INCOME TAXES

9 Months Ended

Jul. 31, 2011

INCOME TAXES

INCOME TAXES

NOTE K INCOME TAXES

The amount of unrecognized tax benefits, including interest and penalties, at July 31, 2011, recorded in other long-term liabilities was $22.3 million, of which $17.4 million would impact the Company’s effective tax rate if recognized.  The Company includes accrued interest and penalties related to uncertain tax positions in income tax expense, with $(6.1) million and $(4.6) million included in expense in the third quarter and first nine months, respectively, of fiscal 2011.  The amount of accrued interest and penalties at July 31, 2011, associated with unrecognized tax benefits was $6.3 million.

During the third quarter of fiscal year 2011, the liability for gross unrecognized tax benefits decreased by $13.0 million (excluding interest and penalties), primarily due to the settlement of various state income tax audits.  The net impact to tax expense resulting from the decrease in gross unrecognized tax benefits (including interest, penalties, and other offsetting items) was a reduction of $4.4 million.  There were no material adjustments to the liability for unrecognized tax benefits during the third quarter of fiscal year 2010.

The Company is regularly audited by federal and state taxing authorities.  During fiscal year 2010, the I.R.S. concluded its examination of the Company’s consolidated federal income tax returns for the fiscal years through 2007, and opened its examination for fiscal years 2008 and 2009.  The Company is in various stages of audit by several state taxing authorities on a variety of fiscal years, as far back as 1996.  While it is reasonably possible that one or more of these audits may be completed within the next 12 months and that the related unrecognized tax benefits may change, based on the status of the examinations it is not possible to reasonably estimate the effect of any amount of such change to previously recorded uncertain tax positions.