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Income Taxes and Uncertain Tax Positions
 9 Months Ended
Sep. 30, 2012
Income Tax Expense Benefit [Abstract]  
Income Tax Disclosure [Text Block]

Note 3 – Income Taxes and Uncertain Income Tax Positions

 

The Company's year-to-date 2012 effective tax rate of 26.9% was lower than the year-to-date 2011 effective tax rate of 27.1%. Both year-to-date effective tax rates reflect decreases in reserves for uncertain tax positions due to the expiration of applicable statutes of limitations for certain tax years of approximately $0.15 and $0.14 per diluted share for the nine months ended September 30, 2012 and September 30, 2011, respectively.

The FASB's guidance regarding accounting for uncertainty in income taxes prescribes the recognition threshold and measurement attributes for financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return. The guidance further requires the determination of whether the benefits of tax positions will be more likely than not sustained upon audit based upon the technical merits of the tax position. For tax positions that are determined to be more likely than not sustained upon audit, a company recognizes the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement in the financial statements. For tax positions that are not determined to be more likely than not sustained upon audit, a company does not recognize any portion of the benefit in the financial statements. Additionally, the guidance provides for derecognition, classification, penalties and interest, accounting in interim periods, disclosure and transition.

As of September 30, 2012, the Company's cumulative liability for gross unrecognized tax benefits was $12,043. At December 31, 2011, the Company's cumulative liability for gross unrecognized tax benefits was $12,719.

The Company continues to recognize interest and penalties associated with uncertain tax positions as a component of taxes on income before equity in net income of associated companies in its Condensed Consolidated Statement of Income. The Company recognized $57 and $6 for interest and $70 and $264 for penalties on its Condensed Consolidated Statement of Income for the three and nine months ended September 30, 2012, respectively, and recognized $63 and $122 for interest and $110 and $535 for penalties on its Condensed Consolidated Statement of Income for the three and nine months ended September 30, 2011, respectively. As of September 30, 2012, the Company had accrued $2,266 for cumulative interest and $1,555 for cumulative penalties, and $2,268 for cumulative interest and $1,298 for cumulative penalties at December 31, 2011.

During the three and nine months ended September 30, 2012, the Company recognized decreases of approximately $426 and $1,498, respectively, in its cumulative liability for gross unrecognized tax benefits due to the expiration of the applicable statutes of limitations for certain tax years. During the three and nine months ended September 30, 2011, the Company recognized decreases of approximately $424 and $1,382, respectively, in its cumulative liability for gross unrecognized tax benefits due to the expiration of the applicable statutes of limitations for certain tax years.

The Company estimates that during the year ending December 31, 2012 it will reduce its cumulative liability for gross unrecognized tax benefits by approximately $1,700 to $1,800 due to the expiration of the statute of limitations with regard to certain tax positions. This estimated reduction in the cumulative liability for unrecognized tax benefits does not consider any increase in liability for unrecognized tax benefits with regard to existing tax positions or any increase in cumulative liability for unrecognized tax benefits with regard to new tax positions for the year ending December 31, 2012.

The Company and its subsidiaries are subject to U.S. Federal income tax, as well as the income tax of various state and foreign tax jurisdictions. Tax years that remain subject to examination by major tax jurisdictions include the Netherlands and the United Kingdom from 2006, Brazil from 2007, Spain from 2008, the United States and China from 2009, Italy from 2010, and various domestic state tax jurisdictions from 1993.

In the second quarter of 2012, the Internal Revenue Service (“IRS”) initiated a limited scope audit of the Company's 2009 Federal income tax return. By letter dated October 15, 2012, the IRS notified the Company that it had completed the review of the Company's 2009 Federal income tax return without any changes to the reported information, completing the audit. Also, during the second quarter of 2012, the Italian tax authorities initiated a transfer pricing audit of the Company's Italian subsidiary. On July 7, 2012, the Company received a preliminary tax report related to this transfer pricing audit, which proposed several adjustments to the taxable income of the subsidiary. In conjunction with outside counsel, the Company reviewed the report and believes it should prevail on its merits. As a result, the Company does not believe it has any exposures warranting an uncertain tax position reserve. There has been no change in this matter during the third quarter of 2012.