Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes

Income Taxes

11.  Income Taxes

For the nine months ended September 30, 2011, the company recorded income tax expense in continuing operations of $15.1 million, as compared to an income tax benefit of $7.3 million for the nine months ended September 30, 2010.  The company has determined that it is more likely than not that the deferred tax assets related to net operating losses in certain jurisdictions will not be used and therefore a tax benefit for current period losses has not been recognized.  This was the primary driver of the increased tax expense for the three and nine months ended September 30, 2011.  The income tax provision for the three and nine months ended September 30, 2011 was calculated under the annual effective tax rate method.  The income tax provision for the three and nine months ended September 30, 2010 was calculated under the discrete method.  The mix of income (loss) between foreign and domestic operations in 2010 caused an unusual relationship between income (loss) and income tax expense (benefit) with small changes in the annual pre-tax book income resulting in a significant impact on the rate and unreliable estimates. As a result, the company computed the provision for income taxes for the three and nine months ended September 30, 2010 by applying the actual effective tax rate to the year-to-date loss, which the company believes provided a more reasonable approximation of the company’s tax provision for that period.

The company’s unrecognized tax benefits, excluding interest and penalties, were $48.7 million as of September 30, 2011 and $40.4 million as of September 30, 2010.  All of the company’s unrecognized tax benefits as of September 30, 2011, if recognized, would impact the effective tax rate. The increase in the company’s unrecognized tax benefits as of September 30, 2011 relative to the prior year resulted primarily from audit examination activity related to prior years.  It is reasonably possible that a number of uncertain tax positions may be settled within the next 12 months.  Settlement of these matters is not expected to have a material effect on the company’s consolidated results of operations, financial positions, or cash flows.

There have been no significant developments in the quarter with respect to the company’s ongoing tax audits in various jurisdictions.

As a result of Wisconsin legislation enacted in June 2011, an income tax benefit of $5.5 million was recorded in the second quarter relating to the release of previously recorded valuation allowances on net operating loss carryforwards in the state.