Income Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes

Income Taxes

10.Income Taxes

The effective income tax rate for the second quarter of 2012 was 18.4 percent compared to 30.1 percent a year ago.  The effective income tax rate for the first six months of 2012 was 25.6 percent compared to 25.3 percent a year ago.

The second quarter of 2012 includes two items that significantly impact the effective income tax rate.  The first is a tax benefit of approximately $13 million related to the 2012 reversal of a valuation allowance recorded in 2009 against the Company’s net deferred tax assets in Korea.  During the second quarter, the Company determined that the realization of these net deferred tax assets is more-likely-than-not after weighing the positive and negative evidence in accordance with US GAAP.  Additionally, in the second quarter of 2012 the Company recognized an income tax benefit of $6 million related to the $10 million pre-tax charge in Kenya and associated tax write-off of the investment (see Note 3 of the Notes to the Condensed Consolidated Financial Statements for additional information).

Without these items, the Company’s effective income tax rates for the second quarter and first half of 2012 would have been approximately 30 percent and 31 percent, respectively.  The Company’s effective income tax rate for first half 2011 was favorably impacted by the recognition of the $58.4 million nontaxable NAFTA settlement and would have otherwise been approximately 31 percent.

It is reasonably likely that approximately $4 million of previously unrecognized tax benefits will be recognized in the third quarter of 2012 as a result of a lapse of the statute of limitations.