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Income Taxes
 12 Months Ended
Dec. 31, 2012
Income Taxes [Abstract]  
Income Taxes

Note F—Income Taxes

Income before income taxes was derived from the following sources:

 

                         
    2012     2011     2010  

United States

   $ 21,754     $ 18,842     $ 9,007  

Foreign

     23,073       27,152       21,176  
   

 

 

    

 

 

    

 

 

  
    $ 44,827     $ 45,994     $ 30,183  
   

 

 

    

 

 

    

 

 

  

The components of income taxes for the years ended December 31 are as follows:

 

                         
    2012     2011     2010  

Current

                        

Federal

   $ 9,663     $ 5,679     $ 1,768  

Foreign

     7,885       8,896       5,498  

State and local

     920       1,123       809  
   

 

 

    

 

 

    

 

 

  
      18,468       15,698       8,075  
   

 

 

    

 

 

    

 

 

  

Deferred

                        

Federal

     (1,443 )      726       342  

Foreign

     (1,310 )      (1,199 )      (1,098 ) 

State and local

     (174 )      (215 )      (144 ) 
   

 

 

    

 

 

    

 

 

  
      (2,927 )      (688 )      (900 ) 
   

 

 

    

 

 

    

 

 

  

Income taxes

   $ 15,541     $ 15,010     $ 7,175  
   

 

 

    

 

 

    

 

 

  

The differences between the provision for income taxes at the U.S. federal statutory rate and the tax shown in the Statements of Consolidated Income for the years ended December 31 are summarized as follows:

 

                         
    2012     2011     2010  

U. S. federal statutory tax rate

     35 %      35 %      35 % 

Federal tax at statutory rate

   $ 15,689     $ 16,098     $ 10,564  

State and local taxes, net of federal benefit

     485       590       432  

U.S. federal permanent items

     332       14       324  

Domestic productions activity deduction

     (669 )      (401 )      (312 ) 

Foreign earnings and related tax credits

     1,498       261       641  

Non-U.S. tax rate variances

     (1,175 )      (1,510 )      (3,121 ) 

Unrecognized tax benefits

     310       21       (368 ) 

Valuation allowance

     (337 )      19       (403 ) 

Tax credits

     (85 )      (265 )      (329 ) 

Other, net

     (507 )      183       (253 ) 
   

 

 

    

 

 

    

 

 

  
    $ 15,541     $ 15,010     $ 7,175  
   

 

 

    

 

 

    

 

 

  

 

Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the tax basis of assets and liabilities and their carrying value for financial statement purposes. The tax effects of temporary differences that give rise to the Company’s deferred tax assets and liabilities at December 31 are as follows:

 

                 
    2012     2011  

Deferred tax assets:

                

Accrued compensation and benefits

   $ 1,808     $ 1,520  

Inventory valuation reserves

     2,771       1,938  

Benefit plan reserves

     9,468       9,126  

Capital tax loss carryforwards

     2,034       2,054  

Net operating loss carryforwards

     788       1,061  

Other accrued expenses

     2,480       2,222  

Unrealized foreign exchange

     58       346  
   

 

 

    

 

 

  

Gross deferred tax assets

     19,407       18,267  

Valuation allowance

     (2,329 )      (3,115 ) 
   

 

 

    

 

 

  

Net deferred tax assets

     17,078       15,152  
   

 

 

    

 

 

  

Deferred tax liabilities:

                

Depreciation and other basis differences

     (5,276 )      (4,602 ) 

Intangibles

     (3,571 )      (2,706 ) 

Other

     (90 )      (307 ) 
   

 

 

    

 

 

  

Deferred tax liabilities

     (8,937 )      (7,615 ) 
   

 

 

    

 

 

  

Net deferred tax assets

   $ 8,141     $ 7,537  
   

 

 

    

 

 

  

 

                 
    2012     2011  

Change in net deferred tax assets:

                

Deferred income tax benefit

   $ 2,927     $ 688  

Items of other comprehensive income (loss)

     (1,033 )      2,175  

Currency translation

     (254 )      (49 ) 

Deferred tax balances from business acquisition

     (1,036 )      0  
   

 

 

    

 

 

  

Total change in net deferred tax assets

   $ 604     $ 2,814  
   

 

 

    

 

 

  

Deferred taxes are recognized at currently enacted tax rates for temporary differences between the financial reporting and income tax bases of assets and liabilities and operating loss and tax credit carryforwards.

At December 31, 2012, the Company had $2 million of U.S. capital loss carryfowards that will expire in 2013 and $.8 million of foreign net operating loss carryfowards that will expire between the years 2013 and 2017.

The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. Based on this evaluation, the Company has established a valuation allowance of $2.3 million at December 31, 2012 in order to measure only the portion of the deferred tax asset that is more likely than not will be realized. Therefore, the Company recorded an allowance of $2 million against the U.S. capital loss carryfoward and $.3 million against the foreign net operating loss carryforwards. The net decrease of $.8 million in the valuation allowance from the prior year is primarily due to usage of foreign net operating loss carryfowards.

The Company has not established a deferred tax liability associated with approximately $117 million of its undistributed foreign earnings at December 31, 2012 as these earnings are considered to be permanently reinvested. These earnings would be taxable upon the sale or liquidation of these foreign subsidiaries, or upon the remittance of dividends. While the measurement of the unrecognized U.S. income taxes with respect to these earnings is not practicable, foreign tax credits would be available to offset some or all of any portion of such earnings that would be remitted as dividends.

 

Income taxes paid net of refunds were approximately $16 million in 2012, $14 million in 2011, and $8.4 million in 2010.

The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. As of December 31, 2012, with few exceptions, the Company is no longer subject to U.S. federal, state, local or foreign examinations by tax authorities for years before 2006.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the period ended December 31:

 

                         
    2012     2011     2010  

Balance at January 1

   $ 1,015     $ 1,062     $ 1,304  

Additions for tax positions of current year

     0       0       53  

Additions for tax positions of prior years

     511       0       62  

Reductions for tax positions of prior years

     0       (32 )      (281 ) 

Expiration of statutes of limitations

     (165 )      (15 )      (76 ) 
   

 

 

    

 

 

    

 

 

  

Balance at December 31

   $ 1,361     $ 1,015     $ 1,062  
   

 

 

    

 

 

    

 

 

  

Accrued interest and penalties are not included in the above unrecognized tax balances. The Company records accrued interest as well as penalties related to unrecognized tax benefits as part of the provision for income taxes. The Company recognized less than $.1 million, $.1 million and $.1 million in interest, net of the amount lapsed through expiring statutes during the years ended December 31, 2012, 2011 and 2010, respectively. The Company had approximately $.6 million, $.5 million and $.4 million for the payment of interest accrued at December 31, 2012, 2011 and 2010, respectively. The Company had approximately $.3 million accrued for the payment of penalties at December 31, 2012, 2011 and 2010. If recognized, approximately $.7 million, $.5 million, and $.4 million of unrecognized tax benefits would affect the tax rate for the years ended December 31, 2012, 2011 and 2010 respectively. The Company may decrease its unrecognized tax benefits by approximately $.2 million within the next twelve months due to the expiration of statutes of limitations.