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Income Taxes | 12 Months Ended
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Dec. 31, 2012
Income Taxes | NOTE 12. INCOME TAXES Income before income taxes was taxed in the following jurisdictions in each of the years ended December 31:
|  | 2012 |  |  | 2011 |  |  | 2010 |
|  | (Dollars in thousands) |
Domestic |  | $ | 212,213 |  |  | $ | 266,586 |  |  | $ | 223,623 |
Foreign |  |  | 11,574 |  |  |  | 23,581 |  |  |  | (1,943 | )
Total |  | $ | 223,787 |  |  | $ | 290,167 |  |  | $ | 221,680 |
The components of the provision for income taxes are as follows:
|  | 2012 |  |  | 2011 |  |  | 2010 |
|  | (Dollars in thousands) |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 57,106 |  |  | $ | 61,905 |  |  | $ | 49,763 |
State |  |  | 8,449 |  |  |  | 4,039 |  |  |  | 6,914 |
Foreign |  |  | 8,385 |  |  |  | 7,287 |  |  |  | (1,001 | )
Current income tax provision |  |  | 73,940 |  |  |  | 73,231 |  |  |  | 55,676 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 5,999 |  |  |  | 25,059 |  |  |  | 20,808 |
State |  |  | (610 | ) |  |  | (883 | ) |  |  | 3,381 |
Foreign |  |  | (6,888 | ) |  |  | (413 | ) |  |  | (2,831 | )
Deferred income tax provision |  |  | (1,499 | ) |  |  | 23,763 |  |  |  | 21,358 |
|  | $ | 72,441 |  |  | $ | 96,994 |  |  | $ | 77,034 |
The provision for income taxes varied from income taxes computed at the statutory U.S. federal income tax rate as a result of the following:
|  | 2012 |  |  | 2011 |  |  | 2010 |
|  | (Dollars in thousands) |
Income taxes computed at the statutory U.S. federal income tax rate |  | $ | 78,325 |  |  | $ | 101,559 |  |  | $ | 77,588 |
State income taxes, net of federal tax benefit |  |  | 5,978 |  |  |  | 8,557 |  |  |  | 5,910 |
Tax liabilities (no longer required) required |  |  | (182 | ) |  |  | 507 |  |  |  | 2,488 |
Valuation allowance |  |  | 239 |  |  |  | (6,662 | ) |  |  | (88 | )
Manufacturing exemption |  |  | (6,865 | ) |  |  | (5,128 | ) |  |  | (6,834 | )
Tax credit refunds, net |  |  | (1,066 | ) |  |  | (3,165 | ) |  |  | (2,096 | )
Foreign earnings taxed at other than 35% |  |  | (566 | ) |  |  | 94 |  |  |  | (2,406 | )
Deferred tax rate changes |  |  | (3,422 | ) |  |  | — |  |  |  | — |
Other |  |  | — |  |  |  | 1,232 |  |  |  | 2,472 |
|  | $ | 72,441 |  |  | $ | 96,994 |  |  | $ | 77,034 |
Effective tax rate |  |  | 32.4 | % |  |  | 33.4 | % |  |  | 34.8 | %
Deferred income taxes reflect the net tax effect of temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Significant components of our deferred tax assets and liabilities at December 31 are as follows:
|  | 2012 |  |  | 2011 |
|  | (Dollars in thousands) |
Deferred tax assets: |  |  |  |  |  |  |  |
Pension and other postretirement liabilities |  | $ | 23,853 |  |  | $ | 49,273 |
Rationalization and other accrued liabilities |  |  | 28,040 |  |  |  | 25,481 |
AMT and other credit carryforwards |  |  | 5,815 |  |  |  | 6,129 |
Net operating loss carryforwards |  |  | 24,829 |  |  |  | 21,228 |
Foreign currency translation |  |  | — |  |  |  | 2 |
Inventory and related reserves |  |  | 14,013 |  |  |  | 981 |
Other |  |  | 9,972 |  |  |  | 8,301 |
Total deferred tax assets |  |  | 106,522 |  |  |  | 111,395 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Property, plant and equipment |  |  | (193,887 | ) |  |  | (205,177 | )
Other intangible assets |  |  | (26,302 | ) |  |  | (27,387 | )
Foreign currency translation |  |  | (12,602 | ) |  |  | (18,078 | )
Other |  |  | (10,358 | ) |  |  | (4,322 | )
Total deferred tax liabilities |  |  | (243,149 | ) |  |  | (254,964 | )
Valuation allowance |  |  | (12,361 | ) |  |  | (11,840 | )
|  | $ | (148,988 | ) |  | $ | (155,409 | )
At December 31, 2012, the net deferred tax liability in our Consolidated Balance Sheets was comprised of current deferred tax assets of $34.0 million, long-term deferred tax assets of $10.1 million and long-term deferred tax liabilities of $193.0 million. At December 31, 2011, the net deferred tax liability in our Consolidated Balance Sheets was comprised of current deferred tax assets of $14.7 million, long-term deferred tax assets of $7.9 million and long-term deferred tax liabilities of $178.0 million. During 2012, we acquired PFC. A portion of the PFC purchase price was allocated to goodwill and other intangible assets, which are tax deductible in the applicable jurisdictions and are being amortized over 15 years for tax purposes. We acquired VN during 2011. A portion of the VN purchase price was allocated to goodwill and other intangible assets, which are not deductible for tax purposes in the applicable jurisdictions. The valuation allowance in 2012 includes deferred tax assets of $0.4 million resulting from federal net operating loss carryforwards, or NOLs. The valuation allowance also includes losses of certain foreign operations of $8.2 million, state and local credit carryforwards totaling $0.7 million and foreign tax credit carryforwards totaling $3.1 million. The valuation allowance for deferred tax assets increased in 2012 by $0.5 million primarily due to a change in foreign NOLs. We file a consolidated U.S. federal income tax return that includes all domestic subsidiaries except Silgan Can Company, or Silgan Can, and Silgan Equipment Company, or Silgan Equipment. Silgan Can and Silgan Equipment file separate U.S. federal income tax returns. Silgan Equipment has federal NOLs of approximately $0.4 million that expire in 2021 and have a full valuation allowance recorded against them. At December 31, 2012, we had state tax NOLs of approximately $6.1 million that are available to offset future taxable income and that expire from 2014 to 2024. We recognize accrued interest and penalties related to unrecognized taxes as additional tax expense. At December 31, 2012 and December 31, 2011, we had $4.8 million and $4.5 million, respectively, accrued for potential interest and penalties. The total amount of unrecognized tax benefits as of December 31, 2012 and December 31, 2011 were $49.5 million and $41.0 million, respectively, net of associated tax assets and excluding the federal tax benefit of state taxes, interest and penalties. Tax assets associated with uncertain tax positions primarily represent our estimate of the potential tax benefits in one tax jurisdiction that could result from the payment of income taxes in another jurisdiction. At December 31, 2012 and 2011, we had approximately $16.0 million and $7.0 million, respectively, in assets associated with uncertain tax positions recorded in other assets in our Consolidated Balance Sheets. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits included as other liabilities in our Consolidated Balance Sheets is as follows:
|  | 2012 |  |  | 2011 |
|  | (Dollars in thousands) |
Balance at January 1, |  | $ | 48,055 |  |  | $ | 39,065 |
Increase based upon tax positions of current year |  |  | 927 |  |  |  | 773 |
Increase based upon tax positions of a prior year |  |  | 701 |  |  |  | 1,594 |
Increase due to acquisitions |  |  | 3,316 |  |  |  | 8,968 |
Decrease based upon a lapse in the statute of limitations |  |  | (1,566 | ) |  |  | (2,345 | )
Balance at December 31, |  | $ | 51,433 |  |  | $ | 48,055 |
The total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, at December 31, 2012 and December 31, 2011 were $32.8 million and $33.0 million, respectively. Silgan and its subsidiaries file U.S. Federal income tax returns, as well as income tax returns in various states and foreign jurisdictions. With limited exceptions and due to the impact of net operating loss and other credit carryforwards, we may be effectively subject to U.S. Federal income tax examinations for periods after 1990. We are subject to examination by state and local tax authorities generally for the period mandated by statute, with the exception of states where waivers of the statute of limitations have been executed. These states and the earliest open period include Wisconsin (1995) and Indiana (2007). Our foreign subsidiaries are generally not subject to examination by tax authorities for periods before 2008, and we have contractual indemnities with third parties with respect to open periods that predate our ownership of certain foreign subsidiaries. Subsequent periods may be examined by the relevant tax authorities. The Internal Revenue Service, or IRS, has concluded its review of tax years 2004 through 2007 for us, and the final resolution of those years is pending the review of the Joint Committee on Taxation. The IRS has commenced an examination of Silgan’s income tax returns for the tax years 2008 through 2010. It is reasonably possible that all or a portion of the IRS audit will be closed in the next twelve months which may result in a significant decrease to the amount of our unrecognized tax benefits. Due to the ongoing nature of these audits, the number of years involved, the number of discrete issues under review and the unpredictability of the Joint Committee on Taxation review process, we are unable to estimate the amount of this potential decrease. We had undistributed earnings from foreign subsidiaries of $62.7 million at December 31, 2012. If the earnings of foreign subsidiaries were not indefinitely reinvested, a deferred tax liability of $21.9 million would be required, excluding the potential use of foreign tax credits in the United States.

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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 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
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