Income Taxes

12 Months Ended

Feb. 29, 2012

Income Taxes [Abstract]

INCOME TAXES

NOTE 17 – INCOME TAXES

Income (loss) from continuing operations before income taxes:

	2012		2011		2010
United States	$	73,811	$	135,859	$	129,115
International		24,004		20,148		(8,161)
	$	97,815	$	156,007	$	120,954

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

	2012		2011		2010
Current:
Federal	$	6,793	$	23,263	$	7,730
International		8,767		8,980		2,079
State and local		9,666		8,104		4,303
		25,226		40,347		14,112
Deferred		15,391		28,642		25,268
	$	40,617	$	68,989	$	39,380

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

	2012		2011		2010
Income tax expense at statutory rate		$34,235	$	54,602	$	42,334
State and local income taxes, net of federal tax benefit		3,870		5,568		1,431
Corporate-owned life insurance		(726)		(1,909)		(4,688)
International items, net of foreign tax credits		135		697		(2,490)
Worthless stock deduction on international subsidiary		-		(53)		(6,043)
Exchange loss of international liquidation		-		-		2,562
Accruals and settlements		4,031		8,866		6,313
Other		(928)		1,218		(39)
Income tax at effective tax rate		$40,617	$	68,989	$	39,380

During 2012, of the $27,154 goodwill impairment charge, $5,900 had no tax basis, and therefore, is permanently nondeductible. The effect of this is included in the “International items, net of foreign tax credits” line above.

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.

Income taxes paid from continuing operations were $30,420 in 2012, $23,519 in 2011 and $12,881 in 2010.

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

	February 29, 2012			February 28, 2011
Deferred tax assets:
Employee benefit and incentive plans	$	62,205		$	54,186
Goodwill and other intangible assets		56,720			50,371
Net operating loss carryforwards		26,260			29,850
Foreign tax credit carryforward		25,957			26,638
Reserves not currently deductible		27,631			31,923
Accrued expenses deductible as paid		9,778			10,082
Deferred revenue		6,501			13,327
Deferred capital loss		8,215			8,490
Charitable contributions carryforward		367			1,271
Inventory costing		2,194			-
Other (each less than 5 percent of total assets)		12,514			7,812
		238,342			233,950
Valuation allowance		(20,670	)		(24,042	)
Total deferred tax assets		217,672			209,908
Deferred tax liabilities:
Property, plant and equipment		37,640			21,654
Inventory costing		-			2,453
Other		2,440			3,404
Total deferred tax liabilities		40,080			27,511
Net deferred tax assets	$	177,592		$	182,397

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

	February 29, 2012			February 28, 2011
Deferred and refundable income taxes (current)	$	57,450		$	61,475
Deferred and refundable income taxes (noncurrent)		121,056			121,806
Deferred income taxes and noncurrent income taxes payable		(914	)		(884	)
Net deferred tax assets	$	177,592		$	182,397

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 29, 2012, the valuation allowance of $20,670 related principally to certain international and domestic net operating loss carryforwards and deferred capital losses.

At February 29, 2012, the Corporation had deferred tax assets of approximately $5,952 for international net operating loss carryforwards, of which $4,387 has no expiration dates and $1,565 has expiration dates ranging from 2028 through 2032. 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 $14,310, $5,998, $367 and $25,957, respectively. The federal net operating loss carryforwards have expiration dates ranging from 2020 to 2028. The state net operating loss carryforwards have expiration dates ranging from 2013 to 2032. The charitable contribution carryforward has an expiration date of 2015. The FTC carryforwards have expiration dates ranging from 2015 to 2019.

Deferred taxes have not been provided on approximately $76,119 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 29, 2012, the Corporation had unrecognized tax benefits of $30,360 that, if recognized, would have a favorable effect on the Corporation’s income tax expense of $19,160, compared to unrecognized tax benefits of $43,323 that, if recognized, would have a favorable effect on the Corporation’s income tax expense of $32,811 at February 28, 2011. It is reasonably possible that the Corporation’s unrecognized tax positions as of February 29, 2012 could decrease approximately $11,187 during 2013 due to anticipated settlements and resulting cash payments related to open years after 1996, which are currently under examination.

The following chart reconciles the Corporation’s total gross unrecognized tax benefits for the years ended February 29, 2012, February 28, 2011 and February 28, 2010:

	2012		2011		2010
Balance at beginning of year	$	43,323	$	45,661	$	34,760
Additions based on tax positions related to current year		270		2,177		12,673
Additions for tax positions of prior years		5,404		1,239		4,656
Reductions for tax positions of prior years		(8,959)		(2,405)		(6,345)
Settlements		(9,444)		(2,972)		(83)
Statute lapse		(234)		(377)		-
Balance at end of year	$	30,360	$	43,323	$	45,661

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 29, 2012, the Corporation recognized a net expense of $6,530 for interest and penalties on unrecognized tax benefits and income taxes. As of February 29, 2012, the total amount of gross accrued interest and penalties related to unrecognized tax benefits and income taxes netted to a payable of $8,558. During the year ended February 28, 2011, the Corporation recognized a net expense of $16,621 for interest and penalties related to unrecognized tax benefits and refundable 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.

The Corporation is subject to examination by the Internal Revenue Service 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.