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INCOME TAXES
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3 Months Ended |
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Mar. 31, 2012
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| INCOME TAXES [Abstract] | |
| INCOME TAXES |
NOTE 7-INCOME TAXES
The Company calculates interim effective tax rates in accordance with the FASB guidance for income taxes and applies the estimated annual effective tax rate to year-to-date pretax income (loss) at the end of each interim period to compute a year-to-date tax expense (or benefit). This guidance requires departure from effective tax rate computations when losses incurred within tax jurisdictions cannot be carried back and future profits associated with operations in those tax jurisdictions cannot be assured beyond any reasonable doubt. Accordingly, the Company has calculated and applied an expected annual effective tax rate of approximately 19% (as compared to 22% in the prior year), excluding significant, unusual or extraordinary items, for ordinary income associated with operations, which are principally outside of the United States, for which the Company currently expects to have annual taxable income. The Company has not recorded tax benefits associated with losses from operations for which future taxable income cannot be reasonably assured. As required by this guidance, the Company also includes tax effects of significant, unusual or extraordinary items in income tax expense in the interim period in which they occur.
Net income tax expense is $4.3 million for the three months ended March 31, 2012. The components of tax expense that contributed to the net income tax expense for the three months ended March 31, 2012 primarily consists of income tax expense of $1.6 million based on the expected annual rate pertaining to income for the three month period ending on March 31, 2012, state and local taxes of $1.0 million, establishment of valuation allowance of $0.5 million on deferred tax assets and an increase for unrecognized tax benefits of $0.9 million.
As of March 31, 2012 and December 31, 2011, the Company had unrecognized tax benefits of approximately $13.3 million and $13.4 million, respectively. During the three months ended March 31, 2012, unrecognized tax benefits decreased by approximately $0.1 million, primarily attributable to settlements of approximately $1.0 million which were partially offset by $0.9 million of tax, interest and penalty accruals. All of these unrecognized tax benefits would favorably impact the effective tax rate if recognized in the future.
Historically, the Company has reinvested all foreign earnings in its continuing foreign operations. The Company currently believes all undistributed foreign earnings will be indefinitely reinvested in its foreign operations.
The tax years 2002 through 2011 remain open to examination by the major tax jurisdictions to which the Company is subject.
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