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Income Taxes | 12 Months Ended
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Dec. 31, 2011
Income Taxes [Abstract] |
Income Taxes |
16. | Income Taxes
The income tax provision (benefit) consists of the following (in thousands):
|  | Year Ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Current: |  |  |  |  |  |  |  |  |
Domestic |  | $ | 10,887 |  |  | $ | (7 | ) |  | $ | 102 |
Foreign |  |  | 1,108 |  |  |  | 1,528 |  |  |  | 334 |
Total current |  |  | 11,995 |  |  |  | 1,521 |  |  |  | 436 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  | $ | (11,886 | ) |  |  | 13,873 |  |  |  | 5,534 |
Foreign |  |  | 12 |  |  |  | (3 | ) |  |  | 124 |
Total deferred |  |  | (11,874 | ) |  |  | 13,870 |  |  |  | 5,658 |
Total income tax provision |  | $ | 121 |  |  | $ | 15,391 |  |  | $ | 6,094 |
We have not provided for U.S. income taxes on the undistributed earnings of our foreign subsidiaries that are deferred from U.S. income taxation and that we intend to be permanently reinvested. We have provided for U.S. income tax regarding those undistributed earnings of our foreign subsidiaries subject to current taxation under Subpart F of the Internal Revenue Code. Cumulative undistributed earnings of foreign subsidiaries on which no U.S. income tax has been provided were $19.9 million at the end of 2011, $24.7 million at the end of 2010, and $22.2 million at the end of 2009. Earnings before income taxes for foreign operations amounted to approximately $4.3 million, $4 million, and $5.2 million in 2011, 2010, and 2009, respectively. Reconciliations between taxes at the U.S. Federal income tax rate and taxes at our effective income tax rate on earnings from continuing operations before income taxes are as follows (in thousands):
|  | Year Ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
U.S. Federal income tax rate of 35% |  | $ | 22,557 |  |  | $ | 14,032 |  |  | $ | 4,200 |
Increase (decrease) in tax rate resulting from: |  |  |  |  |  |  |  |  |  |  |  |
State and local income taxes, net of federal income tax benefit |  |  | 2,261 |  |  |  | 2,050 |  |  |  | (17 | )
Sale of European distribution business |  |  | - |  |  |  | - |  |  |  | (2,680 | )
Income (benefit) taxes attributable to foreign income |  |  | (163 | ) |  |  | 107 |  |  |  | 1,715 |
Change in unrecognized tax benefits |  |  | (454 | ) |  |  | (1,084 | ) |  |  | - |
Other non-deductible items, net |  |  | (2,455 | ) |  |  | 639 |  |  |  | 128 |
Change in valuation allowance |  |  | (21,625 | ) |  |  | (353 | ) |  |  | 2,748 |
Provision (benefit) for income taxes |  | $ | 121 |  |  | $ | 15,391 |  |  | $ | 6,094 |
The following is a summary of the components of the net deferred tax assets and liabilities recognized in the accompanying consolidated balance sheets (in thousands):
|  | December 31, |
|  | 2011 |  |  | 2010 |
Deferred tax assets: |  |  |  |  |  |
Inventories |  | $ | 16,036 |  |  | $ | 15,602 |
Allowance for customer returns |  |  | 9,308 |  |  |  | 8,313 |
Postretirement benefits |  |  | 3,389 |  |  |  | 9,129 |
Allowance for doubtful accounts |  |  | 2,480 |  |  |  | 2,769 |
Accrued salaries and benefits |  |  | 7,828 |  |  |  | 9,022 |
Net operating loss |  |  | 383 |  |  |  | 2,162 |
Capital loss |  |  | 6,133 |  |  |  | 6,903 |
Tax credit carry forwards |  |  | 4,065 |  |  |  | 8,327 |
Deferred gain on building sale |  |  | 2,583 |  |  |  | 3,010 |
Accrued asbestos liabilities |  |  | 10,905 |  |  |  | 10,261 |
Other |  |  | 2,975 |  |  |  | 4,203 |
|  |  | 66,085 |  |  |  | 79,701 |
Valuation allowance (1) |  |  | (7,843 | ) |  |  | (29,468 | )
Total deferred tax assets |  |  | 58,242 |  |  |  | 50,233 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation |  |  | 8,906 |  |  |  | 10,528 |
Promotional costs |  |  | 200 |  |  |  | 223 |
Other |  |  | - |  |  |  | - |
Total deferred tax liabilities |  |  | 9,106 |  |  |  | 10,751 |
Net deferred tax assets |  | $ | 49,136 |  |  | $ | 39,482 |
| (1) | Current net deferred tax assets are $32.2 million and $18.1 million for 2011 and 2010, respectively. Non-current net deferred tax assets are $16.9 million and $21.3 million for 2011 and 2010, respectively. The tax valuation allowance was allocated to long term deferred tax assets in the amounts of $7.8 million and $15.9 million in 2011 and 2010, respectively, and to current deferred tax assets in the amount of $13.6 million in 2010. None of the valuation allowance was allocated to current deferred tax assets in 2011.
In assessing the realizability of the deferred tax assets, we consider whether it is more likely than not that some portion or the entire deferred tax asset will be realized. Ultimately, the realization of the deferred tax asset is dependent upon the generation of sufficient taxable income in those periods in which temporary differences become deductible and/or net operating loss carryforwards can be utilized. We consider the level of historical taxable income, scheduled reversal of temporary differences, tax planning strategies and projected future taxable income in determining whether a valuation allowance is warranted. We also consider cumulative losses in recent years as well as the impact of one-time events in assessing our pre-tax earnings. Assumptions regarding future taxable income require significant judgment. Our assumptions are consistent with estimates and plans used to manage our business. In December 2011, we realized a non-recurring non-cash benefit of $21.5 million in our tax provision related to a reduction of a significant portion of our deferred tax valuation allowance on net U.S. deferred tax assets. In assessing the ability to recognize our deferred tax assets, we reviewed all positive and negative evidence and considered historical book and taxable income, the scheduled reversal of deferred tax assets and liabilities, and projected future book and taxable income. Based upon this detailed assessment, we determined that it is more likely than not that a significant portion of our net U.S. deferred tax assets, for which a valuation allowance had been previously recorded, will be realized and, as such, reversed $21.5 million of the valuation allowance on net U.S. deferred tax assets. The remaining valuation allowance of $7.8 million as of December 31, 2011 is intended to provide for uncertainty regarding the ultimate realization of our state tax credit carryovers, U.S. capital loss carryforwards, U.S. foreign tax credit carryovers, and foreign net operating loss carryforwards. Based on these considerations, we believe it is more likely than not that we will realize the benefit of the net deferred tax asset of $49.1 million as of December 31, 2011, which is net of the remaining valuation allowance. At December 31, 2011, we have approximately $2 million of foreign net operating loss carryforwards, which will expire in 2012 and 2013. We also have foreign tax credit carryforwards of approximately $1 million that will expire in varying amounts between 2011 and 2020, a capital loss carryforward of $15.5 million that will expire in 2014 and an alternative minimum tax credit carryforward of approximately $2.7 million, which has no expiration date. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Balance at January 1, 2011 |  | $ | 803 |
Increase based on tax positions taken in the current year |  |  | - |
Decrease based on tax positions taken in the current year |  |  | (454 | )
Balance at December 31, 2011 |  | $ | 349 |
The amount of unrecognized tax benefits at December 31, 2011, if ultimately recognized, will reduce our annual effective tax rate. We are subject to taxation in the U.S. and various state, local and foreign jurisdictions. As of December 31, 2011, the Company is no longer subject to U.S. Federal tax examinations for years before 2008. We remain subject to examination by state and local tax authorities for tax years 2007 through 2011. Foreign jurisdictions have statutes of limitations generally ranging from 2 to 6 years. Years still open to examination by foreign tax authorities in major jurisdictions include Canada (2007 onward), Hong Kong (2006 onward) and Poland (2006 onward). We do not presently anticipate that our unrecognized tax benefits will significantly increase or decrease prior to September 15, 2012, the due date for the U.S. Federal tax return; however, actual developments in this area could differ from those currently expected. We recognize interest and penalties associated with income tax matters as components of the “provision for income taxes.”

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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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