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Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2011
Income Taxes |
| (15) | Income Taxes
The Company or its subsidiaries file income tax returns in the U.S. federal, 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 2007. In 2010, the French Tax Authorities commenced an examination of the French subsidiary’s income tax returns for 2006 through 2008. In October 2011, the Company agreed in principle with the French tax authority on the consequences of the audit, which covered income tax and non-income tax items. As a result, the Company increased income tax expense by $1.7 million and reduces its reserve for contingency related to non-income tax items recorded in 2010 by $1.3 million. The Company follows the provisions of uncertain tax positions as addressed in FASB Accounting Standards Codification 740-10-65-1. The Company did not recognize any increase in the liability for unrecognized tax benefits and has no uncertain tax position at December 31, 2011. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties as a component of the provision for income taxes. No interest or penalties were recognized during the periods presented and there is no accrual for interest and penalties at December 31, 2011. The components of income before income taxes consist of the following:
|  | Year ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
U.S. operations |  | $ | 3,478 |  |  | $ | 1,364 |  |  | $ | (30 | )
Foreign operations |  |  | 63,915 |  |  |  | 52,476 |  |  |  | 46,378 |
|  | $ | 67,393 |  |  | $ | 53,840 |  |  | $ | 46,348 |
The provision for current and deferred income tax expense (benefit) consists of the following:
|  | Year ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 1,269 |  |  | $ | 515 |  |  | $ | 280 |
State and local |  |  | 286 |  |  |  | 112 |  |  |  | 119 |
Foreign |  |  | 23,898 |  |  |  | 22,096 |  |  |  | 18,870 |
|  |  | 25,453 |  |  |  | 22,723 |  |  |  | 19,269 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (170 | ) |  |  | 22 |  |  |  | (260 | )
State and local |  |  | 3 |  |  |  | (53 | ) |  |  | 9 |
Foreign |  |  | (842 | ) |  |  | (4,527 | ) |  |  | (2,828 | )
|  |  | (1,009 | ) |  |  | (4,558 | ) |  |  | (3,079 | )
Total income tax expense |  | $ | 24,444 |  |  | $ | 18,165 |  |  | $ | 16,190 |
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
|  | December 31, |
|  | 2011 |  |  | 2010 |
Deferred tax assets: |  |  |  |  |  |  |  |
State net operating loss carry forwards |  | $ | — |  |  | $ | 433 |
Foreign net operating loss carry forwards |  |  | 629 |  |  |  | 1,725 |
Alternative minimum tax credit carry forwards |  |  | 514 |  |  |  | 514 |
Inventory and accounts receivable |  |  | 392 |  |  |  | 372 |
Profit sharing |  |  | 1,806 |  |  |  | 1,575 |
Stock option compensation |  |  | 682 |  |  |  | 610 |
Effect of inventory profit elimination |  |  | 3,424 |  |  |  | 3,605 |
Other |  |  | 452 |  |  |  | 514 |
Total gross deferred tax assets |  |  | 7,899 |  |  |  | 9,348 |
Valuation allowance |  |  | (629 | ) |  |  | (2,118 | )
Net deferred tax assets |  |  | 7,270 |  |  |  | 7,230 |
Deferred tax liabilities (long-term): |  |  |  |  |  |  |  |
Property, plant, and equipment |  |  | — |  |  |  | (8 | )
Trademarks and licenses |  |  | (5,975 | ) |  |  | (6,473 | )
Other |  |  | (93 | ) |  |  | (308 | )
Total deferred tax liabilities |  |  | (6,068 | ) |  |  | (6,789 | )
Net deferred tax assets (liabilities) |  | $ | 1,202 |  |  | $ | 441 |
In 2011, all remaining state net operating loss carry-forwards were written off against the valuation allowance, as they are no longer available for utilization. Valuation allowances had been provided on the potential benefit of state net operating loss carry-forwards as it was determined that future tax benefits from option compensation deductions might prevent the net operating loss carry-forwards from being fully utilized. In 2010 and 2009, $0.2 million and $0.6 million, respectively, of such valuation allowances were realized which was equal to the benefits realized from the utilization of net operating loss carry-forwards. The amounts realized were credited to additional paid-in capital in the respective periods. In addition, valuation allowances of $0.9 million and $0.8 million had been provided in 2010 and 2009, respectively, against certain foreign net operating loss carry-forwards, as it was determined that future profitable operations from certain foreign subsidiaries might not be sufficient to realize the full amount of net operating loss carry-forwards. In 2011, approximately $1.1 million of such valuation allowances was realized as the Company was able to utilize certain foreign net operating loss carry-forwards for which a valuation allowance had been established. No further valuation allowances have been provided as management believes that it is more likely than not that the asset will be realized in the reduction of future taxable income. The Company has not provided for U.S. deferred income taxes on $202 million of undistributed earnings of its non-U.S. subsidiaries as of December 31, 2011 since the Company intends to reinvest most of these earnings in its foreign operations indefinitely and the Company believes it has sufficient foreign tax credits available to offset any potential tax on amounts that have been and are planned to be repatriated. Differences between the United States Federal statutory income tax rate and the effective income tax rate were as follows:
|  | Year ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Statutory rates |  |  | 34.0 | % |  |  | 34.0 | % |  |  | 34.0 | %
State and local taxes, net of Federal benefit |  |  | 0.3 |  |  |  | 0.1 |  |  |  | 0.2 |
Effect of foreign taxes greater than (less than) U.S. statutory rates |  |  | 2.0 |  |  |  | (0.5 | ) |  |  | 0.6 |
Other |  |  | — |  |  |  | 0.1 |  |  |  | 0.1 |
Effective rates |  |  | 36.3 | % |  |  | 33.7 | % |  |  | 34.9 | %

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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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