Huntington National Bank 2006 Annual Report Download - page 16

MANAGEMENT’S DISCUSSION AND ANALYSIS HUNTINGTON BANCSHARES INCORPORATED
–I NCOME T AXES — The calculation of our provision for income taxes is complex and requires the use of estimates and
judgments. We have two accruals for income taxes: Our accrued income taxes represent the net estimated amount currently
due or to be received from taxing jurisdictions, including any reserve for potential audit issues, and is reported as a component
of ‘‘accrued expenses and other liabilities’’ in our consolidated balance sheet; our deferred federal income tax liability
represents the estimated impact of temporary differences between how we recognize our assets and liabilities under GAAP, and
how such assets and liabilities are recognized under the federal tax code.
In the ordinary course of business, we operate in various taxing jurisdictions and are subject to income and non-income taxes.
The effective tax rate is based in part on our interpretation of the relevant current tax laws. We believe the aggregate liabilities
related to taxes are appropriately reflected in the consolidated financial statements. We review the appropriate tax treatment of
all transactions taking into consideration statutory, judicial, and regulatory guidance in the context of our tax positions. In
addition, we rely on various tax opinions, recent tax audits, and historical experience.
From time to time, we engage in business transactions that may have an effect on our tax liabilities. Where appropriate, we
have obtained opinions of outside experts and have assessed the relative merits and risks of the appropriate tax treatment of
business transactions taking into account statutory, judicial, and regulatory guidance in the context of its tax position.
However, changes to our estimates of accrued taxes can occur due to changes in tax rates, implementation of new business
strategies, resolution of issues with taxing authorities regarding previously taken tax positions and newly enacted statutory,
judicial, and regulatory guidance. Such changes can affect the amount of our accrued taxes and can be material to our financial
position and/or results of operations. The potential impact to our operating results for any of these changes cannot be
reasonably estimated.
Pending Acquisition of Sky Financial Group, Inc.
On December 20, 2006, Huntington announced the signing of a definitive agreement to acquire Sky Financial Group, Inc. (Sky
Financial) in a stock and cash transaction expected to be valued at approximately $3.5 billion. Sky Financial is a $17.6 billion
diversified financial holding company with over 330 banking offices and over 400 ATMs. Sky Financial serves communities in
Ohio, Pennsylvania, Indiana, Michigan and West Virginia. Sky’s financial service affiliates include: Sky Bank, commercial and
retail banking; Sky Trust, asset management services; and Sky Insurance, retail and commercial insurance agency services.
Under the terms of the agreement, Sky Financial shareholders will receive 1.098 shares of Huntington common stock, on a tax-
free basis, and a taxable cash payment of $3.023 for each share of Sky Financial common stock. The merger was unanimously
approved by both boards and is expected to close in the third quarter of 2007, pending customary regulatory approvals, as well as
approval by both companies’ shareholders.
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