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Income Taxes
9 Months Ended
Sep. 30, 2013
Income Tax Disclosure [Abstract]  
Income Taxes

13. Income Taxes

The effective tax rate for the three and nine months ended September 30, 2013 was 28.0% and 27.8%, respectively. The earnings of the Company’s foreign entities for the three and nine months ended September 30, 2013 were $7.4 million and $18.9 million, respectively. The tax rates in the foreign jurisdictions in which the Company operates are less than the domestic tax rate. The effective tax rate for the three and nine months ended September 30, 2013 was positively impacted by foreign profits taxed at lower rates. The effective tax rate for the nine months ended September 30, 2013 was also positively impacted by the recognition of $1.4 million tax benefit as a result of implementing the 2012 American Taxpayer Relief Act and negatively impacted by acquisition related expenses that are not deductible for tax purposes as well as an increase in the valuation allowance against foreign tax credits as a result of the acquisition of ORCC.

The Company reported a tax benefit for the three months ended September 30, 2012 while reporting a pretax profit for the same period. The resulting effective tax rate is negative. The effective tax rate for the nine months ended September 30, 2012 was 90.6%. The earnings of the Company’s foreign entities for the three and nine months ended September 30, 2012 was $14.5 million and $37.0 million, respectively. The tax rates in the foreign jurisdictions in which the Company operates are less than the Company’s domestic rate. The effective tax rate for the three and nine months ended September 30, 2012 was positively impacted by foreign profits taxed at lower rates and a domestic loss taxed at a higher rate. The effective tax rate for the three and nine months ended September 30, 2012 was positively impacted by a $1.6 million release of an accrued tax liability and a favorable adjustment of $1.0 million to the Company’s uncertain tax positions as the statute of limitations expired for the tax returns to which they are associated during the nine months ended September 30, 2012. The effective tax rate for the nine months ended September 30, 2012 was positively impacted by a $1.4 million release of a valuation allowance during the nine months ended September 30, 2012. The valuation allowance was released based upon evidence that one of the Company’s foreign entities will be able to fully utilize its remaining tax losses.

 

The Company’s effective tax rate could fluctuate significantly on a quarterly basis and could be negatively affected to the extent earnings are lower in the countries in which the Company operates that have a lower statutory rate or higher in the countries in which it operates that have a higher statutory rate or to the extent it has losses sustained in countries where the future utilization of those losses is uncertain. The Company’s effective tax rate could also fluctuate due to changes in the valuation of its deferred tax assets or liabilities, or by changes in tax laws, regulations, accounting principles, or interpretations thereof. In addition, the Company is occasionally subject to examination of its income tax returns by tax authorities in the jurisdictions in which it operates. The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes.

The amount of unrecognized tax benefits for uncertain tax positions was $15.5 million as of September 30, 2013 and $13.1 million as of December 31, 2012, excluding related liabilities for interest and penalties of $2.1 million and $1.8 million as of September 30, 2013 and December 31, 2012, respectively. The amount of unrecognized tax benefits for uncertain tax positions increased by $1.9 million and $0.4 million during the nine months ended September 30, 2013 for the uncertain tax positions of ORCC and PTESA, respectively, which were included in the preliminary purchase price allocation.

The Company believes it is reasonably possible that the total amount of unrecognized tax benefits will decrease within the next 12 months by approximately $2.0 million, due to the settlement of various audits and the expiration of statutes of limitation.