O'Reilly Auto Parts 2005 Annual Report Download - page 49

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O’REILLY AUTOMOTIVE 2005 ANNUAL REPORT
47
notes to consolidated financial statements (continued)
A reconciliation of the provision for income taxes to the amounts computed at the federal statutory rate is as follows:
(In thousands) 2005 2004 2003
Federal income taxes at statutory rate $87,874 $65,708 $56,015
State income taxes, net of federal tax benefit 4,986 4,355 3,935
Other items, net (6,057) -5
$86,803 $70,063 $59,955
The Company's provision for income taxes for the third quarter of 2005 included a non-cash tax adjustment of $6.1 million in the quarter resulting
from the favorable resolution of prior tax uncertainties. The tax benefit realized in the third quarter is nonrecurring and reflects the reversal of
previously recorded income tax reserves related to a prior acquisition. In determining the quarterly provision for income taxes, the Company uses an
estimated annual effective tax rate based on expected annual income by jurisdiction and statutory tax rates. The impact of significant discrete items,
including the tax benefit realized in the third quarter of 2005, is separately recognized in the quarter in which they occur.
The tax benefit associated with the exercise of non-qualified stock options has been reflected as additional paid-in capital in the accompanying
consolidated financial statements.