Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes

Income Taxes

11. Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions.  The Internal Revenue Service ("IRS") has completed examinations of the Company's U.S. income tax returns or the statute has passed on years through 2006. The IRS has completed its examination of the Company's 2009 income tax return and the proposed adjustments to the Company's tax positions were not material.  

Under the provisions of the ASC Subtopic 740-10-25, Income Taxes - Recognition, the Company had no unrecognized tax benefits as of September 30, 2011.

The Company's effective tax rate was 39.5% and 41.2% for the respective three and nine months ended September 30, 2011 compared to 37.4% and 39.0% for the respective three and nine months ended September 30, 2010. The increase in the effective rate is primarily due to lower projected foreign-source income and non-deductible adjustments related to the fair value of contingent consideration. The difference between the Company's federal statutory rate of 35% and effective tax rate relates primarily to state income taxes, net of the federal benefit, and permanent non-deductible items such as 50% of meals and entertainment expenses, present value adjustment to acquisition-related contingent consideration, and non-deductible executive compensation, partially offset by the tax benefits of certain disqualified dispositions of incentive stock options by holders.  As of September 30, 2011, the Company's net current deferred tax asset was $0.2 million and its net non-current deferred tax liability was $0.4 million.  Generally, deferred tax assets are related to stock compensation, accruals, and net operating losses of acquired companies; and deferred tax liabilities are related to identifiable intangibles and prepaid expenses.  Net current deferred tax assets are recorded in "Other current assets" and net non-current deferred tax liabilities are recorded in "Other non-current liabilities" on the Condensed Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010.