13. Income Taxes

Income tax expense is composed of the following:


	Fiscal year ended March 31,
	2011			2010			2009
Current:
Federal	$	24,232		$	9,000		$	10,793
State		2,736			(981	)		2,673
Foreign		14,114			9,957			14,876

Total current		41,082			17,976			28,342
Deferred:
Federal		(1,358	)		4,678			7,730
State		2,010			852			311
Foreign		(3,716	)		1,445			787

Total deferred		(3,064	)		6,975			8,828

Income tax expense	$	38,018		$	24,951		$	37,170

Earnings before income taxes consists of the following:


	Fiscal year ended March 31,
	2011		2010		2009
United States	$	57,710	$	37,418	$	21,545
Foreign		93,734		49,837		97,555

Earnings before income taxes	$	151,444	$	87,255	$	119,100

Income taxes paid by the Company for the fiscal years ended March 31, 2011, 2010 and 2009 were $41,800, $22,553 and $21,214, respectively.

The following table sets forth the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities:


	March 31,
	2011			2010
Deferred tax assets:
Accounts receivable	$	1,304		$	1,140
Inventories		6,669			4,626
Net operating loss carryforwards		78,236			69,469
Accrued liabilities and restructuring expenses		22,061			14,503
Other assets		9,200			9,189

Gross deferred tax assets		117,470			98,927
Less valuation allowance		(63,617	)		(58,382	)

Total deferred tax assets		53,853			40,545
Deferred tax liabilities:
Property, plant and equipment		31,945			28,288
Other intangible assets		43,440			38,363
Convertible Notes		20,727			19,363
Other liabilities		4,992			1,858

Total deferred tax liabilities		101,104			87,872

Net deferred tax liabilities	$	(47,251	)	$	(47,327	)

The Company has approximately $16,543 in United States federal net operating loss carryforwards, approximately $9,054 of which are limited by Section 382 of the Internal Revenue Code, that begin to expire in the year ending 2023. The Company has recorded a valuation allowance against approximately $8,515 of the losses limited by Section 382.

The net operating loss carryforwards at March 31, 2011 related to the Company's foreign subsidiaries are approximately $250,000. Some of these net operating loss carryforwards have an unlimited life, while others expire at various times over the next 20 years. In addition, the Company also had approximately $52,149 of net operating loss carryforwards for state tax purposes that expire at various times over the next 20 years. The Company has recorded a valuation allowance for net deferred tax assets in certain foreign and state tax jurisdictions, primarily related to net operating loss carryforwards, due to the significant losses incurred in these tax jurisdictions. As of March 31, 2011 and 2010, the valuation allowance associated with certain foreign and state tax jurisdictions was $55,738 and $50,698, respectively. During the fiscal years ended March 31, 2011 and 2010, the Company recorded tax benefits of $2,498 and $2,260, respectively, due to the utilization of net operating loss carryforwards in certain foreign subsidiaries.

A reconciliation of income taxes at the statutory rate to the income tax provision is as follows:


	Fiscal year ended March 31,
	2011			2010			2009
United States statutory income tax expense (at 35%)	$	53,005		$	30,539		$	41,685
Increase (decrease) resulting from:
State income taxes, net of federal effect		3,035			(116	)		1,942
Nondeductible expenses, domestic manufacturing deduction and other		(1,848	)		3,799			427
Effect of foreign operations		(14,841	)		(9,253	)		(9,374	)
Valuation allowance		(1,333	)		(18	)		2,490

Income tax expense	$	38,018		$	24,951		$	37,170

The effective income tax rate was 25.1 % in fiscal 2011, compared to 28.6 % in fiscal 2010 and 31.2 % in fiscal 2009. The fiscal 2011 tax expense includes a non-recurring tax benefit of approximately $3,145 attributable to the favorable settlement of foreign tax audits which reduced the effective tax rate by 2.1 percentage points. Similarly, the fiscal 2010 tax expense included a non-recurring tax benefit of approximately $2,141, attributable to the filing of amended tax returns which reduced the effective tax rate by 2.5 percentage points.

At March 31, 2011, the Company has not recorded United States income or foreign withholding taxes on approximately $374,000 of undistributed earnings of foreign subsidiaries that could be subject to taxation if remitted to the United States because the Company currently plans to keep these amounts permanently invested overseas.

The Company recognizes and measures uncertain tax positions taken, or expected to be taken, in a tax return in accordance with FASB guidance on accounting for uncertainty in income taxes.

A reconciliation of the beginning and ending amount of unrecognized tax benefits under FASB guidance is as follows:


March 31, 2008	$	13,310
Increases related to current year tax positions		6,509
Decreases related to prior year tax positions due to foreign currency translation		(724	)
Decreases related to prior year tax position settled		(4,886	)
Lapse of statute of limitations		(904	)

March 31, 2009	$	13,305
Increases related to current year tax positions		919
Increases related to prior year tax positions due to foreign currency translation		5
Decreases related to prior year tax position settled		(2,940	)
Lapse of statute of limitations		(539	)

March 31, 2010	$	10,750
Increases related to current year tax positions		2,896
Increases related to prior year tax positions		324
Increases related to prior year tax positions due to foreign currency translation		122
Decreases related to prior year tax position settled		(3,145	)
Lapse of statute of limitations		(302	)

March 31, 2011	$	10,645

All of the balance of unrecognized tax benefits at March 31, 2011, if recognized, would be included in the Company's Consolidated Statements of Income and have a favorable impact on both the Company's Statements of Income and effective tax rate.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2004.

The Company anticipates that it is reasonably possible that a portion of the March 31, 2011 balance of the unrecognized tax benefits could be recognized within the next twelve months due to the expiration of the relevant statutes of limitations. An estimate of the range of the adjustments cannot be made at this time.

The Company recognizes tax related interest and penalties in income tax expense in its Consolidated Statements of Income. As of March 31, 2011, 2010 and 2009, the Company had an accrual of $675, $905 and $740, respectively, for interest and penalties.