expenses		1,032			1,067
Total current		2,976			3,226
Intangible assets, primarily goodwill		27,108			24,330
Depreciation		5,885			1,263
Total non-current		32,993			25,593
Total deferred tax liabilities		35,969			28,819
Net deferred tax (liability) asset	$	(1,775	)	$	4,171

At December 31, 2011, certain of our international subsidiaries had tax loss carryforwards totaling approximately $13.1 million, which expire in various years after 2012.  Deferred tax assets related to the tax loss carryforwards of these international subsidiaries were $4.0 million as of December 31, 2011 and $3.5 million as of December 31, 2010.  We have recorded a corresponding valuation allowance of $4.0 million and $3.5 million in the respective years.  We have also recorded a $5.7 million valuation allowance related to our deferred tax asset recorded for the write-off of our investment in LAC.

As presented in the Consolidated Statements of Cash Flows, the changes in deferred income taxes include changes related to the deferred income tax provision, the estimated tax impact of accumulated other comprehensive income (loss) and equity losses from our former investment in LAC.

We reduce federal and state income taxes payable by the tax benefits associated with the exercise of nonqualified stock options and the lapse of restrictions on restricted stock awards.  To the extent realized tax deductions exceed the amount of previously recognized deferred tax benefits related to share-based compensation, we record an excess tax benefit in stockholders’ equity. We recorded excess tax benefits of $3.1 million in 2011 and $1.9 million in 2010.

As of December 31, 2011, United States income taxes were not provided on earnings of our foreign subsidiaries, as we have invested or expect to invest the undistributed earnings indefinitely.  If in the future these earnings are repatriated to the United States, or if we determine that the earnings will be remitted in the foreseeable future, additional income tax provisions may be required. Determining the amount of unrecognized deferred tax liability on these undistributed earnings is not practicable due to the complexity of tax laws and regulations and the varying circumstances, tax treatments and timing of any future repatriation.

We hold, through our affiliates, cash balances in the countries in which we operate, including amounts held outside the United States. Most of the amounts held outside the United States could be repatriated to the United States, but, under current law, may be subject to United States federal income taxes, less applicable foreign tax credits.  Repatriation of some foreign balances is restricted by local laws including the imposition of withholding taxes in some jurisdictions. We have not provided for the United States federal tax liability on these amounts and for financial statement purposes, these foreign cash balances are considered indefinitely reinvested.

The following is a summary of the activity related to uncertain tax positions for the past three years (in thousands):

		2011			2010			2009
Balance at beginning of year	$	3,962		$	4,550		$	3,887
Increases for tax positions taken during a prior period		–			114			579
Increases for tax positions taken during the current period		914			811			898
Decreases resulting from the expiration of the statute of limitations		(46	)		(992	)		(814	)
Decreases relating to settlements		(115	)		(521	)		–
Balance at end of year	$	4,715		$	3,962		$	4,550

The total amount of unrecognized tax benefits that, if recognized, would decrease the effective tax rate was $3.0 million at December 31, 2011 and $2.6 million at December 31, 2010.

We record interest expense related to unrecognized tax benefits in interest expense, while we record related penalties in selling and administrative expenses.  For unrecognized tax benefits, we had interest expense of $0.3 million in 2011 and $0.1 million in 2010.  Accrued interest related to unrecognized tax benefits was approximately $0.8 million at December 31, 2011 and $0.5 million at December 31, 2010.

We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions.  With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2008.