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Taxes | 12 Months Ended
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Dec. 31, 2011
Taxes [Abstract] |
Taxes | 12. Taxes Income Taxes Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the consolidated deferred tax assets and liabilities were (in thousands):
Fiscal Year |  | 2011 |  |  | 2010 |
Current deferred income tax assets (liabilities): |  |  |  |  |  |  |  |
Bad debt allowance |  | $ | 6,605 |  |  | $ | 7,028 |
Returns allowance |  |  | 15,364 |  |  |  | 15,468 |
Inventory |  |  | 11,656 |  |  |  | 10,144 |
Warranty reserve |  |  | 2,078 |  |  |  | 1,054 |
Compensation |  |  | 7,707 |  |  |  | 2,894 |
Accrued liabilities |  |  | 5,951 |  |  |  | 3,536 |
Returns cost of sales |  |  | (6,613 | ) |  |  | (6,024 | )
Deferred rent |  |  | 1,560 |  |  |  | 789 |
Loss carry-forwards |  |  | 881 |  |  |  | 1,596 |
Other |  |  | 1,312 |  |  |  | 6,837 |
Total current deferred tax assets |  |  | 46,501 |  |  |  | 43,322 |
Valuation allowance |  |  | (698 | ) |  |  | (1,486 | )
Net current deferred income tax assets |  | $ | 45,803 |  |  | $ | 41,836 |
Long-term deferred income tax (liabilities) assets: |  |  |  |  |  |  |  |
Unrealized exchange losses |  |  | 2,858 |  |  |  | 2,520 |
State income tax and interest on tax contingencies |  |  | 0 |  |  |  | 925 |
Fixed assets |  |  | (35,413 | ) |  |  | (8,847 | )
Trade names and customer lists |  |  | (7,144 | ) |  |  | (7,168 | )
Compensation |  |  | 3,522 |  |  |  | 5,972 |
Deferred rent |  |  | 6,693 |  |  |  | 3,264 |
Loss carry-forwards |  |  | 2,275 |  |  |  | 2,375 |
Undistributed earnings of certain foreign subsidiaries |  |  | (57,324 | ) |  |  | (44,122 | )
Tax deductible foreign reserves |  |  | 1,460 |  |  |  | (1,229 | )
Other |  |  | 4,115 |  |  |  | 2,038 |
Total deferred income tax liabilities |  |  | (78,958 | ) |  |  | (44,272 | )
Valuation allowance |  |  | (2,495 | ) |  |  | (2,695 | )
Net long-term deferred income tax liabilities |  | $ | (81,453 | ) |  | $ | (46,967 | )
Total long-term deferred income tax assets |  |  | 4,875 |  |  |  | 926 |
Total deferred income tax liabilities |  |  | (86,328 | ) |  |  | (47,893 | )
Net long-term deferred income tax liabilities |  | $ | (81,453 | ) |  | $ | (46,967 | )
The deferred income tax asset for loss carry-forwards includes $11.6 million of net operating losses of foreign subsidiaries. Valuation allowances have been recorded to reflect the estimated amount of deferred tax assets that may not be realized on these losses. The amounts and the fiscal year of expiration of our loss carry-forwards are (in thousands): Operating loss carry-forwards
Expires 2012 through 2016 |  | $ | 947 |
Expires 2017 through 2021 |  |  | 1,004 |
Expires 2022 through 2026 |  |  | 1,496 |
Indefinite |  |  | 8,186 |
Total loss carry-forwards |  | $ | 11,633 |
The following table identifies earnings before income taxes for the Company's U.S. and non-U.S. based operations for the fiscal years indicated (in thousands):
Fiscal Year |  | 2011 |  |  | 2010 |  |  | 2009 |
U.S. |  | $ | 173,861 |  |  | $ | 154,318 |  |  | $ | 94,543 |
Non-U.S. |  |  | 277,698 |  |  |  | 229,892 |  |  |  | 125,355 |
Total |  | $ | 451,559 |  |  | $ | 384,210 |  |  | $ | 219,898 |
The Company's provision for income taxes consisted of the following for the fiscal years indicated (in thousands):
Fiscal Year |  | 2011 |  |  | 2010 |  |  | 2009 |
Current provision: |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  | $ | 59,854 |  |  | $ | 54,820 |  |  | $ | 46,350 |
Non-U.S. |  |  | 55,407 |  |  |  | 44,613 |  |  |  | 22,629 |
State and local |  |  | 7,416 |  |  |  | 4,535 |  |  |  | 3,284 |
Total current |  |  | 122,677 |  |  |  | 103,968 |  |  |  | 72,263 |
Deferred provision: |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  |  | 25,116 |  |  |  | 19,112 |  |  |  | 3,320 |
Non-U.S. |  |  | (4,680 | ) |  |  | (3,188 | ) |  |  | (39 | )
State and local |  |  | 1,044 |  |  |  | (572 | ) |  |  | 60 |
Total deferred |  |  | 21,480 |  |  |  | 15,352 |  |  |  | 3,341 |
Provision for income taxes |  | $ | 144,157 |  |  | $ | 119,320 |  |  | $ | 75,604 |
The expected cash payments for current U.S. income tax expense for fiscal years 2011, 2010 and 2009 were reduced by approximately $11.2 million, $12.5 million and $2.1 million, respectively, as a result of tax deductions related to the exercise of non-qualified stock options and stock appreciation rights and the vesting of restricted stock and restricted stock units. The expected cash payments for current foreign tax expense were reduced by $1.7 million in fiscal 2011 and $1.7 million in fiscal 2010 as a result of tax deductions related to the exercise of stock options and the vesting of restricted stock granted to foreign employees. The income tax benefits resulting from these stock-based compensation plans have been recorded to additional paid-in capital. Total deferred income tax expense of $21.5 million, $15.4 million and $3.3 million for fiscal years 2011, 2010 and 2009, respectively, are included in deferred income taxes on the consolidated statements of cash flows. The Company was granted a 100% tax holiday for its watch assembly activities in Switzerland for tax years 2003 through 2007 and a 60% tax holiday for tax years 2008 through 2012. After 2012, the Company will pay the full Swiss tax rate on its watch assembly activities. This tax holiday reduced current foreign income taxes by approximately $0.9 million, $0.2 million and $0.1 million in fiscal years 2011, 2010 and 2009, respectively. A reconciliation of income tax computed at the U.S. federal statutory income tax rate of 35% to the provision for income taxes is as follows:
Fiscal Year |  | 2011 |  |  | 2010 |  |  | 2009 |
Tax at statutory rate |  |  | 35.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
State, net of federal tax benefit |  |  | 1.2 |  |  |  | 0.9 |  |  |  | 0.8 |
Foreign rate differential |  |  | (12.0 | ) |  |  | (11.1 | ) |  |  | (9.2 | )
U.S. tax on foreign income |  |  | 6.7 |  |  |  | 9.8 |  |  |  | 8.7 |
Income tax contingencies |  |  | 0.7 |  |  |  | (3.7 | ) |  |  | (0.4 | )
Other |  |  | 0.3 |  |  |  | 0.2 |  |  |  | (0.5 | )
Provision for income taxes |  |  | 31.9 | % |  |  | 31.1 | % |  |  | 34.4 | %
Deferred U.S. federal income taxes and foreign withholding taxes are not recorded on undistributed earnings of certain foreign subsidiaries where management plans to continue reinvesting these earnings outside the U.S. The amount of undistributed earnings that would be subject to tax if distributed was approximately $371.8 million at December 31, 2011. Determining tax amounts that would be payable if these earnings were distributed to the U.S. parent company is not practicable. The total amount of unrecognized tax benefits under ASC 740, excluding interest and penalties that would favorably impact the effective tax rate in future periods if recognized, was $12.7 million for fiscal year 2011, $8.1 million for fiscal year 2010, and $7.8 million for fiscal year 2009. During the second quarter of fiscal 2010, the examination phase of the Internal Revenue Service ("IRS") audit for tax years 2005 and 2006 was completed. The IRS proposed certain adjustments to the Company's tax returns and the Company filed a protest. The protest is under review by the IRS Office of Appeals and will be resolved within the next twelve months. The examination of the 2007-2009 federal income tax returns by the IRS began in January 2012. The Company is also subject to examinations in various state and foreign jurisdictions for the 2005-2010 tax years, none of which the Company believes are individually significant. Audit outcomes and timing of audit settlements are subject to significant uncertainty. The Company has classified uncertain tax positions as long-term income taxes payable unless such amounts are expected to be paid within twelve months from December 31, 2011. As of December 31, 2011, the Company had recorded $2.7 million of unrecognized tax benefits, excluding interest and penalties, for positions that could be settled within the next twelve months. Consistent with its past practice, the Company recognizes interest and/or penalties related to income tax overpayments and income tax underpayments in income tax expense and income taxes receivable/payable, respectively. The total amount of accrued income tax-related interest in the consolidated balance sheets was $2.5 million and $1.3 million at December 31, 2011 and January 1, 2011, respectively. There were no penalties in the consolidated balance sheets at December 31, 2011 or January 1, 2011. The Company accrued interest expense of $1.2 million, $0.8 million and $1.8 million in each of fiscal years 2011, 2010 and 2009. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the fiscal years indicated (in thousands):
Fiscal Year |  | 2011 |  |  | 2010 |  |  | 2009 |
Balance at beginning of year |  | $ | 10,945 |  |  | $ | 35,426 |  |  | $ | 33,855 |
Gross increases tax positions in prior years |  |  | 5,963 |  |  |  | 2,680 |  |  |  | 4,676 |
Gross decreases tax positions in prior years |  |  | 0 |  |  |  | (27,799 | ) |  |  | (641 | )
Gross increases-current year tax positions |  |  | 1,192 |  |  |  | 842 |  |  |  | 2,428 |
Settlements |  |  | (119 | ) |  |  | (204 | ) |  |  | 0 |
Lapse in statute of limitations |  |  | 0 |  |  |  | 0 |  |  |  | (4,902 | )
Increase due to currency revaluation |  |  | (7 | ) |  |  | 0 |  |  |  | 10 |
Balance at end of year |  | $ | 17,974 |  |  | $ | 10,945 |  |  | $ | 35,426 |

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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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