Income Taxes

9 Months Ended

Jul. 31, 2013

Income Tax Disclosure [Abstract]

Income Taxes

16. Income Taxes

The provision for income taxes was $25.1 million and $34.4 million, or 52.9 percent and 35.5percent of pre-tax income, for the three months ended July 31, 2013 and 2012, respectively. The provision for income taxes was $99.3million and $104.7 million, or 40.0percent and 35.7 percent of pre-tax income, for the nine months endedJuly 31,2013 and 2012, respectively. The Company's tax rate for the three and nine month periods ending July 31, 2013 was increased by 14.1 percent and 2.7 percent, respectively, due to the state tax settlement described below.

The provision for income taxes in the three and nine months ended July 31, 2013 and 2012 is comprised of federal, state, and foreign taxes. The primary difference between the Company's effective tax rate and the statutory federal rate of 35.0percent are state income taxes, income and losses recognized by the consolidated CLO entity, other non-controllinginterests and the tax benefit of disqualifying dispositions of incentive stock options.

The Company records a valuation allowance when necessary to reduce deferred tax assets to an amount that is more likely than not to be realized. There was no valuation allowance recorded as of July 31, 2013 or October 31, 2012.

The Company is currently under audit by several states. The tax authority of one state previously provided the Company with draft workpapers challenging a tax position in the Company's previously filed tax returns. During the quarter ended July 31, 2013, the tax authority presented the Company with a settlement offer, which the Company accepted and executed on July 30, 2013. The settlement agreement stipulated a lump sum payment of $19.6 million to settle all matters relating to the tax authority's audit of the fiscal years ended October 31, 2004 through October 31, 2009. The $19.6 million payment resulted in a net increase to income tax expense in the third quarter of fiscal 2013 of $6.7 million, equal to the amount of the payment less previously recorded reserves of $9.3 million and a federal tax benefit on the increased state tax of $3.6 million.