Note 7—Income Taxes


(In thousands)	2011			2010		2009
Components of income before income taxes
U.S. income	$	58,817		$	38,398	$	33,393
Non-U.S. income		46,001			18,951		31,947

Income before income taxes		104,818			57,349		65,340

Provision for income taxes
Current
Federal	$	6,829		$	9,498	$	12,935
State		872			149		1,398
Non-U.S.		18,272			1,481		11,046

Total current provision		25,973			11,128		25,379

Deferred
Federal		10,853			3,862		313
State		772			194		(1,438	)
Non-U.S.		(2,825	)		3,106		(2,251	)

Total deferred provision (benefit).		8,800			7,162		(3,376	)

Provision for income taxes		34,773			18,290		22,003

Reconciliation of the U.S. federal income tax rates to our effective tax rate:


	2011			2010			2009
U.S. federal income tax rate		35.0	%		35.0	%		35.0	%
State income taxes—U.S.		1.0			0.4			1.4
Taxes on non-U.S. income		(2.1	)		(0.8	)		(0.4	)
Research and development credits		(1.3	)		(2.3	)		(1.2	)
Manufacturing deduction		(0.3	)		(1.9	)		(0.8	)
Valuation allowances		0.1			2.0			0.4
Statutory rate changes		—			—			(0.9	)
Other		0.8			(0.5	)		0.2

Effective income tax rate		33.2	%		31.9	%		33.7	%

Components of deferred tax assets and liabilities:


	December 31
(In thousands)	2011			2010
Deferred tax assets
Postretirement benefits	$	13,561		$	16,369
Inventory reserves		3,773			2,830
Vacation allowances		1,319			1,535
Net operating losses and tax credit carryforwards		9,436			10,209
Post employment benefits		2,400			3,085
Foreign tax credit carryforwards (expiring between 2012 and 2020)		3,463			3,535
Stock options		7,815			6,446
Liability insurance		4,116			3,759
Basis of capital assets		1,102			1,970
Warranties		2,903			2,775
Reserve for doubtful accounts		1,581			2,226
Deferred revenue		217			1,240
Other		3,788			2,219

Total deferred tax assets		55,474			58,198
Valuation allowances		(2,777	)		(4,323	)

Net deferred tax assets		52,697			53,875

Deferred tax liabilities
Property, plant and equipment		(13,565	)		(22,697	)
Pension		(18,609	)		(44,897	)
Intangibles		(16,209	)		(1,527	)
Other		(973	)		—

Total deferred tax liabilities		(49,356	)		(69,121	)

Net deferred taxes		3,341			(15,246	)

At December 31, 2011, we had net operating loss carryforwards of approximately $31.0 million, the majority of which are in non-U.S. tax jurisdictions. Net operating loss carryforwards of $0.1 million will expire in 2013 and the remainder may be carried forward indefinitely.

No deferred U.S. income taxes have been provided on undistributed earnings of non-U.S. subsidiaries, which amounted to $229.0 million as of December 31, 2011. These earnings are considered to be reinvested for an indefinite period of time. It is not practicable to determine the deferred tax liability on these undistributed earnings.

A reconciliation of the change in the tax liability for unrecognized tax benefits for the years ended December 31, 2011 and December 31, 2010 is as follows:


(In thousands)	2011			2010
Beginning balance	$	11,827		$	9,126
Additions for tax positions related to the current year		1,268			3,183
Adjustments for tax positions related to prior years		(9	)		39
Statute expiration		(259	)		(247	)
Settlements		—			(274	)

Ending balance		12,827			11,827

The total amount of unrecognized tax benefits, if recognized, would reduce our future effective tax rate. We have recognized tax benefits associated with these liabilities in the amount of $11.4 million and $10.5 million at December 31, 2011 and December 31, 2010, respectively.

We recognize interest related to unrecognized tax benefits in interest expense and penalties in operating expenses. Our liability for accrued interest and penalties related to uncertain tax positions was $0.8 million at December 31, 2010. During 2011, we accrued additional interest related to uncertain tax positions of $0.1 million. Our liability for accrued interest and penalties related to uncertain tax positions was $0.9 million at December 31, 2011.

We file a U.S. federal income tax return along with various state and foreign income tax returns. Examinations of our federal returns have been completed through 2006, and the 2007 tax year was closed by statute. Various state and foreign income tax returns may be subject to tax audits after 2005.