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INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2011
INCOME TAXES |
INCOME TAXES |
(8) INCOME TAXES Earnings before income taxes and equity in earnings of nonconsolidated subsidiaries are as follows:
|  | 2011 |  | 2010 |  | 2009 |
--- | --- | --- | --- | --- | --- | --- | ---
United States |  | $ | 134,363 |  | $ | 78,327 |  | $ | 159,063 |
Foreign |  |  | 99,394 |  |  | 74,655 |  |  | 67,021 |
|  | $ | 233,757 |  | $ | 152,982 |  | $ | 226,084 |
Income tax expense (benefit) consists of:
|  | 2011 |  | 2010 |  | 2009 |
--- | --- | --- | --- | --- | --- | --- | ---
Current: |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 53,005 |  | $ | 21,900 |  | $ | 43,497 |
State |  |  | 8,915 |  |  | 3,527 |  |  | 5,681 |
Foreign |  |  | 29,287 |  |  | 23,919 |  |  | 16,618 |
|  |  | 91,207 |  |  | 49,346 |  |  | 65,796 |
Non-current: |  |  | (1,655 | ) |  | 645 |  |  | (277 | )
Deferred: |  |  |  |  |  |  |  |  |  |
Federal |  |  | (4,586 | ) |  | 5,258 |  |  | 8,146 |
State |  |  | (1,180 | ) |  | 686 |  |  | 1,092 |
Foreign |  |  | (79,196 | ) |  | (927 | ) |  | (1,863 | )
|  |  | (84,962 | ) |  | 5,017 |  |  | 7,375 |
|  | $ | 4,590 |  | $ | 55,008 |  | $ | 72,894 |
The reconciliations of the statutory federal income tax rate and the effective tax rate follows:
|  | 2011 |  | 2010 |  | 2009 |
--- | --- | --- | --- | --- | --- | --- | ---
Statutory federal income tax rate |  |  | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State income taxes, net of federal benefit |  |  | 1.5 |  |  | 1.8 |  |  | 2.5 |
Carryforwards, credits and changes in valuation allowances |  |  | (27.7 | ) |  | (0.2 | ) |  | (0.9 | )
Foreign tax rate differences |  |  | (2.7 | ) |  | (3.4 | ) |  | (3.1 | )
Changes in unrecognized tax benefits |  |  | (0.7 | ) |  | 0.4 |  |  | (0.1 | )
Non-deductible acquisition costs—Delta |  |  | — |  |  | 2.3 |  |  | — |
Domestic production activities deduction |  |  | (2.3 | ) |  | (1.3 | ) |  | (1.2 | )
Other |  |  | (1.1 | ) |  | 1.4 |  |  | — |
|  |  | 2.0 | % |  | 36.0 | % |  | 32.2 | %
Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating loss and tax credit carryforwards. The tax effects of significant items comprising the Company's net deferred income tax liabilities are as follows:
|  | 2011 |  | 2010 |
--- | --- | --- | --- | --- | ---
Deferred income tax assets: |  |  |  |  |  |  |
Accrued expenses and allowances |  | $ | 16,898 |  | $ | 14,790 |
Accrued insurance |  |  | 1,572 |  |  | 1,481 |
Tax credit and net operating loss carryforwards |  |  | 166,020 |  |  | 174,283 |
Defined benefit pension liability |  |  | 17,006 |  |  | 31,251 |
Inventory allowances |  |  | 6,262 |  |  | 3,360 |
Accrued warranty |  |  | 4,900 |  |  | 3,613 |
Deferred compensation |  |  | 34,720 |  |  | 30,076 |
Gross deferred income tax assets |  |  | 247,378 |  |  | 258,854 |
Valuation allowance |  |  | (123,522 | ) |  | (208,130 | )
Net deferred income tax assets |  |  | 123,856 |  |  | 50,724 |
Deferred income tax liabilities: |  |  |  |  |  |  |
Property, plant and equipment |  |  | 36,551 |  |  | 43,713 |
Intangible assets |  |  | 60,684 |  |  | 62,281 |
Other liabilities |  |  | 9,380 |  |  | 4,514 |
Total deferred income tax liabilities |  |  | 106,615 |  |  | 110,508 |
Net deferred income tax asset/(liability) |  | $ | 17,241 |  | $ | (59,784 | )
Uncertain tax positions included in other non-current liabilities are evaluated in a two-step process, whereby (1) the Company determine whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more likely than not recognition threshold, the Company would recognize the largest amount of tax benefit that is greater than fifty percent likely to be realized upon ultimate settlement with the related tax authority. The following summarizes the activity related to our unrecognized tax benefits in 2011, 2010 and 2009, in thousands:
|  | 2011 |  | 2010 |  | 2009 |
--- | --- | --- | --- | --- | --- | --- | ---
Gross unrecognized tax benefits—beginning of year |  | $ | 5,708 |  | $ | 2,175 |  | $ | 2,369 |
Gross increases—tax positions in prior period |  |  | 3 |  |  | 77 |  |  | 71 |
Gross decreases—tax positions in prior period |  |  | (34 | ) |  | (44 | ) |  | (157 | )
Gross increases—current-period tax positions |  |  | 851 |  |  | 500 |  |  | 486 |
Gross increases—acquisitions |  |  | — |  |  | 3,000 |  |  | — |
Lapse of statute of limitations |  |  | (2,224 | ) |  | — |  |  | (594 | )
Gross unrecognized tax benefits—end of year |  | $ | 4,304 |  | $ | 5,708 |  | $ | 2,175 |
There are approximately $1,389 of uncertain tax positions for which reversal is reasonably possible during the next 12 months due to the closing of the statute of limitation. The nature of these uncertain tax positions is generally the computation of a tax deduction or tax credit. In the third quarter of 2009, the Company recorded a reduction of its gross unrecognized tax benefit of $594, with $386 recorded as a reduction of income tax expense, due to the expiration of statutes of limitation in the United States. In the second quarter of 2010, an additional $3,000 of uncertain tax positions were recorded in connection with the acquisition of Delta and did not impact current tax expense. In the third quarter of 2011, the Company recorded a reduction of its gross unrecognized tax benefit of $2,224 with $1,446 recorded as a reduction of income tax expense, due to the expiration of statutes of limitation in the United States and Australia. In addition to these amounts, there was an aggregate of $413 and $421 of interest and penalties at December 31, 2011 and December 25, 2010, respectively. The Company's policy is to record interest and penalties directly related to income taxes as income tax expense in the Consolidated Statements of Earnings. The Company files income tax returns in the U.S. and various states as well as foreign jurisdictions. Tax years 2008 and forward remain open under U.S. statutes of limitation. Generally, tax years 2007 and forward remain open under state statutes of limitation. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $4,098 and $5,504 at December 31, 2011 and December 25, 2010, respectively. At December 31, 2011 and December 25, 2010, net deferred tax assets of $102,738 and $30,138, respectively, were included in refundable and deferred income taxes ($43,819 at December 31, 2011 and $29,206 at December 25, 2010) and other assets ($58,920 at December 31, 2011 and $932 at December 25, 2010). At December 31, 2011 and December 25, 2010, net deferred tax liabilities of $85,497 and $89,922, respectively, are included in deferred income taxes. During 2010, the gross deferred income tax assets and valuation allowances increased significantly. These increases were a result of the acquisition of Delta. At December 31, 2011 and December 25, 2010 respectively, there were $166,020 and $174,283 relating mainly to operating loss and tax credit carryforwards and $17,006 and $31,251 related to its defined benefit pension obligation. In 2011, the company formulated and executed a restructuring plan that resulted in the company being more likely than not to be able to use some of these deferred tax assets. As a result, the company removed valuation allowances with a corresponding decrease in tax expense of $34,402 relating mainly to operating losses and $31,300 relating to defined benefit pension obligation. At December 31, 2011 and December 25, 2010, management of the Company reviewed recent operating results and projected future operating results. The Company's belief that realization of its net deferred tax assets is more likely than not is based on, among other factors, changes in operations that have occurred in recent years and available tax planning strategies. Valuation allowances have been established for certain operating losses that reduce deferred tax assets to an amount that will, more likely than not, be realized. The deferred tax assets at December 31, 2011 that are associated with tax loss and tax credit carryforwards not reduced by valuation allowances expire in periods starting 2012 through 2027. The currency translation adjustments in "Accumulated other comprehensive income (loss)" are not adjusted for income taxes as they relate to indefinite investments in non-US subsidiaries. During 2011 the Company recorded $1,647 in income tax expense on $23,929 of undistributed earnings of foreign subsidiaries which are not considered permanently invested. Provision has not been made for United States income taxes on a portion of the undistributed earnings of the Company's foreign subsidiaries (approximately $518,887 at December 31, 2011 and $387,586 at December 25, 2010, respectively) because the Company intends to reinvest those earnings. Such earnings would become taxable upon the sale or liquidation of these foreign subsidiaries or upon remittance of dividends.

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- 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 Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: 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 3: 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 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: 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 Reference 6: 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 7: 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 8: 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 + Details
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