Income Taxes

9 Months Ended

Jun. 30, 2012

Income Taxes

Income Taxes

5. Income Taxes

        Our provision for income taxes is impacted by a number of factors, including federal taxes, our international tax structure, state tax rates in the jurisdictions where we conduct business, and our ability to utilize state tax credits that expire between 2013 and 2016. Therefore, our overall effective income tax rate could vary as a result of these factors.

        The effective income tax rate for the three months ended June 30, 2012 was 28.2%. The effective income tax rate for the nine months ended June 30, 2012 was 31.2%. Our effective income tax rates for the three and nine months ended June 30, 2012 were higher than the prior comparable periods primarily due to certain foreign benefits and other deductions that were higher in proportion to the net tax expense and thus decreased the effective tax rate for the three and nine months ended June 30, 2011.

        We accrue interest and penalties related to unrecognized tax benefits in income tax expense. This methodology is consistent with previous periods. At June 30, 2012, we had $1,550 and $635 accrued for the potential payment of interest and penalties, respectively. As of June 30, 2012, we were subject to U.S. federal income tax examinations for the tax years 2007-2011, and to foreign examinations for the tax years of 2005-2011. In addition, we are generally subject to state and local examinations for fiscal years 2007-2011.

        We are under an Internal Revenue Service ("IRS") examination for the tax years 2007-2009. Among other issues, the IRS has questioned the values used by the Company to transfer product and provide services to an international subsidiary. We believe we have appropriately valued such product transfers and services and intend to continue to support this position.

        At June 30, 2012, we had a liability of $11,112 for unrecognized tax benefits, the recognition of which would have an effect of $8,620 on income tax expense and the effective income tax rate. We do not believe that the amount will change significantly in the next 12 months. At this time, we are unable to make a reasonably reliable estimate of the timing of payments in years beyond 12 months due to uncertainties in the timing of various tax audit outcomes.