INCOME TAXES

12 Months Ended

Dec. 31, 2011

INCOME TAXES

INCOME TAXES

NOTE 11 – INCOME TAXES

The components of income (loss) before income taxes for the three years ended December 31, 2011 were as follows:

	Year Ended December 31,
	2011		2010		2009
U.S.	$	204,667	$	135,756	$	110,909
Non-U.S.		96,664		51,352		(24,171	)
Total	$	301,331	$	187,108	$	86,738

The components of income tax expense (benefit) for the three years ended December 31, 2011 were as follows:

	Year Ended December 31,
	2011		2010			2009
Current:
Federal	$	42,510	$	30,642		$	25,688
Non-U.S.		19,970		15,532			15,943
State and local		6,699		4,337			3,364
		69,179		50,511			44,995
Deferred:
Federal		12,140		6,802			(4,612	)
Non-U.S.		2,768		(2,640	)		(2,735	)
State and local		231		225			257
		15,139		4,387			(7,090	)
Total	$	84,318	$	54,898		$	37,905

The differences between total income tax expense and the amount computed by applying the statutory federal income tax rate to income before income taxes for the three years ended December 31, 2011 were as follows:

	Year Ended December 31,
	2011			2010			2009
Statutory rate of 35% applied to pre-tax income	$	105,466		$	65,488		$	30,358
Effect of state and local income taxes, net of federal tax benefit		4,585			3,044			2,443
Taxes (less) more than the U.S. tax rate on non-U.S. earnings, including utilization of tax loss carryforwards, losses with no benefit and changes in non-U.S. valuation allowance		(13,637	)		(1,417	)		18,484
Manufacturing deduction		(5,330	)		(3,900	)		(2,310	)
U.S. tax cost (benefit) of foreign source income		145			(3,282	)		(14,486	)
Resolution and adjustments to uncertain tax positions		(5,103	)		(3,204	)		4,275
Other		(1,808	)		(1,831	)		(859	)
Total	$	84,318		$	54,898		$	37,905
Effective tax rate		27.98%			29.34%			43.70%

The 2011 effective tax rate is impacted by the geographic mix of earnings and taxes at lower rates in foreign jurisdictions, including Canada, Mexico, Poland and the U.K., as well as loss utilization in other foreign jurisdictions. Total income tax payments, net of refunds, were $62,600 in 2011, $40,970 in 2010 and $33,522 in 2009.

Deferred Taxes

Significant components of deferred tax assets and liabilities at December 31, 2011 and 2010, were as follows:

	December 31,
	2011			2010
Deferred tax assets:
Tax loss and credit carryforwards	$	32,313		$	45,383
Inventory		8,224			8,190
Other accruals		15,652			16,024
Employee benefits		17,600			17,304
Pension obligations		79,371			36,251
Other		7,111			13,662
Deferred tax assets, gross		160,271			136,814
Valuation allowance		(31,713	)		(38,451	)
Deferred tax assets, net		128,558			98,363
Deferred tax liabilities:
Property, plant and equipment		40,806			37,191
Intangible assets		13,251			15,170
Inventory		2,973			5,246
Pension obligations		1,676			2,239
Other		9,685			9,369
Deferred tax liabilities		68,391			69,215
Total Deferred taxes	$	60,167		$	29,148

At December 31, 2011, certain subsidiaries had tax loss carryforwards of approximately $114,733 that will expire in various years from 2012 through 2030, except for $30,070 for which there is no expiration date.

In assessing the realizability of deferred tax assets, the Company assesses whether it is more likely than not that a portion or all of the deferred tax assets will not be realized. The Company considers the scheduled reversal of deferred tax liabilities, tax planning strategies, and projected future taxable income in making this assessment. At December 31, 2011, a valuation allowance of $31,713 was recorded against certain deferred tax assets based on this assessment. The Company believes it is more likely than not that the tax benefit of the remaining net deferred tax assets will be realized. The amount of net deferred tax assets considered realizable could be increased or decreased in the future if the Company's assessment of future taxable income or tax planning strategies changes.

The Company does not provide deferred income taxes on unremitted earnings of certain non-U.S. subsidiaries which are deemed permanently reinvested. It is not practicable to calculate the deferred taxes associated with the remittance of these earnings. Deferred income taxes associated with earnings of $3,776 that are not expected to be permanently reinvested were not significant.

Unrecognized Tax Benefits

Liabilities for unrecognized tax benefits are classified as "Accrued taxes" non-current unless expected to be paid in one year. The Company recognizes interest and penalties related to unrecognized tax benefits in "Income taxes." Current income tax expense included a benefit of $505 for the year ended December 31, 2011 and an expense of $312 for the year ended December 31, 2010 for interest and penalties. For those same years, the Company's accrual for interest and penalties related to unrecognized tax benefits totaled $9,039 and $10,443, respectively.

The following table summarizes the activity related to unrecognized tax benefits:

	2011			2010
Balance at January 1	$	38,393		$	42,840
Increase related to current year tax provisions		2,221			1,830
Increase related to prior years' tax positions		3,250			1,163
Increase related to acquisitions		–			438
Decrease related to settlements with taxing authorities		(3,424	)		(507	)
Resolution of and other decreases in prior years' tax liabilities		(13,460	)		(4,950	)
Other		(324	)		(2,421	)
Balance at December 31	$	26,656		$	38,393

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $17,325 at December 31, 2011 and $22,925 at December 31, 2010.

The Company files income tax returns in the U.S. and various state, local 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 2003. The Company is currently subject to various U.S. state audits, a Russian tax audit for 2008 - 2010, a German tax audit for 2007 - 2009, a Canadian tax audit for 2003 - 2007 and an Indonesian tax audit for 2003 - 2007.

The Company is generally not able to precisely estimate the ultimate settlement amounts or timing until after the close of an audit. The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by local authorities and may not be fully sustained.

Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including progress of tax audits and closing of statutes of limitations. Based on information currently available, management believes that additional audit activity could be completed and/or statutes of limitations may close relating to existing unrecognized tax benefits. It is reasonably possible there could be a further reduction of $7,082 in prior years' unrecognized tax benefits in 2012.