Income Taxes

12 Months Ended

Feb. 28, 2011

Income Taxes [Abstract]

INCOME TAXES

NOTE 17 – INCOME TAXES

Income (loss) from continuing operations before income taxes:

	2011		2010			2009
United States	$	135,859	$	129,115		$	(136,523	)
International		20,148		(8,161	)		(138,410	)
	$	156,007	$	120,954		$	(274,933	)

Income tax expense (benefit) from the Corporation’s continuing operations has been provided as follows:

	2011		2010		2009
Current:
Federal	$	23,263	$	7,730	$	(21,530	)
International		8,980		2,079		2,918
State and local		8,104		4,303		876
		40,347		14,112		(17,736	)
Deferred		28,642		25,268		(29,438	)
	$	68,989	$	39,380	$	(47,174	)

Reconciliation of the Corporation’s income tax expense (benefit) from continuing operations from the U.S. statutory rate to the actual effective income tax rate is as follows:

	2011			2010			2009
Income tax expense (benefit) at statutory rate	$	54,602		$	42,334		$	(96,227	)
State and local income taxes, net of federal tax benefit		5,568			1,431			(1,128	)
Corporate-owned life insurance		(1,909	)		(4,688	)		(633	)
Nondeductible goodwill		-			-			61,445
International items, net of foreign tax credits		697			(2,490	)		(7,613	)
Worthless stock deduction on international subsidiary		(53	)		(6,043	)		(9,460	)
Charitable contributions carryforward expiration		-			-			2,434
Exchange loss of international liquidation		-			2,562			-
Valuation allowance		(1,067	)		302			(2,000	)
Accruals and settlements		8,866			6,313			486
Other		2,285			(341	)		5,522
Income tax at effective tax rate	$	68,989		$	39,380		$	(47,174	)

During 2011, estimated accruals and settlements increased because the Corporation received new information associated with anticipated settlements related to open years which are currently under examination.

During 2010, the Corporation determined it was eligible for a worthless stock deduction related to one of its international subsidiaries, which resulted in the recording of a benefit of $6,043.

During 2009, of the $290,166 of goodwill and other intangible assets impairment charge, $175,558 had no tax basis, and therefore, is permanently nondeductible. As a result, the prior year tax benefit was reduced by $61,445. Also, in 2009, $2,434 of a prior year net charitable contribution carryforward expired. Prior to 2009, the Corporation’s taxable income projections for 2009 supported the utilization of that carryforward in 2009. During 2009, the Corporation determined it was eligible for a worthless stock deduction related to one of its international subsidiaries, which resulted in the recording of a benefit of $9,460.

Income taxes paid from continuing operations were $23,519 in 2011, $12,881 in 2010 and $19,555 in 2009.

Significant components of the Corporation’s deferred tax assets and liabilities are as follows:

	February 28, 2011			February 28, 2010
	(Restated)
Deferred tax assets:
Employee benefit and incentive plans	$	54,186		$	59,859
Net operating loss carryforwards		29,850			37,722
Deferred capital loss		8,490			8,379
Deferred revenue		13,327			9,539
Net reserves not currently deductible		39,989			39,364
Charitable contributions carryforward		1,271			2,094
Foreign tax credit carryforward		26,638			35,948
Goodwill and other intangible assets		50,371			58,104
Inventory costing		-			1,562
Other		9,242			2,959
		233,364			255,530
Valuation allowance		(24,042	)		(25,109	)
Total deferred tax assets		209,322			230,421
Deferred tax liabilities:
Property, plant and equipment		18,132			20,647
Inventory costing		2,453			-
Other		6,340			1,057
Total deferred tax liabilities		26,925			21,704
Net deferred tax assets	$	182,397		$	208,717

Net deferred tax assets are included on the Consolidated Statement of Financial Position in the following captions:

	February 28, 2011			February 28, 2010
	(Restated)
Deferred and refundable income taxes (current)	$	61,475		$	66,776
Deferred and refundable income taxes (noncurrent)		121,806			143,770
Deferred income taxes and noncurrent income taxes payable		(884	)		(1,829	)
Net deferred tax assets	$	182,397		$	208,717

Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases as well as from net operating loss and tax credit carryforwards, and are stated at tax rates expected to be in effect when taxes are actually paid or recovered. Deferred income tax assets represent amounts available to reduce income tax payments in future years.

The Corporation periodically reviews the need for valuation allowances against deferred tax assets and recognizes these deferred tax assets to the extent that realization is more likely than not. Based upon a review of earnings history and trends, forecasted earnings and the relevant expiration of carryforwards, the Corporation believes that the valuation allowances provided are appropriate. At February 28, 2011, the valuation allowance of $24,042 related principally to certain international and domestic net operating loss carryforwards and deferred capital losses.

At February 28, 2011, the Corporation had deferred tax assets of approximately $8,961 for international net operating loss carryforwards, of which $4,710 has no expiration dates and $4,251 has expiration dates ranging from 2014 through 2020. In addition, the Corporation had deferred tax assets related to domestic net operating loss, state net operating loss, charitable contribution and foreign tax credit (“FTC”) carryforwards of approximately $15,231, $8,612, $1,271 and $26,638, respectively. The federal net operating loss carryforwards have expiration dates ranging from 2019 to 2027. The state net operating loss carryforwards have expiration dates ranging from 2012 to 2031. The charitable contribution carryforward has an expiration date of 2014. The FTC carryforwards have expiration dates ranging from 2015 to 2020.

Deferred taxes have not been provided on approximately $81,256 of undistributed earnings of international subsidiaries since substantially all of these earnings are necessary to meet their business requirements. It is not practicable to calculate the deferred taxes associated with these earnings; however, foreign tax credits would be available to reduce federal income taxes in the event of distribution.

At February 28, 2011, the Corporation had unrecognized tax benefits of $43,323 that, if recognized, would have a favorable effect on the Corporation’s income tax expense of $32,811, compared to unrecognized tax benefits of $45,661 that, if recognized, would have a favorable effect on the Corporation’s income tax expense of $33,765 at February 28, 2010. It is reasonably possible that the Corporation’s unrecognized tax positions as of February 28, 2011 could decrease approximately $9,498 during 2012 due to anticipated settlements and resulting cash payments related to open years after 1996, which are currently under examination.

The following chart reconciles the Company’s total gross unrecognized tax benefits for the years ended February 28, 2011, 2010 and 2009:

	2011			2010			2009
Balance at beginning of year	$	45,661		$	34,760		$	27,523
Additions based on tax positions related to the current year		2,177			12,673			229
Reductions based on tax positions related to the current year		-			-			(408	)
Additions for tax positions of prior years		1,239			4,656			18,744
Reductions for tax positions of prior years		(2,405	)		(6,345	)		(6,581	)
Settlements		(2,972	)		(83	)		(4,747	)
Statute lapse		(377	)		-			-
Balance at end of year	$	43,323		$	45,661		$	34,760

The Corporation recognizes interest and penalties accrued on unrecognized tax benefits and income taxes as a component of income tax expense. During the year ended February 28, 2011, the Corporation recognized a net expense of $16,621 for interest and penalties on unrecognized tax benefits and income taxes. As of February 28, 2011, the total amount of gross accrued interest and penalties related to unrecognized tax benefits and income taxes netted to a payable of $16,312. During the year ended February 28, 2010, the Corporation recognized a net benefit of $812 for interest expense and penalties related to unrecognized tax benefits and refundable income taxes. As of February 28, 2010, the total amount of gross accrued interest and penalties included on the Consolidated Statement of Financial Position related to unrecognized tax benefits and refundable income taxes netted to a refundable of $1,042.

The Corporation is subject to examination by the IRS and various U.S. state and local jurisdictions for tax years 1996 to the present. The Corporation is also subject to tax examination in various international tax jurisdictions, including Canada, the United Kingdom, Australia, Italy, Mexico and New Zealand for tax years 2006 to the present.