Income Taxes

6 Months Ended

Jul. 31, 2012

Income Taxes [Abstract]

INCOME TAXES

NOTE 9 – INCOME TAXES

The Company recorded a tax expense of $2.5 million and a tax expense of $0.9 million for the three months ended July 31, 2012 and 2011, respectively. The effective tax rate for the three month period ended July 31, 2012 was 23.6%. The effective tax rate for the three month period ended July 31, 2011 was 16.0%.

The Company recorded a tax expense of $4.1 million and a tax expense of $1.6 million for the six months ended July 31, 2012 and 2011, respectively. The effective tax rate for the six month period ended July 31, 2012 was 21.7%. The effective tax rate for the six month period ended July 31, 2011 was 23.8%.

All periods include the effects of changes to the valuation allowances on net deferred tax assets and the application of accounting for income taxes in interim periods. The fluctuation in the effective tax rate for the three months and six months ended July 31, 2012, is also due to a shift in the mix of global pre-tax financial results as well as a $0.5 million discrete expense recorded in the current year for a contingent exposure relative to a recent foreign tax audit.

The Company bases its estimate of deferred tax assets and liabilities on current tax laws and rates as well as expected future income. The realization of deferred tax assets depends on the Company’s ability to generate future income. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available positive and negative evidence, it is more-likely-than-not that all or a portion of the deferred tax assets will not

be realized. In the third quarter of fiscal 2010 the Company determined that it was appropriate to record a full valuation allowance against its net deferred tax assets in the United States, primarily due to the Company’s domestic loss position in recent years, although the Company believes it may ultimately utilize the underlying tax benefits within the statutory limits. Management continues to evaluate the appropriate level of allowance on all deferred tax assets considering such factors as prior earnings history, expected future earnings, carryback and carryforward periods, and tax and business strategies that could potentially enhance the likelihood of realization of the deferred tax assets. Management believes it may be reasonably possible, based on expectations of future income that its judgment regarding the appropriateness of the level of allowance on the U.S. deferred tax assets may change in the next twelve months.