|12 Months Ended|
Dec. 31, 2012
10. INCOME TAXES
The Company's income tax provision consisted of the following:
The primary factors causing income tax expense to be different than the federal statutory rate for 2012, 2011 and 2010 are as follows:
The provision for income taxes resulted in an effective tax rate of 37.0% on income before income taxes for the year ended December 31, 2012. The effective rate differs from the annual federal statutory rate primarily because of state and foreign income taxes.
For 2011 and 2010 the effective tax rate was 37.5% and 37.3%, respectively. The effective income tax rate differs from the annual federal statutory tax rate primarily because of state and foreign income taxes.
During 2012, 2011 and 2010, the Company paid income taxes of $63.0 million, $52.0 million and $60.1 million, respectively, net of refunds.
The Company had state and federal income taxes receivable totaling $5.2 million and $6.3 million at December 31, 2012 and 2011, respectively, included in other current assets.
Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes. Significant components of the Company's deferred tax assets and liabilities at December 31, 2012 and 2011 are as follows:
Analysis of the valuation allowance:
As of December 31, 2012, the Company has net operating loss carryforwards for foreign and state income tax purposes of approximately $207.0 million, which will be available to offset future taxable income. If not used, these carryforwards will expire between 2013 and 2028. Management believes that it is unlikely to be able to utilize approximately $10.0 million of foreign net operating losses before they expire and has included a valuation allowance for the effect of these unrealizable operating loss carryforwards. The valuation allowance increased by $0.5 million due to the foreign net operating losses.
Earnings from continuing operations before income tax includes foreign income of $13.0 million in 2012, $11.0 million in 2011 and $7.8 million in 2010. During December 2009, the international subsidiaries remitted their earnings to the Company in the form of a one-time dividend. In the future the Company intends to reinvest indefinitely the undistributed earnings of non-U.S. subsidiaries. Computation of the potential deferred tax liability associated with these undistributed earnings is not practicable.
The total amount of unrecognized tax benefits at December 31, 2012 that, if recognized, would affect the effective tax rate is $1.6 million. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. In many cases these uncertain tax positions are related to tax years that remain subject to examination by the relevant taxing authorities. The federal tax audit for 2002 and 2003 was completed in 2011. In addition, the Company has subsidiaries in various state jurisdictions that are currently under audit for years ranging from 1996 through 2008. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S., income tax examinations for years prior to 2006.
It is reasonably possible that the amount of unrecognized tax benefits will increase or decrease in the next 12 months. These changes may be the result of settlement of ongoing state audits. It is expected that certain state audits will be completed in the next 12 months resulting in a reduction of the liability for unrecognized tax benefits of $0.9 million. None of the reductions in the liability for unrecognized tax benefits due to settlements discussed above will affect the effective tax rate.
The Company's policy is to record interest and penalties related to income tax matters in income tax expense. Accrued interest and penalties were $0.9 million and $1.0 million as of December 31, 2012 and 2011, respectively. During 2012, 2011 and 2010 the Company recognized interest and penalties of $0.1 million, $0.3 million and $0.9 million, respectively.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef