Sonic 2013 Annual Report Download - page 46

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44
The Company’s cash equivalents are carried at cost which approximates fair value and totaled $39.1 million
and $25.9 million at August 31, 2013 and 2012, respectively. This fair value is estimated using Level 1 methods.
At August 31, 2013, the fair value of the Company’s 2011 Fixed Rate Notes and 2013 Fixed Rate Notes
approximated the carrying value of $447.6 million, including accrued interest. At August 31, 2012, the fair value
of the Company’s 2011 Fixed Rate Notes was estimated at $510.8 million versus a carrying value of $482.0 million,
including accrued interest. The fair value of the 2011 Fixed Rate Notes and the 2013 Fixed Rate Notes is estimated
using Level 2 inputs from market information available for public debt transactions for companies with ratings that
are similar to the Company’s ratings and from information gathered from brokers who trade in the Company’s notes.
12. Income Taxes
The Company’s income before the provision for income taxes is classified by source as domestic income.
The components of the provision for income taxes consist of the following for the years ended August 31:
2013 2012 2011
Current:
Federal $ 16,741 $ 17,851 $ 5,060
State 2,688 3,892 2,223
19,429 21,743 7,283
Deferred:
Federal 439 180 1,876
State (270) (46) (5)
169 134 1,871
Provision for income taxes $ 19,598 $ 21,877 $ 9,154
The provision for income taxes differs from the amount computed by applying the statutory federal income tax
rate due to the following for the fiscal years ended August 31:
2013 2012 2011
Amount computed by applying a tax rate of 35% $ 19,705 $ 20,287 $ 9,933
State income taxes (net of federal income tax benefit) 229 928 602
Employment related and other tax credits, net (1,572) (1,291) (1,730)
Adjustment of prior year deferred tax items –1,559 –
Valuation allowance for state net operating losses 1,343 972 839
Other (107) (578) (490)
Provision for income taxes $ 19,598 $ 21,877 $ 9,154
During fiscal year 2012, the Company conducted a reconciliation of its tax basis balance sheet and identified
certain adjustments which were recorded in fiscal year 2012 to appropriately reflect the Company’s current and
deferred tax accounts. As a result of this reconciliation process, the Company recorded an additional income tax
provision of $1.6 million for fiscal year 2012. Management of the Company evaluated the impact of this adjustment
and concluded the effect of this adjustment was immaterial to the current and prior year financial statements.
Notes to Consolidated Financial Statements
August 31, 2013, 2012 and 2011 (In thousands, except per share data)