NOTE 8 — INCOME TAXES

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. The Company performs an evaluation of the realizability of the Company's deferred tax assets on a quarterly basis. This evaluation considers all positive and negative evidence and factors, such as the scheduled reversal of temporary differences, historical and projected future taxable income, and prudent and feasible tax planning strategies. The estimates and assumptions used by the Company in computing the income taxes reflected in the Company's consolidated financial statements could differ from the actual results reflected in the income tax returns filed during the subsequent year. Adjustments are recorded based on filed returns when such returns are finalized or the related adjustments are identified.

Significant components of the provision for income taxes are as follows:


	Year ended January 31,
	2012			2011			2010
	(In thousands)
Current:
Federal	$	65,526		$	46,356		$	27,431
State		1,694			897			916
Foreign		41,000			30,527			28,134

Total current		108,220			77,780			56,481

Deferred:
Federal		(20,119	)		(1,496	)		2,403
State		115			1,862			538
Foreign		(9,742	)		6,606			(5,482	)

Total deferred		(29,746	)		6,972			(2,541	)

	$	78,474		$	84,752		$	53,940

The reconciliation of income tax computed at the U.S. federal statutory tax rate to income tax expense is as follows:


	Year ended January 31,
	2012			2011			2010
U.S. statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit		0.4			0.6			0.5
Net changes in deferred tax valuation allowances		(3.4	)		(1.2	)		(3.3	)
Tax on foreign earnings different than U.S. rate		(10.1	)		(8.3	)		(9.7	)
Nondeductible interest		1.5			1.3			3.0
Reserve established for foreign income tax contingencies		0.1			0.5			0.1
Reversal of previously accrued income tax reserves		(0.4	)		(0.2	)		(1.4	)
Effect of company-owned life insurance		0			(0.5	)		(1.0	)
Disposal of subsidiaries		2.9			0			0
Other, net		0.6			0.7			(0.3	)

		26.6	%		27.9	%		22.9	%

In fiscal 2012, the Company recorded an income tax benefit of $13.6 million for the reversal of deferred tax valuation allowances primarily related to specific jurisdictions in Europe, which had been recorded in prior fiscal years. This income tax benefit was substantially offset by an income tax expense associated with the write-off of deferred and other income tax assets related to the closure of the Brazil in-country commercial operations.

In fiscal 2010, an income tax benefit of $5.4 million was recognized for the reversal of a deferred tax valuation allowance related to a specific European jurisdiction, which had been recorded in prior fiscal years.

The components of pretax income are as follows:


	Year ended January 31,
	2012		2011		2010
	(In thousands)
United States	$	133,274	$	135,039	$	92,551
Foreign		162,048		168,576		142,589

	$	295,322	$	303,615	$	235,140

The significant components of the Company's deferred tax liabilities and assets are as follows:


	January 31,
	2012			2011
	(In thousands)
Deferred tax liabilities:
Depreciation and amortization	$	48,111		$	40,431
Capitalized marketing program costs		4,008			2,639
Convertible senior debentures interest		0			27,514
Goodwill		2,711			3,061
Deferred costs currently deductible		14,468			13,914
Other, net		5,333			8,050

Total deferred tax liabilities		74,631			95,609

Deferred tax assets:
Accrued liabilities		43,521			52,137
Loss carryforwards		130,396			140,558
Amortizable goodwill		16,109			19,627
Depreciation and amortization		5,945			4,902
Disallowed interest expense		16,693			19,236
Other, net		15,960			12,381

		228,624			248,841
Less: valuation allowances		(158,613	)		(186,586	)

Total deferred tax assets		70,011			62,255

Net deferred tax liability	$	4,620		$	33,354

The net change in the deferred tax valuation allowances was a decrease of $28.0 million in fiscal 2012, primarily resulting from the utilization of net operating losses. The net change in the deferred tax valuation allowances was an increase of $0.7 million in fiscal 2011 and an increase of $10.2 million in fiscal 2010. The valuation allowances at both January 31, 2012 and 2011 primarily relate to foreign net operating loss carryforwards. The Company's foreign net operating loss carryforwards totaled $641.0 million and $686.4 million at January 31, 2012 and 2011, respectively. The majority of the net operating losses have an indefinite carryforward period with the remaining portion expiring in fiscal years 2013 through 2025. The Company evaluates a variety of factors in determining the realizability of deferred tax assets, including the scheduled reversal of temporary differences, historical and projected future taxable income, and prudent and feasible tax planning strategies.

To the extent that the Company generates consistent taxable income within those operations with valuation allowances, the Company may reduce the valuation allowances, thereby reducing the income tax expense and increasing net income in the period the determination was made.

In conjunction with the acquisitions of Triade and MCC during fiscal 2011, the Company recorded a $9.2 million long-term deferred tax liability (see also Note 5 – Acquisitions).

At January 31, 2012, there are $207.3 million of consolidated cumulative undistributed earnings of foreign subsidiaries. It is not currently practical to estimate the amount of unrecognized deferred U.S. income tax that might be payable if any earnings were to be distributed by individual foreign subsidiaries.

A reconciliation of the beginning and ending balances of the total amount of gross unrecognized tax benefits, excluding accrued interest and penalties, for the years ended January 31, 2012 and 2011 and 2010 is as follows (in thousands):


Gross unrecognized tax benefits at January 31, 2009	$	4,663
Increases in tax positions for current year		1,071
Expiration of statutes of limitation		(2,770	)
Settlements		(223	)
Changes due to translation of foreign currencies		366

Gross unrecognized tax benefits at January 31, 2010		3,107
Increases in tax positions for prior years		2,742
Increases in tax positions for current year		86
Expiration of statutes of limitation		(860	)

Gross unrecognized tax benefits at January 31, 2011		5,075
Increases in tax positions for prior years		1,590
Decreases in tax positions for prior years		(208	)
Increases in tax positions for current year		56
Expiration of statutes of limitation		(791	)
Settlements		(1,990	)
Changes due to translation of foreign currencies		(47	)

Gross unrecognized tax benefits at January 31, 2012	$	3,685

At January 31, 2012, 2011 and 2010, the amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $2.5 million, $5.1 million and $3.1 million, respectively.

Unrecognized tax benefits that have a reasonable possibility of significantly decreasing within the 12 months following January 31, 2012 totaled $2.5 million and were primarily related to the foreign taxation of certain transactions. Consistent with prior periods, the Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. The Company's accrued interest at January 31, 2012, would not have a material impact on the effective tax rate if reversed. The provision for income taxes for each of the fiscal years ended January 31, 2012, 2011 and 2010 includes interest expense on unrecognized income tax benefits for current and prior years which is not significant to the Company's Consolidated Statement of Income. The change in the balance of accrued interest for fiscal 2012, 2011 and 2010, includes the current year end accrual, an interest benefit resulting from the expiration of statutes of limitation, and the translation adjustments on foreign currencies.

The Company conducts business primarily in the Americas and Europe and, as a result, one or more of its subsidiaries files income tax returns in the U.S. federal, various state, local and foreign tax jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities. The Company is no longer subject to examinations by the Internal Revenue Service for years before fiscal 2009. Income tax returns of various foreign jurisdictions for fiscal 2006 and forward are currently under taxing authority examination or remain subject to audit.