INCOME TAXES

6 Months Ended

Jul. 31, 2011

INCOME TAXES

7. INCOME TAXES

	Six months ended July 31,
	2011			2010
Provision for income taxes	$	235		$	(13,400	)
Effective income tax rate		(19.2	%)		19.2	%

Effective tax rates were (19.2%) and 19.2% for the six months ended July 31, 2011 and 2010, respectively. Tax expense for the six months ended July 31, 2011 and 2010 is due to tax expense in certain profitable foreign subsidiaries and no tax benefit recognized in certain jurisdictions where the Company incurred a loss. In addition, the tax benefit for the six months ended July 31, 2010 resulted when the Company recorded a Goodwill Impairment charge in the second quarter of fiscal year 2011 which reversed the deferred tax liability. There was no significant impact to the tax expense related to uncertain tax positions or the interest on uncertain tax positions.

Generally, accounting standards require companies to provide for income taxes each quarter based on their estimate of the effective tax rate for the full year. The authoritative guidance for accounting for income taxes allows use of the discrete method when, in certain situations, the actual interim period effective tax rate may be used if it provides a better estimate of income tax expense. Due to the Company’s losses in the US, the full valuation allowance in the US, and the relatively small amount of projected US income, it is the Company’s position that the discrete method provides a more accurate estimate of income tax expense for domestic taxes and therefore domestic income tax expense for the current quarter has been presented using that method. Taxes on international earnings continue to be calculated using an estimate of the effective tax rate for the full year.