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Income Taxes
6 Months Ended
Jan. 31, 2015
Income Taxes [Abstract]  
Income Taxes

Note O – Income Taxes

 

The effective tax rate for the three and six months ended January 31, 2015 was 27.0 percent and 27.3 percent, respectively.  The effective tax rate for the three and six months ended January 31, 2014 was 22.1 percent and 27.6 percent, respectively.  The increase in the Company’s effective tax rate for the three months ended January 31, 2015, was primarily due to a $6.4 million tax benefit recorded in the prior year quarter associated with the favorable settlement of a tax audit.  This increase was partially offset by the retroactive reinstatement of the Research and Experimentation Credit in the United States in the current year quarter.  The decrease in the Company’s effective tax rate for the six months ended January 31, 2015 was primarily due to a favorable shift in the mix of earnings between tax jurisdictions and the retroactive reinstatement of the Research and Experimentation Credit in the United States, which was recognized during the current year six-month period, and non-recurring tax costs associated with foreign dividend distributions recorded during the prior year six-month period.  This decrease was partially offset by the tax benefit associated with the favorable settlement of a tax audit recorded in the prior year six-month period.

 

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions.  With few exceptions, the Company is no longer subject to state and foreign income tax examinations by tax authorities for years before 2008.  The United States Internal Revenue Service has completed examinations of the Company’s U.S. federal income tax returns through 2012.

At January 31, 2015, the total unrecognized tax benefits were $16.3 million and accrued interest and penalties on these unrecognized tax benefits were $1.7 million.  The Company recognizes accrued interest related to unrecognized tax benefits in income tax expense.  If the Company were to prevail on all unrecognized tax benefits recorded, substantially all of the unrecognized tax benefits would benefit the effective tax rate.  With an average statute of limitations of about 5 years, up to $1.0 million of the unrecognized tax benefits could potentially expire in the next 12 month period.  It is possible that quicker than expected settlement of either current or future audits and disputes would cause additional reversals of previously recorded reserves in the next 12 month period.  Quantification of an estimated range and timing of future audit settlements cannot be made at this time.