(9)                     Income Taxes

Interim income taxes are based on an estimated annualized effective tax rate applied to the respective quarterly periods, adjusted for discrete tax items in the period in which they occur. For the three months ended September 30, 2013 and 2012, the Company’s provision for income taxes, as a percentage of income before income taxes was 24.7 percent and 25.0 percent, respectively, compared with a U.S. federal statutory rate of 35.0 percent. For the nine months ended September 30, 2013 and 2012, the Company’s provision for income taxes, as a percentage of income before income taxes was 31.5 percent and 25.5 percent, respectively, compared with a U.S. federal statutory rate of 35.0 percent.

The difference between the effective tax rate and the U.S. federal statutory tax rate for the three months ended September 30, 2013 was primarily attributed to foreign tax credit benefits (-12.7 percent), net favorable foreign items related to foreign tax rate differences, the impact of unremitted earnings, and adjustments to foreign valuation allowances (-17.4 percent), offset by an increase in tax liabilities associated with uncertain tax positions (18.8 percent).

The difference between the effective tax rate and the U.S. federal statutory tax rate for the three months ended September 30, 2012 was primarily attributed to a domestic valuation allowance release related to the utilization of foreign tax credits (-6.8 percent), in addition to net favorable foreign items related to foreign tax rate differences, the impact of unremitted earnings, and adjustments to foreign valuation allowances (-4.2 percent).

The difference between the effective tax rate and the U.S. federal statutory tax rate for the nine months ended September 30, 2013 was primarily attributed to foreign tax credit benefits (-4.3 percent), net favorable foreign items related to foreign tax rate differences, the impact of unremitted earnings, and adjustments to foreign valuation allowances (-5.9 percent), offset by an increase in tax liabilities associated with uncertain tax positions (6.4 percent).

The difference between the effective tax rate and the U.S. federal statutory tax rate for the nine months ended September 30, 2012 was primarily attributed to a domestic valuation allowance release related to the utilization of foreign tax credits (-6.5 percent), in addition to net favorable foreign items related to foreign tax rate differences, the impact of unremitted earnings, and adjustments to foreign valuation allowances (-4.0 percent).

Changes to the effective rate due to dividends received from foreign subsidiaries, impact of foreign tax credits and the unremitted earnings calculation are expected to be recurring; however, depending on various factors, the changes may be favorable or unfavorable in a particular period. The Company’s aggregate consolidated effective tax rate will typically reflect differences between the lower statutory rates in foreign markets compared to the U.S. statutory rate of 35 percent. Given the large number of jurisdictions in which the Company does business and the number of factors that can impact effective tax rates in any given year, the consolidated effective rate is likely to reflect relatively significant fluctuations from year-to-year.

The Company’s U.S. federal income tax returns for 2009 through 2012 are open to examination for federal tax purposes. The Company has several foreign tax jurisdictions that have open tax years from 2006 through 2012. The Internal Revenue Service (“IRS”) is currently conducting an audit of the Company’s U.S. federal income tax returns for the 2009 through 2011 tax years.

As of September 30, 2013, the Company had accrued $11,486 related to unrecognized tax positions compared with $10,571 as of December 31, 2012. This net increase was primarily attributed to the increase in transfer pricing contingencies, including increases in penalties and interest.

Although the Company believes its estimates related to its unrecognized tax benefits are reasonable, the Company can provide no assurances that the final tax outcome of these matters will not be different from that which it has reflected in its historical income tax provisions and accruals.  Any differences in the final tax outcome of these matters could have a material impact on the Company’s income tax provision and operating results in the periods in which the Company makes such determination.