XML 73 R15.htm IDEA: XBRL DOCUMENT
v2.4.0.6

INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2012
INCOME TAXES | 7. INCOME TAXES The components of income tax expense from our wholly-owned operations and investments and our controlling interest in joint ventures with Carrier are as follows:
Years Ended December 31, |  | 2012 |  |  | 2011 |  |  | 2010 |
U.S. Federal |  | $ | 50,919 |  |  | $ | 50,197 |  |  | $ | 44,845 |
State |  |  | 6,245 |  |  |  | 6,338 |  |  |  | 5,515 |
Foreign |  |  | 5,478 |  |  |  | 315 |  |  |  | — |
|  | $ | 62,642 |  |  | $ | 56,850 |  |  | $ | 50,360 |
Current |  | $ | 55,918 |  |  | $ | 48,540 |  |  | $ | 37,635 |
Deferred |  |  | 6,724 |  |  |  | 8,310 |  |  |  | 12,725 |
|  | $ | 62,642 |  |  | $ | 56,850 |  |  | $ | 50,360 |
We calculate our income tax expense and our effective tax rate for 100% of income attributable to our wholly-owned operations and investments and for our controlling interest of income attributable to our joint ventures with Carrier, which are taxed as partnerships for income tax purposes. Following is a reconciliation of the effective income tax rate:
Years Ended December 31, |  | 2012 |  |  | 2011 |  |  | 2010 |
U.S. federal statutory rate |  |  | 35.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
State income taxes, net of federal benefit and other |  |  | 2.5 |  |  |  | 3.1 |  |  |  | 3.0 |
Tax effects on foreign income |  |  | (0.8 | ) |  |  | (0.1 | ) |  |  | — |
Effective income tax rate attributable to Watsco, Inc. |  |  | 36.7 |  |  |  | 38.0 |  |  |  | 38.0 |
Taxes attributable to noncontrolling interest |  |  | (8.3 | ) |  |  | (8.8 | ) |  |  | (6.9 | )
Effective income tax rate |  |  | 28.4 | % |  |  | 29.2 | % |  |  | 31.1 | %
The following is a summary of the significant components of our current and long-term deferred tax assets and liabilities:
December 31, |  | 2012 |  |  | 2011 |
Current deferred tax assets: |  |  |  |  |  |  |  |
Capitalized inventory costs and inventory reserves |  | $ | 2,386 |  |  | $ | 2,966 |
Allowance for doubtful accounts |  |  | 1,084 |  |  |  | 1,634 |
Other current deferred tax assets |  |  | 1,215 |  |  |  | 979 |
Self-insurance reserves |  |  | 1,039 |  |  |  | 769 |
Total current deferred tax assets (1) |  |  | 5,724 |  |  |  | 6,348 |
Long-term deferred tax assets: |  |  |  |  |  |  |  |
Share-based compensation |  |  | 13,911 |  |  |  | 11,688 |
Other long-term deferred tax assets |  |  | 797 |  |  |  | 1,021 |
Net operating loss carryforwards |  |  | 609 |  |  |  | 648 |
|  |  | 15,317 |  |  |  | 13,357 |
Valuation allowance |  |  | (391 | ) |  |  | (423 | )
Total long-term deferred tax assets (2) |  |  | 14,926 |  |  |  | 12,934 |
Long-term deferred tax liabilities: |  |  |  |  |  |  |  |
Deductible goodwill |  |  | (66,636 | ) |  |  | (46,057 | )
Depreciation |  |  | (3,100 | ) |  |  | (2,500 | )
Other long-term deferred tax liabilities |  |  | (1,358 | ) |  |  | (1,141 | )
Total long-term deferred tax liabilities (2) |  |  | (71,094 | ) |  |  | (49,698 | )
Net deferred tax liabilities |  | $ | (50,444 | ) |  | $ | (30,416 | )
(1) | Current deferred tax assets have been included in the consolidated balance sheets in other current assets.
(2) | Long-term deferred tax assets and liabilities have been included in the consolidated balance sheets in deferred income taxes and other liabilities.
U.S. income taxes have not been provided on the undistributed earnings of international subsidiaries, as those earnings are considered to be permanently reinvested in the operations of those subsidiaries. Management has determined that $391 and $423 of valuation allowance was necessary at December 31, 2012 and 2011, respectively, to reduce the deferred tax assets to the amount that will more likely than not be realized. At December 31, 2012, there were state and other net operating loss carryforwards of $8,288, which expire in varying amounts from 2013 through 2026. These amounts are available to offset future taxable income. There were no federal net operating loss carryforwards at December 31, 2012. We are subject to U.S. federal income tax, income tax of multiple state jurisdictions and foreign income tax. We are subject to tax audits in the various jurisdictions until the respective statutes of limitations expire. We are no longer subject to U.S. federal tax examinations for tax years prior to 2009. For the majority of states, we are no longer subject to tax examinations for tax years prior to 2008. As of December 31, 2012 and 2011, the total amount of gross unrecognized tax benefits (excluding the federal benefit received from state positions) was $2,474 and $2,424, respectively. Of these totals, $1,609 and $1,773, respectively, (net of the federal benefit received from state positions) represent the amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate. Our continuing practice is to recognize penalties within selling, general and administrative expenses and interest related to income tax matters in income tax expense in the consolidated statements of income. As of December 31, 2012 and 2011, the cumulative amount of estimated accrued interest and penalties resulting from such unrecognized tax benefits was $583 and $495, respectively, and is included in deferred income taxes and other liabilities in the accompanying consolidated balance sheets. The change in gross unrecognized tax benefits during 2012 and 2011 is as follows:
Gross balance at January 1, 2011 |  | $ | 1,889 |
Additions based on tax positions related to the current year |  |  | 542 |
Reductions due to lapse of applicable statute of limitations |  |  | (7 | )
Gross balance at December 31, 2011 |  |  | 2,424 |
Additions based on tax positions related to the current year |  |  | 416 |
Reductions due to lapse of applicable statute of limitations |  |  | (366 | )
Gross balance at December 31, 2012 |  | $ | 2,474 |

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration