Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes [Abstract]

INCOME TAXES

NOTE 9 — INCOME TAXES

The Company uses the asset and liability approach for financial accounting and reporting of income taxes. A valuation allowance is provided for deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized. In assessing the realizability of deferred tax assets, management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies. The Company’s ability to realize its deferred tax assets depends upon the generation of sufficient future taxable income to allow for the utilization of its deductible temporary differences and loss and credit carry forwards.

The Company operates in multiple tax jurisdictions, both within the United States and outside of the United States, and faces audits from various tax authorities regarding the inclusion of certain items in taxable income, the deductibility of certain expenses, transfer pricing, the utilization and carryforward of various tax credits, and the utilization of various carryforward items such as charitable contributions; capital losses, and net operating loss carryforwards (“NOLs”). At June 30, 2011, the amount of liability for unrecognized tax benefits related to federal, state, and foreign taxes was approximately $727,000 including approximately $140,000 of accrued interest.

Activity regarding the liability for unrecognized tax benefits for the six months ended June 30, 2011 is as follows:

	(in thousands)
Balance at December 31, 2010	$	542
Increase related to prior year tax positions		185
Balance at June 30, 2011	$	727

The Company is currently under examination in several tax jurisdictions and remains subject to examination until the statute of limitations expires for the applicable tax jurisdiction. In addition, the Company is currently under examination by the Internal Revenue Service for its consolidated federal income tax returns for 2008 and 2009. Based upon the expiration of statutes of limitations and/or the conclusion of tax examinations in several jurisdictions, the Company believes it is reasonably possible that the total amount of previously unrecognized tax benefits discussed above may decrease by up to $690,000 within twelve months of June 30, 2011 and such amount is reflected on the Company’s consolidated balance sheet as current taxes payable.

The Company’s policy is to classify interest and penalties related to unrecognized tax benefits as income tax expense.

The income tax provision for the three months ended June 30, 2011 was $4.4 million on income before income tax provision of $0.4 million. The difference between the effective tax rate for the three months ended June 30, 2011 and the U.S. federal tax rate of 35% primarily relates to a change in valuation allowance against deferred tax assets associated with the sale of the Gift business in light of The Russ Companies (“TRC”) bankruptcy filing (discrete item of $3.6 million), and an adjustment to the state deferred tax asset related to the enactment of a single sales factor in New Jersey (discrete item of $0.6 million). The difference between the U.S. federal tax rate of 35% and the estimated effective tax rate for the year excluding discrete items of 41.8% primarily relates to provision for state tax, net of federal benefit (3.8%), the effect of permanent adjustments (2.2%), and other foreign related adjustments (0.8%). The provision for income tax for the three months ended June 30, 2010 was $2.6 million on profit before tax of $7.1 million. The difference between the effective tax rate of 37% for the three months ended June 30, 2010 and the U.S. federal tax rate primarily relates to the provision for state taxes, net of federal tax benefit.

The income tax provision for the six months ended June 30, 2011 was $4.4 million on income before income tax provision of $0.3 million. The difference between the effective tax rate for the six months ended June 30, 2011 and the U.S. federal tax rate of 35% primarily relates to a change in valuation allowance against deferred tax assets associated with the sale of the Gift business in light of the TRC bankruptcy filing (discrete item of $3.6 million), an adjustment to the state deferred tax asset related to the enactment of a single sales factor in New Jersey (discrete item of $0.6 million), and an increase for unrecognized tax benefits (discrete item of $0.1 million). The difference between the U.S. federal tax rate of 35% and the estimated effective tax rate for the year excluding discrete items of 41.8% primarily relates to a provision for state tax, net of federal benefit (3.8%), the effect of permanent adjustments (2.2%), and other foreign related adjustments (0.8%). The provision for income tax for the six months ended June 30, 2010 was $4.8 million on profit before tax of $12.8 million. The difference between the effective tax rate of 38% for the six months ended June 30, 2010 and the U.S. federal tax rate primarily relates to the provision for state taxes, net of federal tax benefit.