Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes
12 Months Ended
Apr. 30, 2013
Income Taxes
8. Income Taxes

The provision for income taxes is based on reported income 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 was as follows:


     Year Ended April 30,  
     2013     2012     2011  
     (in thousands)  

Current income taxes:



   $ 4,100      $ 4,173      $ 7,606   


     1,237        1,609        5,714   


     8,759        12,670        11,826   










Current provision for income taxes

     14,096        18,452        25,146   

Deferred income taxes:



     (423     7,281        (2,442


     1,895        3,508        830   


     1,069        (890     9,158   










Deferred provision for income taxes

     2,541        9,899        7,546   










Total provision for income taxes

   $ 16,637      $ 28,351      $ 32,692   










The domestic and foreign components of income 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,  
     2013      2012      2011  
     (in thousands)  


   $ 15,915       $ 42,375       $ 56,741   


     31,905         38,429         32,963   










Income before provision for income taxes and
equity in earnings of unconsolidated subsidiaries

   $ 47,820       $ 80,804       $ 89,704   










The reconciliation of the statutory federal income tax rate to the effective consolidated tax rate is as follows:


     Year Ended April 30,  
     2013     2012     2011  

U.S. federal statutory income tax rate

     35.0     35.0     35.0

Foreign source income, net of credits generated

     0.6        3.0        1.9   

Foreign tax rates differential

     (3.7     (2.9     (3.8

COLI increase, net

     (4.8     (2.7     (2.8

Repatriation of foreign earnings

     (3.2     (1.7     0.1   

State income taxes, net of federal benefit

     5.7        4.0        4.6   

Adjustments for valuation allowance

     (0.4     (0.7     4.8   

Non-deductible business acquisition transaction costs


Expense disallowances

     1.1        0.8        0.5   

Change in uncertain tax positions

     1.9               (2.3


     1.3        0.3        (1.6










Effective income tax rate

     34.8     35.1     36.4











Components of deferred tax assets and liabilities are as follows:


     April 30,  
     2013     2012  
     (in thousands)  

Deferred tax assets:


Deferred compensation

   $ 64,791      $ 63,133   

Loss and credit carryforwards

     42,984        33,355   

Allowance for doubtful accounts

     1,804        1,388   

Deferred rent

     6,366        6,901   

Deferred revenue


Reserves and accruals

     7,613        3,773   


     4,556        4,284   







Gross deferred tax assets

     129,760        112,834   







Deferred tax liabilities:



     (21,560     (11,103

Property and equipment

     (6,747     (4,527

Prepaid expenses



     (2,824     (3,995







Gross deferred tax liabilities

     (35,315     (19,625







Valuation allowances

     (27,731     (25,089







Net deferred tax asset

   $ 66,714      $ 68,120   







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,  
     2013     2012  
     (in thousands)  



Deferred tax assets

   $ 12,561      $ 15,868   

Deferred tax liabilities

     (9,050     (5,038







Current deferred tax asset

     3,511        10,830   









Deferred tax asset

     117,199        96,966   

Deferred tax liabilities

     (26,265     (14,587







Valuation allowance

     (27,731     (25,089







Non-current deferred tax asset, net

     63,203        57,290   







Net deferred tax assets

   $ 66,714      $ 68,120   








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 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.

As of April 30, 2013, the Company has U.S. federal net operating loss carryforwards of $20.4 million from the acquisition of PDI, which will begin to expire in 2028. The utilization of these losses is subject to an annual limitation as defined under Section 382 of the Internal Revenue Code. The Company also has U.S. federal foreign tax credit carryforwards of $3.2 million, which will begin to expire in 2023. The Company has state net operating loss carryforwards of $13.2 million, which will begin to expire in 2014. The Company also has foreign net operating loss carryforwards of $108.0 million, which will begin to expire in 2014.

The Company has a plan to distribute a portion of the cash held in foreign locations to the United States and has recorded a $0.9 million deferred tax liability for additional taxes that would arise in connection with these distributions. Other than these amounts, the Company has not provided for U.S. taxes or foreign withholding taxes on approximately $119.0 million of undistributed earnings of its foreign subsidiaries as such earnings are intended to be reinvested indefinitely. 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. An estimate of these taxes, however, is not practicable.

The Company or one of its subsidiaries files federal and state income tax returns in the United States as well as foreign jurisdictions. These income tax returns are subject to audit by the Internal Revenue Service (the “IRS”) and various state and foreign tax authorities. In October 2012, the IRS commenced an examination of the Company’s U.S. federal income tax returns for the tax years ended April 30, 2011 and 2010. The Company’s income tax returns are not otherwise under examination in any material jurisdiction. The statute of limitations varies by jurisdiction in which the Company operates. With few exceptions, however, the Company’s tax returns for years prior to fiscal year 2008 are no longer open to examination by tax authorities (including U.S. federal, state and foreign).

Unrecognized tax benefits are the differences between the amount of benefits of tax positions taken, or expected to be taken, on a tax return and the amount of benefits recognized for financial reporting purposes. As of April 30, 2013, the Company had a liability of $2.0 million for unrecognized tax benefits. A reconciliation of the beginning and ending balances of the gross unrecognized tax benefits is as follows:


     Year Ended April 30,  
     2013      2012      2011  
     (in thousands)  

Unrecognized tax benefits, beginning of year

   $       $  —       $ 3,532   

Settlement with tax authority


Additions based on tax positions related to the current year


Additions based on tax positions related to prior years

     569                 72   

Reductions due to lapse of statute of limitations











Unrecognized tax benefits, end of year

   $ 2,023       $       $   











The Company classifies interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes. The liability for unrecognized tax benefits is included in income taxes payable in the consolidated balance sheets. The full amount of unrecognized tax benefits would impact the effective tax rate if recognized. The total liability for unrecognized tax benefits is not expected to change within the next twelve months.