(5)

Income Taxes

We determine the tax provision for interim periods using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes we make a cumulative adjustment. We classify interest and penalties associated with unrecognized tax benefits as income tax expense in our Condensed Consolidated Statements of Operations.

Our effective tax rate was 33.9% and 35.4% for the first six months of 2011 and 2010, respectively. This decrease was primarily due to the research and development tax credit being in effect for the first six months of 2011 while it was not effective for the first six months of 2010 and a favorable foreign tax audit settlement during the first quarter of 2011.

During the first quarter of 2010, the Internal Revenue Service commenced its examination of the 2008 and 2009 income tax returns. We do not believe this examination will have a material effect on our financial position, results of operations or liquidity.

As of the end of the second quarter of 2011, we do not anticipate any settlements of the aforementioned matter or any of our remaining unrecognized tax benefits within the next 12 months.