Annual report pursuant to Section 13 and 15(d)

Income Taxes

 v2.3.0.11
Income Taxes
12 Months Ended
Apr. 30, 2011
Income Taxes [Abstract]  
IncomeTaxes
 
8.   Income Taxes
 
The provision (benefit) for income taxes is based on reported income (loss) before income taxes. Deferred income tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for tax purposes, as measured by applying the currently enacted tax laws.
 
The provision (benefit) for domestic and foreign income taxes were as follows:
 
                         
    Year Ended April 30,  
    2011     2010     2009  
    (In thousands)  
 
Current income taxes:
                       
Federal
  $ 7,606     $ 862     $ 3,378  
State
    5,714       2,281       601  
Foreign
    11,826       6,738       4,859  
                         
Current provision for income taxes
    25,146       9,881       8,838  
Deferred income taxes:
                       
Federal
    (2,442 )     (2,729 )     (4,459 )
State
    830       (1,303 )     (1,002 )
Foreign
    9,158       (6,334 )     (2,993 )
                         
Deferred provision (benefit) for income taxes
    7,546       (10,366 )     (8,454 )
                         
Total provision (benefit) for income taxes
  $ 32,692     $ (485 )   $ 384  
                         
 
The domestic and foreign components of income (loss) from continuing operations before domestic and foreign income and other taxes and equity in earnings of unconsolidated subsidiaries were as follows:
 
                         
    Year Ended April 30,  
    2011     2010     2009  
    (In thousands)  
 
Domestic
  $ 56,741     $ 10,669     $ (7,806 )
Foreign
    32,963       (5,947 )     (4,267 )
                         
Income (loss) before provision (benefit) for income taxes and equity in earnings of unconsolidated subsidiaries
  $ 89,704     $ 4,722     $ (12,073 )
                         
 
The reconciliation of the statutory federal income tax rate to the effective consolidated tax rate is as follows:
 
                         
    Year Ended April 30,  
    2011     2010     2009  
 
U.S. federal statutory income tax rate
    35.0 %     35.0 %     35.0 %
Foreign source income, net of credits generated
    1.9       52.9       48.8  
Income subject to net differing foreign tax rates
    (3.8 )     52.6       (27.8 )
COLI increase, net
    (2.8 )     (69.8 )     (1.3 )
Repatriation of foreign earnings
    0.1       38.5        
State income taxes, net of federal benefit
    4.6       13.8       2.2  
Adjustments for contingencies and valuation allowance
    4.8       52.7       (54.7 )
Tax exempt interest income
          (0.7 )     2.0  
Expense disallowances
    0.5       7.5       (3.4 )
Uncertain tax position reserve reversal
    (2.3 )     (208.8 )      
Other
    (1.6 )     16.0       (4.0 )
                         
Effective income tax rate
    36.4 %     (10.3 )%     (3.2 )%
                         
 
Deferred income taxes reflect the net effects of temporary difference between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Components of the deferred tax assets and liabilities are as follows:
 
                 
    April 30,  
    2011     2010  
    (In thousands)  
 
Deferred tax assets:
               
Deferred compensation
  $ 64,333     $ 64,984  
Loss and credit carryforwards
    33,834       35,439  
Allowance for doubtful accounts
    1,797       1,020  
Property and equipment
    371       739  
Deferred rent
    6,422       1,488  
Other
    4,664       4,293  
                 
Gross deferred tax assets
    111,421       107,963  
                 
Deferred tax liabilities:
               
Intangibles
    (8,228 )     (6,340 )
Unrealized gain
    (2,393 )      
                 
Gross deferred tax liabilities
    (10,621 )     (6,340 )
                 
Valuation allowances
    (26,168 )     (21,037 )
                 
Net deferred tax asset
  $ 74,632     $ 80,586  
                 
 
Certain deferred tax amounts and valuation allowances were reclassified during fiscal 2011 based on differences between fiscal 2010 provision and related tax return filings. Changes to the valuation allowance balances are recorded through the provision for income taxes in the respective year.
 
The deferred tax amounts have been classified in the consolidated balance sheets as follows:
 
                 
    April 30,  
    2011     2010  
    (In thousands)  
 
Current:
               
Deferred tax assets
  $ 10,214     $ 20,844  
Deferred tax liabilities
           
                 
Current deferred tax asset, net
    10,214       20,844  
                 
Non-current:
               
Deferred tax asset
    101,207       87,119  
Deferred tax liabilities
    (10,621 )     (6,340 )
                 
Non-current deferred tax asset, gross
    90,586       80,779  
Valuation allowance
    (26,168 )     (21,037 )
                 
Non-current deferred tax asset, net
    64,418       59,742  
                 
Net deferred tax assets
  $ 74,632     $ 80,586  
                 
 
Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. Management believes uncertainty exists regarding the realizability of certain operating and capital losses and has, therefore, established a valuation allowance for this portion of the deferred tax asset. Realization of the deferred income tax asset is dependent on the Company generating sufficient taxable income of the appropriate nature in future years. Although realization is not assured, management believes that it is more likely than not that the net deferred income tax asset will be realized.
 
The following details the scheduled expiration dates of the Company’s net operating loss and tax credit carryforwards:
 
                                 
    April 30, 2011
    2011
  2016
       
    through
  through
       
    2015   2025   Indefinite   Total
    (In thousands)
 
Foreign net operating loss carryforwards
  $ 19,204     $ 6,927     $ 56,659     $ 82,790  
State taxing jurisdiction net operating loss carryforwards
    1,289       22,004       105       23,398  
Foreign tax credit
    1,610       2,447             4,057  
Federal capital loss carryforwards
    7,968                   7,968  
 
During fiscal 2011 and 2010, the Company made an accrual to reflect the Company’s decision to repatriate an additional portion of its previously undistributed foreign earnings, which resulted in a tax expense of $0.4 million and $3.5 million, respectively. No accrual was made in fiscal 2009. Other than these amounts, the Company has not provided for U.S. deferred income taxes on approximately $101.1 million of undistributed earnings and associated withholding taxes of its foreign subsidiaries as the Company has taken the position that its foreign earnings will be permanently reinvested offshore. If a distribution of these earnings were to be made, the Company might be subject to both foreign withholding taxes and U.S. income taxes, net of any allowable foreign tax credits or deductions. However, an estimate of these taxes is not practicable.
 
The Company’s income tax returns are subject to audit by the Internal Revenue Service and various state and foreign tax authorities. Significant disputes may arise with these tax authorities involving issues of the timing and amount of deductions and allocations of income among various tax jurisdictions because of differing interpretations of tax laws and regulations. The Company periodically evaluates its exposures associated with tax filing positions. While management believes its positions comply with applicable laws, the Company records liabilities based upon estimates of the ultimate outcomes of these matters. During fiscal 2011 and 2010, the Company reversed a $2.1 million and $10.3 million reserve for a previous uncertain tax position, as the state and federal statute of limitations expired, respectively. As of April 30, 2010 and 2009, the Company had unrecognized tax benefits of $3.5 million and $13.4 million, respectively, which are included in the accompanying consolidated balance sheet — income taxes payable.
 
Changes in the unrecognized tax benefits are as follows:
 
                         
    Year Ended April 30,  
    2011     2010     2009  
    (In thousands)  
 
Unrecognized tax benefits, beginning of year
  $ 3,532     $ 13,392     $ 10,770  
Settlement with tax authority
    (1,473 )            
Additions based on tax positions related to the current year
                2,000  
Estimated interest for the year
    72       469       622  
Recognized tax benefits
    (2,131 )     (10,329 )      
                         
Unrecognized tax benefits, end of year
  $     $ 3,532     $ 13,392  
                         
 
The total liability for unrecognized tax benefits is not expected to change within the next twelve months. Tax years 2008 through 2010 are subject to examination by the federal and state taxing authorities.