Provision for Income Taxes

3 Months Ended

Oct. 31, 2015

Provision for Income Taxes

12. Provision for Income Taxes

The overall effective income tax rate for the three months ended October 31, 2015 was 34.7% compared with 30.9% for the three months ended October 31, 2014. The primary reason for the increase in the effective income tax rate was the favorable settlement of uncertain tax benefits that occurred during the three months ended October 31, 2014 while no such settlements occurred in the three months ended October 31, 2015.

It is the Company’s policy to recognize interest and penalties accrued relative to unrecognized tax benefits in income tax expense. For the three months ended October 31, 2015, there were no material changes to the balance of unrecognized tax benefits and the Company accrued $141 in interest and penalties related to the remaining uncertain tax positions recorded at July 31, 2015.

The Company anticipates a decrease of approximately $3,525 in unrecognized tax benefits, and $935 in accrued interest and penalties related to unrecognized tax benefits recorded as of October 31, 2015, within the next 12 months from expected settlements or payments of uncertain tax positions and lapses of the applicable statutes of limitations. Actual results may differ from these estimates.

Generally, fiscal years 2012, 2013 and 2014 remain open for federal income tax purposes and fiscal years 2011, 2012, 2013 and 2014 remain open for state and Canadian income tax purposes. The Company and its subsidiaries file a consolidated U.S. federal income tax return and multiple state income tax returns. The Company is currently disputing the audit results by the state of Indiana for tax years ended July 31, 2008, 2009 and 2010. The Company believes it has adequately reserved for its exposure to additional payments for uncertain tax positions related to its Indiana income tax returns in its liability for unrecognized tax benefits.