Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes [Abstract]

Income Taxes

Note 4—Income Taxes:

Management estimates the annual effective income tax rate quarterly, based on current annual forecasted results. Items unrelated to current year ordinary income are recognized entirely in the period identified as a discrete item of tax. The quarterly income tax provision is comprised of tax on ordinary income provided at the most recent estimated annual effective tax rate, increased or decreased for the tax effect of discrete items.

For the nine months ended September 30, 2011, the estimated annual effective tax rate applied to ordinary income was 32.8% compared to a rate of 62.4% for the nine months ended September 30, 2010. Because of the low level of expected 2010 pretax income, the rate for the nine months ended September 30, 2010 was based on the amount of tax expense associated with actual results for the nine-month period rather than an effective tax rate estimated for the entire year. Nevertheless, the effective tax rate in each year results from the mix of foreign losses benefited at lower rates and domestic income taxed at higher rates. Although these factors are present in both 2011 and 2010, the differing mix of foreign losses and domestic income between the periods has a substantial influence on the tax rates for each respective period.

Inclusive of discrete items, the Company recognized a provision for income taxes of $4.6 million, or 41.3% of pretax income for federal, state, and foreign income taxes for the nine months ended September 30, 2011. Discrete items for the current year to date period were $0.9 million. They were principally due to normal adjustments for tax returns filed during the period and the reversal of tax benefits associated with the manufacturing deduction, which was reduced when the 2010 net operating loss was carried back to obtain a refund of 2008 federal tax payments. The tax provision for federal, state, and foreign income taxes for the nine months ended September 30, 2010 was $6.1 million, or 55.5% of pretax income, which included a $0.8 million benefit comprised of a $1.6 million charge associated with repeal of the Medicare Part D subsidy contained in healthcare legislation enacted during the first quarter of 2010, with the remainder associated with the effective settlement of an income tax examination and other immaterial items.