7. Income Taxes

The following table presents components of income tax expense/(benefit) for the three and six month periods ended June 30, 2012 and 2011:

	Three Months Ended		Six Months Ended
	June 30,		June 30,
(in thousands)	2012	2011	2012	2011

Income tax expense/(benefit) based on income from continuing operations, at estimated tax rates of 26.5% in 2012 and 33.6% in 2011, respectively	$6,133	$2,582	$5,896	$7,784
Settlement of pension plan	(37,047)	-	(39,460)	-
Tax rate adjustment on pension plan settlement	886	-	-	-
Provision for change in estimated tax rates	(297)	522	-	-
Income tax from continuing operations before discrete items	($30,325)	$3,104	($33,564)	$7,784

Discrete tax expense(benefit):
Provision for/resolution of tax audits and contingencies	682	35	(6,051)	(1,378)
Total income tax expense/(benefit)	($29,643)	$3,139	($39,615)	$6,406

The second quarter estimated effective tax rate on continuing operations was 26.5 percent in 2012, as compared to 33.6 percent for the same period in 2011. The decrease in the rate was primarily due to a change in the distribution of income and loss amongst the various countries within which we operate.

We conduct business globally and, as a result, the Company or one or more of our subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. We are currently under audit in the U.S. and non-U.S. tax jurisdictions, including but not limited to Canada, Germany, France, and Sweden. Tax reserves are recorded for the outcome of these uncertainties in accordance with US GAAP.

It is reasonably possible that over the next twelve months the amount of unrecognized tax benefits may change within a range of a net increase of $0 million to a net decrease of $5.7 million, from the re-evaluation of certain uncertain tax positions arising in examinations, in appeals, or in the courts, or from the closure of tax statutes. Not included in the range is $22.7 million of tax benefits in Germany related to a 1999 reorganization that have been challenged by the German tax authorities in the course of an audit of tax years 2000-2003. In 2008 the German Federal Tax Court denied tax benefits to other taxpayers in a case involving German tax laws relevant to our reorganization. One of these cases involved a non-German party, and in the ruling in that case, the German Federal Tax Court acknowledged that the German law in question may be violative of European Union ("EU") principles and referred the issue to the European Court of Justice ("ECJ") for its determination on this issue. In September 2009, the ECJ issued an opinion in this case that is generally favorable to the other taxpayer and referred the case back to the German Federal Tax Court for further consideration. In May 2010 the German Federal Tax Court released its decision, in which it resolved certain tax issues that may be relevant to our audit and remanded the case to a lower court for further development. Although we were required to pay approximately $12.7 million to the German tax authorities in order to continue to pursue the position, we believe that it is more likely than not that the relevant German law is violative of EU principles and accordingly we have not accrued tax expense on this matter. As we continue to monitor developments, it may become necessary for us to accrue tax expense and related interest.

The Company is in the process of evaluating its tax-planning strategies to determine if an action could be taken to reduce or eliminate its valuation allowances on its deferred tax assets. It is reasonably possible that over the next twelve months that these actions could result in recognition of a discrete benefit of $8.7 million.