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Income Taxes
6 Months Ended
Jun. 30, 2012
Income Taxes

Note 11 - Income Taxes

The Company calculated its income tax provision for the three and six months ended June 30, 2012 in accordance with the requirements of Accounting Standards Codification Topic 740, “Income Taxes.”

The Company’s effective tax rate attributable to continuing operations of 31.8% for the three months ended June 30, 2012 is higher than the Company’s effective tax rate attributable to continuing operations of 31.3% for the three months ended June 30, 2011 primarily due to the statutory expiration of the U.S. federal research tax credit as of December 31, 2011, partially offset by lower taxes on non-U.S. earnings.

The Company’s effective tax rate attributable to continuing operations of 30.2% for the six months ended June 30, 2012 is lower than the Company’s effective tax rate attributable to continuing operations of 31.1% for the six months ended June 30, 2011 primarily due to lower taxes on non-U.S. earnings partially offset by the statutory expiration of the U.S. federal research credit as of December 31, 2011.

The Company’s effective tax rates attributable to continuing operations for the three and six months ended June 30, 2012 are lower than the statutory U.S. federal tax rate of 35% primarily as a result of income earned in jurisdictions with tax rates lower than the statutory U.S. federal tax rate and the U.S. federal tax benefit for domestic manufacturing activities. These items are partially offset by net U.S. state taxes, and certain expenses that are statutorily non-deductible for income tax purposes.

 

During the three months and six ended June 30, 2012, the Company’s gross unrecognized tax benefits increased by $0.8 million and $1.2 million, respectively, as a result of tax positions taken in both the current and prior periods. During the three and six months ended June 30, 2012, the total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate increased by $0.7 million and $1.2 million, respectively.

The Company recognizes interest related to uncertain tax positions in its income tax expense. During the three and six months ended June 30, 2012, the total amount of interest expense related to unrecognized tax benefits recognized in the Company’s consolidated statement of operations was $0.1 million and $0.2 million, respectively. At June 30, 2012 and December 31, 2011, the total amount of accrued interest expense related to unrecognized tax benefits recorded in the Company’s consolidated balance sheet was $0.7 million and $0.6 million, respectively.

As of June 30, 2012, it is reasonably possible that the Company’s unrecognized tax benefits will decrease by $0.3 million during the next twelve months as a result of activity related to tax positions expected to be taken and the expiration of the statute of limitations on assessment.

The Company’s income tax returns are subject to examination by the U.S. federal, U.S. state and local, and non-U.S. tax authorities. The Internal Revenue Service (“IRS”) has completed its examinations of the Company’s consolidated U.S. federal income tax returns through 2008; however, the 2008 federal income tax return of an acquired subsidiary remains open to examination.

With few exceptions, the Company is no longer subject to U.S. state and local or non-U.S. income tax examinations for years before 2007. As of June 30, 2012, the Company and its subsidiaries are under examination in various jurisdictions, including Canada (2007 through 2009), Germany (2000 through 2009), and California (2007 and 2008).

The Company believes that adequate accruals have been provided for all jurisdictions’ open years.