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INCOME TAXES
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3 Months Ended |
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Mar. 31, 2013
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| Income Tax Disclosure [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 18% for 2013 (as compared to 19% in the prior year), excluding significant, unusual or extraordinary items, for ordinary income associated with operations for which the Company currently expects to have annual taxable income, which are principally outside of the United States. 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 $3.6 million for the three months ended March 31, 2013. The components of tax expense that contributed to the net income tax expense for the three months ended March 31, 2013 primarily consist of income tax expense of $1.3 million based on the expected annual rate pertaining to ordinary income for the three-month period, a $1.1 million federal tax adjustment to prior year tax filings and state and local taxes of $1.0 million.
As of March 31, 2013 and December 31, 2012, the Company had unrecognized tax benefits of approximately $15.7 million and $16.0 million, respectively. During the three months ended March 31, 2013, unrecognized tax benefits decreased by approximately $0.3 million, primarily attributable to currency translation adjustments of $(0.4) million partially offset by an increase in interest and penalty accruals of approximately $0.1 million. 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 that are not currently subject to United States federal income tax will be indefinitely reinvested in its foreign operations.
The tax years 2001 through 2012 remain open to examination by the major tax jurisdictions to which the Company is subject.
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