Income Tax Expense (Benefit)

3 Months Ended

Jun. 30, 2011

Notes To Financial Statements [Abstract]

Income Tax Expense (Benefit)

Income Tax Expense

Income tax expense includes United States federal, state and local, and foreign income taxes, and is based on reported pre-tax income. The effective income tax rates for the three-month periods ended June 30, 2011 and 2010 were 34.4% and 31.3% respectively. During the first quarter of fiscal 2012, we benefited from favorable discrete item adjustments relating to the effective settlement of certain items in connection with the United States audit examination for fiscal 2008 and 2009. Because the accrual established during the three-month period ended June 30, 2010 in connection with the SYSTEM 1 Rebate Program was incurred in the United States at a higher effective rate, the projected mix of income before income taxes resulted in a lower operating tax rate.

Income tax expense is provided on an interim basis based upon our estimate of the annual effective income tax rate, adjusted each quarter for discrete items. In determining the estimated annual effective income tax rate, we analyze various factors, including projections of our annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, our ability to use tax credits and net operating loss carry forwards, and available tax planning alternatives.

As of March 31, 2011, we had $9,594 in unrecognized tax benefits, of which $4,975 would favorably impact the effective tax rate if recognized. As of June 30, 2011, we had $6,067 in unrecognized tax benefits, of which $1,448 would favorably impact the effective tax rate if recognized. The decrease in unrecognized tax benefits for the three months ended June 30, 2011 is primarily due to the effective settlement of United States audit examinations for fiscal 2008 and 2009. We believe that it is reasonably possible that unrecognized tax benefits could decrease by up to $927 within 12 months of June 30, 2011, primarily as a result of settlements with tax authorities. As of June 30, 2011, we have recognized a liability for interest of $1,270 and penalties of $81.

We operate in numerous taxing jurisdictions and are subject to regular examinations by various United States federal, state, and local, as well as foreign, jurisdictions. We are no longer subject to United States federal examinations for years before fiscal 2010 and, with limited exceptions, we are no longer subject to United States state and local, or non-United States, income tax examinations by tax authorities for years before fiscal 2008. We remain subject to tax authority audits in various jurisdictions wherever we do business. We do not expect the results of these examinations to have a material adverse affect on our consolidated financial statements.