NOTE 7— Income Taxes
The provision for income taxes is based on the current estimate of the annual effective tax rate and is adjusted as necessary for
discrete events occurring in a particular period. The effective income tax rate for the third quarter of 2012 was 36.5% as compared to 36.4% for the third quarter of 2011. The Company classifies interest and penalties as an element of tax expense.
The amount of tax related interest and penalties for the third quarter of 2012 and 2011, respectively, was not material.
2012 effective income tax rate was 35.8% as compared to 37.9% for the Year-to-date 2011 period. The lower effective income tax rate was due to corporate restructuring, federal and state income tax credits, disqualifying dispositions of stock options
and other increased permanent tax differences in the current year.
The Company recognizes income tax liabilities related to unrecognized tax
benefits in accordance with the FASB’s authoritative guidance related to uncertain tax positions and adjusts these liabilities when its judgment changes as a result of the evaluation of new information. The Company does not anticipate any
significant changes to the unrecognized tax benefits recorded at the consolidated balance sheet date within the next 12 months.