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Provision for Income Taxes
9 Months Ended
Sep. 30, 2011
Provision for Income Taxes [Abstract] 
Provision for Income Taxes

Note 13. Provision for Income Taxes

As of September 30, 2011, we continued to place a valuation allowance on all of the net deferred tax assets of our U.S. locations, based on the negative financial performance of our U.S. operations during the global economic recession of 2008 and 2009. If U.S. operations return to a level of profitability sufficient to utilize a portion of these deferred tax assets, these assets will be used to offset future U.S. based taxable income. If we determine the probability of realizing all the tax benefits is more likely than not, the entire valuation allowance will be released and deferred tax benefits will be recognized.

For the nine month period ended September 30, 2011, the difference between the U.S. federal statutory tax rate of 34% and our effective tax rate of 23% was primarily due to non-U.S. based earnings being taxed at lower rates. The statutory and effective income tax rates in many of the foreign countries in which we operate are lower than the U.S. federal statutory rate. Additionally, during the first quarter of 2011, the effective tax rate was reduced by recognizing deferred tax benefits totaling $631 related to the Eltmann deconsolidation. These benefits related to losses for write-offs of receivables owed by Eltmann to certain NN subsidiaries that will be deductible once Eltmann is finally liquidated in 2012 or 2013. The table below summarizes the impacts on the effective tax rate for the nine month periods ended September 30, 2011 and 2010.

 

                 

(In Thousands of Dollars)

   Nine Months
ended
September 30,
2011		     Nine Months
ended
September 30,
2010		  

Income tax provision at the federal statutory rate of 34%

   $ 7,112     $ 2,570  

(Decrease) increase in U.S. valuation allowance

     (369 )      2,007  

Non-U.S. earnings taxed at lower rates

     (2,317 )      (1,640 ) 

U.S. State income taxes

     344       —    

Other differences

     116       284  
   

 

 

    

 

 

  

Provision for income taxes

   $ 4,886     $ 3,221  
   

 

 

    

 

 

  

During the nine month period ended September 30, 2011, we have begun to recognize tax expense at our Kunshan (China) Plant and our Kysucke (Slovakia) Plant as we have fully utilized the previous net operating losses at these foreign jurisdictions.

We do not foresee any significant changes to our unrecognized tax benefits within the next twelve months.