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Income Taxes | 12 Months Ended
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Apr. 30, 2014
Income Taxes | 8. Income Taxes The provision for income taxes is based on reported income before income taxes. Deferred income tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for tax purposes, as measured by applying the currently enacted tax laws. The provision (benefit) for domestic and foreign income taxes was as follows:
|  | Year Ended April 30, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
|  | (in thousands) |
Current income taxes: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 6,982 |  |  | $ | 4,100 |  |  | $ | 4,173 |
State |  |  | 1,939 |  |  |  | 1,237 |  |  |  | 1,609 |
Foreign |  |  | 15,502 |  |  |  | 8,759 |  |  |  | 12,670 |
Current provision for income taxes |  |  | 24,423 |  |  |  | 14,096 |  |  |  | 18,452 |
Deferred income taxes: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 5,094 |  |  |  | (423 | ) |  |  | 7,281 |
State |  |  | 177 |  |  |  | 1,895 |  |  |  | 3,508 |
Foreign |  |  | (1,202 | ) |  |  | 1,069 |  |  |  | (890 | )
Deferred provision for income taxes |  |  | 4,069 |  |  |  | 2,541 |  |  |  | 9,899 |
Total provision for income taxes |  | $ | 28,492 |  |  | $ | 16,637 |  |  | $ | 28,351 |
The domestic and foreign components of income from continuing operations before domestic and foreign income and other taxes and equity in earnings of unconsolidated subsidiaries were as follows:
|  | Year Ended April 30, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
|  | (in thousands) |
Domestic |  | $ | 42,411 |  |  | $ | 15,915 |  |  | $ | 42,375 |
Foreign |  |  | 56,603 |  |  |  | 31,905 |  |  |  | 38,429 |
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |  | $ | 99,014 |  |  | $ | 47,820 |  |  | $ | 80,804 |
The reconciliation of the statutory federal income tax rate to the effective consolidated tax rate is as follows:
|  | Year Ended April 30, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
U.S. federal statutory income tax rate |  |  | 35.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
Foreign source income, net of credits generated |  |  | 2.0 |  |  |  | 0.6 |  |  |  | 3.0 |
Foreign tax rates differential |  |  | (4.7 | ) |  |  | (3.7 | ) |  |  | (2.9 | )
COLI increase, net |  |  | (2.9 | ) |  |  | (4.8 | ) |  |  | (2.7 | )
Conclusion of U.S. federal tax audit |  |  | (2.7 | ) |  |  | — |  |  |  | — |
Adjustment to repatriation plan |  |  | (0.6 | ) |  |  | (3.2 | ) |  |  | (1.7 | )
State income taxes, net of federal benefit |  |  | 1.5 |  |  |  | 5.7 |  |  |  | 4.0 |
Adjustments for valuation allowance |  |  | (1.4 | ) |  |  | (0.4 | ) |  |  | (0.7 | )
Non-deductible business acquisition transaction costs |  |  | — |  |  |  | 1.3 |  |  |  | — |
Expense disallowances |  |  | 0.6 |  |  |  | 1.1 |  |  |  | 0.8 |
Change in uncertain tax positions |  |  | 1.1 |  |  |  | 1.9 |  |  |  | — |
Other |  |  | 0.9 |  |  |  | 1.3 |  |  |  | 0.3 |
Effective income tax rate |  |  | 28.8 | % |  |  | 34.8 | % |  |  | 35.1 | %
The decrease in the effective tax rate in fiscal 2014 is due to a tax benefit arising in connection with the conclusion of the IRS examination of the Company’s U.S. federal income tax returns for the tax years ended April 30, 2010 and 2011, a higher percentage of taxable income arising in jurisdictions with lower statutory tax rates and the reversal of valuation allowance previously recorded against deferred tax assets, including net operating losses, of certain foreign subsidiaries that have returned to profitability and are now more-likely-than-not to realize those deferred tax assets. Components of deferred tax assets and liabilities are as follows:
|  | April 30, |
|  | 2014 |  |  | 2013 |
|  | (in thousands) |
Deferred tax assets: |  |  |  |
Deferred compensation |  | $ | 66,359 |  |  | $ | 64,791 |
Loss and credit carryforwards |  |  | 35,177 |  |  |  | 42,984 |
Reserves and accruals |  |  | 8,706 |  |  |  | 7,613 |
Deferred rent |  |  | 5,575 |  |  |  | 6,366 |
Deferred revenue |  |  | 1,672 |  |  |  | 1,646 |
Allowance for doubtful accounts |  |  | 1,536 |  |  |  | 1,804 |
Other |  |  | 6,531 |  |  |  | 4,867 |
Gross deferred tax assets |  |  | 125,556 |  |  |  | 130,071 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Intangibles |  |  | (21,507 | ) |  |  | (21,560 | )
Property and equipment |  |  | (6,277 | ) |  |  | (6,747 | )
Prepaid expenses |  |  | (5,600 | ) |  |  | (4,184 | )
Other |  |  | (5,678 | ) |  |  | (3,135 | )
Gross deferred tax liabilities |  |  | (39,062 | ) |  |  | (35,626 | )
Valuation allowances |  |  | (26,969 | ) |  |  | (27,731 | )
Net deferred tax asset |  | $ | 59,525 |  |  | $ | 66,714 |
Changes to the valuation allowance balances are recorded through the provision for income taxes in the respective year. The deferred tax amounts have been classified in the consolidated balance sheets as follows:
|  | April 30, |
|  | 2014 |  |  | 2013 |
|  | (in thousands) |
Current: |  |  |  |
Deferred tax assets |  | $ | 15,591 |  |  | $ | 13,791 |
Deferred tax liabilities |  |  | (10,813 | ) |  |  | (10,220 | )
Valuation allowance |  |  | (292 | ) |  |  | (60 | )
Current deferred tax asset |  |  | 4,486 |  |  |  | 3,511 |
Non-current: |  |  |  |  |  |  |  |
Deferred tax asset |  |  | 109,965 |  |  |  | 116,280 |
Deferred tax liabilities |  |  | (28,249 | ) |  |  | (25,406 | )
Valuation allowance |  |  | (26,677 | ) |  |  | (27,671 | )
Non-current deferred tax asset, net |  |  | 55,039 |  |  |  | 63,203 |
Net deferred tax assets |  | $ | 59,525 |  |  | $ | 66,714 |
Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. Management believes uncertainty exists regarding the realizability of certain operating losses and has, therefore, established a valuation allowance for this portion of the deferred tax asset. Realization of the deferred income tax asset is dependent on the Company generating sufficient taxable income of the appropriate nature in future years. Although realization is not assured, management believes that it is more likely than not that the net deferred income tax assets will be realized. As of April 30, 2014 and 2013, the Company has U.S. federal net operating loss carryforwards of $12.2 million and $20.4 million, respectively, from the acquisition of PDI, which will begin to expire in 2028. The utilization of these losses is subject to an annual limitation as defined under Section 382 of the Internal Revenue Code. The Company has state net operating loss carryforwards of $30.2 million, which will begin to expire in 2015. The Company also has foreign net operating loss carryforwards of $98.2 million, which will begin to expire in 2015. The Company has a plan to distribute a portion of the cash held in foreign locations to the United States. These planned distributions will not give rise to any additional taxes. Other than these amounts, the Company has not provided for U.S. taxes or foreign withholding taxes on approximately $203.8 million of undistributed earnings of its foreign subsidiaries as such earnings are intended to be reinvested indefinitely. If a distribution of these earnings were to be made, the Company might be subject to both foreign withholding taxes and U.S. income taxes, net of any allowable foreign tax credits or deductions. An estimate of these taxes, however, is not practicable. The Company or one of its subsidiaries files federal and state income tax returns in the United States as well as foreign jurisdictions. These income tax returns are subject to audit by the Internal Revenue Service (the “IRS”) and various state and foreign tax authorities. In January 2014, the IRS finalized an examination of the Company’s U.S. federal income tax returns for the tax years ended April 30, 2011 and 2010. As a result of the conclusion of this audit, the Company recorded a financial statement benefit of $2.6 million primarily due to favorable adjustments to depreciable tax basis on fixed assets and foreign tax credit utilization. In June 2014, the IRS commenced an examination of the Company’s fiscal year 2013 U.S. federal income tax return. The Company’s income tax returns are not otherwise under examination in any material jurisdiction. The statute of limitations varies by jurisdiction in which the Company operates. With few exceptions, however, the Company’s tax returns for years prior to fiscal year 2009 are no longer open to examination by tax authorities (including U.S. federal, state and foreign). Unrecognized tax benefits are the differences between the amount of benefits of tax positions taken, or expected to be taken, on a tax return and the amount of benefits recognized for financial reporting purposes. As of April 30, 2014, the Company had a liability of $2.7 million for unrecognized tax benefits. A reconciliation of the beginning and ending balances of the unrecognized tax benefits is as follows:
|  | Year Ended April 30, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
|  | (in thousands) |
Unrecognized tax benefits, beginning of year |  | $ | 3,400 |  |  | $ | — |  |  | $ | — |
Settlement with tax authority |  |  | (1,946 | ) |  |  | — |  |  |  | — |
Additions based on tax positions related to the current year |  |  | 279 |  |  |  | 1,454 |  |  |  | — |
Additions based on tax positions related to prior years |  |  | 968 |  |  |  | 1,946 |  |  |  | — |
Unrecognized tax benefits, end of year |  | $ | 2,701 |  |  | $ | 3,400 |  |  | $ | — |
The liability for unrecognized tax benefits is included in income taxes payable in the consolidated balance sheets. The full amount of unrecognized tax benefits would impact the effective tax rate if recognized. In the next twelve months, it is reasonably possible that the Company’s unrecognized tax benefits could change due to resolution of certain tax matters, which could include payments on those tax matters. These resolutions and payments could reduce the Company’s unrecognized tax benefits balance by approximately $1.0 million. The Company classifies interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes. The Company had approximately $0.7 million in accrued interest and penalties related to unrecognized tax benefits as of April 30, 2014 and none as of April 30, 2013. The Company accrued approximately $0.1 million of interest related to unrecognized tax benefits in fiscal 2014 and none as of April 30, 2013.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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