Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes

Income Taxes

Note 10: Income Taxes

The Company recorded an income tax provision of $9.5 million, reflecting an effective rate of 39.1% of pretax income during the three months ended June 30, 2011. The effective tax rate for the three months ended June 30, 2011 primarily consisted of a provision for federal income taxes of 32.5% (which is net of a benefit for state taxes of 2.5%), a blended provision for state taxes of 7.0%, and a net benefit for permanent book versus tax differences of 0.4%. The Company recorded an income tax provision of $6.7 million, reflecting an effective rate of 36.5% of pretax income during the three months ended June 30, 2010. The effective tax rate for the three months ended June 30, 2010, primarily consisted of a provision for federal income taxes of 32.4% (which is net of a benefit for state taxes of 2.6%), a provision for state taxes of 7.3%, a benefit for permanent book versus tax differences of 1.5%, and a benefit for an Internal Revenue Service ("IRS") refund of 1.7%.

The Company recorded an income tax provision of $18.1 million, reflecting an effective rate of 38.9% of pretax income during the six months ended June 30, 2011. The effective tax rate for the six months ended June 30, 2011, primarily consisted of a provision for federal income taxes of 32.5% (which is net of a benefit for state taxes of 2.5%), a provision for state taxes of 7.0% and a benefit for permanent book versus tax differences of 0.6%. The Company recorded an income tax provision of $13.2 million, reflecting an effective rate of 36.9% of pretax income during the six months ended June 30, 2010. The effective tax rate for the six months ended June 30, 2010, primarily consisted of a provision for federal income taxes of 32.4% (which is net of a benefit for state taxes of 2.6%), a provision for state taxes of 7.3%, a benefit for permanent book versus tax differences of 1.9%, and a benefit for an IRS refund of 0.9%.

The increase in the overall effective tax rates from three and six months ended June 30, 2010 to June 30, 2011 was primarily attributable to an increase in the effective tax rate in India. The Company's operations in India benefited from a tax holiday, which expired on March 31, 2011. Accounting guidance requires the impact of the expiration of the tax holiday to be spread throughout the year ended December 31, 2011. Accordingly, the impact of the expiration was reflected in the effective tax rates for three and six months ended June 30, 2011.

As of June 30, 2011, the Company had a gross unrecognized tax benefit of $1.2 million that, if recognized, would result in a net tax benefit of approximately $0.8 million and would have a positive effect on the Company's effective tax rate. During the three and six months ended June 30, 2011, there were no material changes to the unrecognized tax benefit.

For the three and six months ended June 30, 2011, the Company has not provided for the United States income taxes or foreign withholding taxes on the quarterly undistributed earnings from continuing operations of its subsidiary operating outside of the United States. Undistributed earnings of the subsidiary for the three and six months ended June 30, 2011, were approximately $0.8 million and $2.8 million, respectively. Such undistributed earnings are considered permanently reinvested.