Income Taxes

12 Months Ended

Oct. 31, 2011

Income Taxes [Abstract]

Income Taxes

Note 12 — Income Taxes

A summary of the provision for income taxes from continuing operations is as follows:

	Year Ended October 31,
In thousands	2011			2010			2009
Current:
Federal	$	512		$	(1,502	)	$	3,221
State		(132	)		1,140			—
Foreign		13,248			18,090			34,448
		13,628			17,728			37,669
Deferred:
Federal		(181	)		(2,872	)		24,699
State		(33	)		(1,087	)		8,166
Foreign		(27,729	)		9,664			(3,867	)
		(27,943	)		5,705			28,998
(Benefit) provision for income taxes	$	(14,315	)	$	23,433		$	66,667

A reconciliation of the effective income tax rate to a computed “expected” statutory federal income tax rate is as follows:

	Year Ended October 31,
	2011			2010			2009
Computed “expected” statutory federal income tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal income tax benefit		0.4			(10.0	)		150.2
Foreign tax rate differential		(16.4	)		15.7			505.5
Foreign tax exempt income		18.8			(38.2	)		(174.3	)
Goodwill impairment		(76.5	)		—			—
Stock-based compensation		(5.7	)		4.2			(21.1	)
Uncertain tax positions		215.5			(3.1	)		(116.5	)
Valuation allowance		(118.4	)		133.1			(2,016.7	)
Other		(8.2	)		16.1			(202.4	)
Effective income tax rate		44.5	%		152.8	%		(1,840.3	)%

The components of net deferred income taxes are as follows:

	Year Ended October 31,
In thousands	2011			2010
Deferred income tax assets:
Allowance for doubtful accounts	$	8,431		$	9,185
Depreciation and amortization		—			539
Unrealized gains and losses		12,946			7,567
Tax loss carryforwards		253,611			175,148
Accruals and other		70,515			71,656
		345,503			264,095
Deferred income tax liabilities:
Depreciation and amortization		(7,041	)		—
Intangibles		(26,310	)		(26,210	)
		(33,351	)		(26,210	)
Deferred income taxes		312,152			237,885
Valuation allowance		(156,065	)		(113,253	)
Net deferred income taxes	$	156,087		$	124,632

The tax benefits from the exercise of certain stock options are reflected as additions to paid-in capital.

Income (loss) before provision for income taxes from continuing operations includes losses of $4.0 million and income of $92.6 million and $102.7 million from foreign jurisdictions for the fiscal years ended October 31, 2011, 2010 and 2009, respectively. The Company does not provide for the U.S. federal, state or additional foreign income tax effects on certain foreign earnings that management intends to permanently reinvest. As of October 31, 2011, foreign earnings earmarked for permanent reinvestment totaled approximately $121.0 million.

As of October 31, 2011, the Company has federal net operating loss carryforwards of approximately $179 million and state net operating loss carryforwards of approximately $187 million, which will expire on various dates through 2031. In addition, the Company has foreign tax loss carryforwards of approximately $523 million as of October 31, 2011. Approximately $475 million will be carried forward until fully utilized, with the remaining $48 million expiring on various dates through 2031. As of October 31, 2011, the Company has capital loss carryforwards of approximately $42 million which will expire in 2014.

Each reporting period, the Company evaluates the realizability of all of its deferred tax assets in each tax jurisdiction. In the fiscal year ended October 31, 2011, the Company concluded that based on all available information and proper weighting of objective and subjective evidence, including a cumulative loss that had been sustained over a three-year period, it is more likely than not that its deferred tax assets in certain jurisdictions in the Asia/Pacific segment will not be realized and a full valuation allowance was established. The Company also continued to maintain a full valuation allowance against its net deferred tax assets in the United States. As a result of the valuation allowances recorded in the U.S. and certain jurisdictions in the Asia/Pacific segment, no tax benefits have been recognized for losses incurred in those tax jurisdictions.

The following table summarizes the activity related to the Company’s unrecognized tax benefits (excluding interest and penalties and related tax carryforwards):

	Year ended October 31,
In thousands	2011			2010
Balance, beginning of year	$	144,923		$	42,103
Gross increases related to prior year tax positions		—			9,220
Gross increases related to current year tax positions		262			110,847
Settlements		(134,190	)		(10,078	)
Lapse in statute of limitation		(545	)		(7,674	)
Foreign exchange and other		(49	)		505
Balance, end of year	$	10,401		$	144,923

During fiscal 2011, the Company released approximately $134.2 million of uncertain tax positions as a result of the positions becoming effectively settled, primarily due to the completion of the Company’s tax audit in France. The settled positions included positions on losses on asset dispositions, intercompany transactions and withholding taxes.

If the Company’s positions are sustained by the relevant taxing authority, approximately $8.8 million (excluding interest and penalties) of uncertain tax position liabilities would favorably impact the Company’s effective tax rate in future periods.

The Company includes interest and penalties related to unrecognized tax benefits in its provision for income taxes in the accompanying consolidated statements of operations, which is included in current tax expense in the summary of income tax provision table shown above. During the fiscal year ended October 31, 2011, the Company recorded a net tax benefit of $3.4 million relating to interest and penalties, and as of October 31, 2011, the Company had recognized a liability for interest and penalties of $6.9 million.

During the next 12 months, it is reasonably possible that the Company’s liability for uncertain tax positions may change by a significant amount as a result of the resolution or payment of uncertain tax positions related to intercompany transactions between foreign affiliates and certain foreign withholding tax exposures. Conclusion of these matters could result in settlement for different amounts than the Company has accrued as uncertain tax benefits. If a position for which the Company concluded was more likely than not is subsequently not upheld, then the Company would need to accrue and ultimately pay an additional amount. Conversely, the Company could settle positions with the tax authorities for amounts lower than have been accrued or extinguish a position through payment. The Company believes the outcomes which are reasonably possible within the next 12 months range from a reduction of the liability for unrecognized tax benefits of $6 million to an increase of the liability of $3 million, excluding penalties and interest for its existing tax positions.

The Company is subject to examination in the United States for its fiscal years ending in 2008 and thereafter. The Company has completed a tax audit in France for fiscal years ending in 2006, 2007, 2008 and 2009 and remains subject to examination for years thereafter. The Company has completed a tax audit in Australia for fiscal years ending in 2005, 2006 and 2007 and remains subject to examination for years thereafter. The Company’s significant foreign tax jurisdictions, including France, Australia and Canada, are subject to normal and regular examination for various tax years generally beginning in the 2006 fiscal year. The Company is currently under examination in Canada for fiscal years ending through 2007.