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Income Taxes
 12 Months Ended
Jul. 31, 2012
Income Tax Disclosure [Abstract]  
Income Taxes
(12)
   Income Taxes
 
Income before taxes consists of the following (in thousands):

 
     Years Ended July 31,   
     2012   2011   2010
U.S.
              $ 237,596          $ 234,035          $ 217,947   
Non-U.S.
                 40,460             29,842             21,548   
Total income before taxes
              $ 278,056          $ 263,877          $ 239,495   
 

The Company’s income tax expense (benefit) from continuing operations consists of (in thousands):

 
     Years Ended July 31,   
     2012   2011   2010
Federal:
                                                        
Current
              $ 102,152          $ 84,119          $ 83,791   
Deferred
                 (14,557 )            278              (3,714 )  
 
                  87,595             84,397             80,077   
State:
                                                        
Current
                 3,332             7,186             6,664   
Deferred
                 (461 )            (128 )            473    
 
                  2,871             7,058             7,137   
Foreign:
                                                        
Current
                 8,460             5,818             1,916   
Deferred
                 (2,989 )            229              (1,262 )  
 
                  5,471             6,047             654    
 
               $ 95,937          $ 97,502          $ 87,868   
 
A reconciliation by year of the expected U.S. statutory tax rate (35% of income before income taxes) to the actual effective income tax rate is as follows:

     Years Ended July 31,   
     2012   2011   2010
Federal statutory rate
                 35.0 %            35.0 %            35.0 %  
State income taxes, net of federal income tax benefit
                 1.2             1.7             2.0   
Foreign
                 (1.9 )            (0.4 )            (1.7 )  
Compensation and fringe benefits
                 —              0.2             0.2   
Other differences
                 0.2             0.4             1.2   
Effective tax rate
                 34.5 %            36.9 %            36.7 %  
 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below, (in thousands):

     July 31,   
     2012   2011
Deferred tax assets:
                                        
Allowance for doubtful accounts
              $ 1,013          $ 1,063   
Accrued compensation and benefits
                 23,902             18,249   
State taxes
                 625              1,488   
Accrued other
                 2,634             3,006   
Deferred revenue
                 2,056             —    
Property and equipment
                 10,969             3,378   
Losses carried forward
                 1,028             398    
Federal tax benefit
                 7,989             5,758   
Total gross deferred tax assets
                 50,216             33,340   
Less valuation allowance
                 (1,211 )            (948 )  
Net deferred tax assets
                 49,005             32,392   
Deferred tax liabilities:
                                        
Vehicle pooling costs
                 (4,537 )            (4,956 )  
Prepaid insurance
                 (792 )            (1,397 )  
Deferred revenue
                 —              (1,721 )  
Intangibles and goodwill
                 (24,758 )            (25,031 )  
Workers compensation
                 (224 )            (359 )  
Total gross deferred tax liabilities
                 (30,311 )            (33,464 )  
Net deferred tax asset (liability)
              $ 18,694          $ (1,072 )  
 

The above net deferred tax asset and liability has been reflected in the accompanying consolidated balance sheets as follows (in thousands):

     July 31,   
     2012   2011
North America current liabilities
              $ 3,601          $ (440 )  
North America non-current assets
                 22,279             9,425   
U.K. non-current liabilities
                 (7,186 )            (10,057 )  
Net deferred tax asset (liability)
              $ 18,694          $ (1,072 )  
 

The Company’s ability to realize deferred tax assets is dependent on its ability to generate future taxable income. Accordingly, the Company has established a valuation allowance in taxable jurisdictions where the utilization of the tax assets is uncertain. Additional timing differences or future tax losses may occur which could warrant a need for establishing additional valuation allowances against certain deferred tax assets. The valuation allowance for the years ended July 31, 2012 and 2011 was $1.2 million and $0.9 million, respectively.

At July 31, 2012 and 2011, if recognized, the portion of liabilities for unrecognized tax benefits that would favorably affect the Company’s effective tax rate is $14.1 million and $13.2 million, respectively. It is possible that the amount of unrecognized tax benefits will change in the next twelve months, due to tax legislation updates or future audit outcomes; however an estimate of the range of the possible change cannot be made at this time.

The following table summarizes the activities related to the Company’s unrecognized tax benefits (in thousands):

     Years Ended July 31,   
     2012   2011   2010
Balance as of August 1
              $ 18,794          $ 18,144          $ 15,965   
Increases related to current year tax positions
                 2,036             1,592             4,514   
Prior year tax positions:
                                                       
Prior year increase
                 618              519              74    
Prior year decrease
                 (952 )            (531 )            (532 )  
Cash settlement
                 (452 )            —              (302 )  
Lapse of statute of limitations
                 (3,098 )            (930 )            (1,575 )  
Balance at July 31
              $ 16,946          $ 18,794          $ 18,144   
 

It is the Company’s continuing practice to recognize interest and penalties related to income tax matters in income tax expense. As of July 31, 2012, 2011 and 2010, the Company had accrued interest and penalties related to the unrecognized tax benefits of $5.6 million, $6.0 million and $5.2 million, respectively.

The Company is currently under audit by the state of New York for fiscal years 2008, 2009 and 2010. The Company is no longer subject to U.S. federal and state income tax examination for fiscal years prior to 2009, with the exception of New York.

In fiscal years 2012, 2011 and 2010, the Company recognized a tax benefit of $4.3 million, $3.6 million and $6.2 million, respectively, upon the exercise of certain stock options which is reflected in stockholders’ equity.

The Company has not provided for U.S. federal income and foreign withholding taxes on its $58.8 million foreign subsidiaries’ undistributed earnings as of July 31, 2012, because the Company intends to reinvest such earnings indefinitely in the operations and potential acquisitions related to its foreign operations. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to U.S. income taxes (subject to an adjustment for foreign tax credits). It is not practical to determine the income tax liability that might be incurred if these earnings were to be distributed.