INCOME TAXES:

12 Months Ended

Mar. 31, 2011

INCOME TAXES:

INCOME TAXES:

13.           INCOME TAXES:

Total income tax expense (benefit) was allocated as follows (dollars in thousands):

	2011		2010		2009
Income from operations	$	34,077	$	32,599	$	24,710
Stockholders’ equity:
Tax (benefit) expense of stock options, warrants and restricted stock	316		683		(34		)
	$	34,393	$	33,282	$	24,676

Income tax expense (benefit) attributable to earnings from operations consists of (dollars in thousands):

	2011			2010			2009
Current:
U.S. Federal	$	12,872		$	164		$	6,039
Non-U.S.	176			351			20
State	2,450			(726		)	2,228
	15,498			(211		)	8,287
Deferred:
U.S. Federal	19,477			31,641			15,938
Non-U.S.	(264		)	(1,056		)	(286		)
State	(634		)	2,225			771
	18,579			32,810			16,423
Total	$	34,077		$	32,599		$	24,710

Deferred income tax expense for 2009 includes expense of $3.1 million, resulting from utilization of acquired deferred tax assets on which full valuation allowances existed and that resulted in reductions in goodwill.  In 2010 and 2009, the Company reversed valuation allowances previously recorded for certain deferred tax assets, resulting in a deferred tax benefit of $1.1 million and $2.1 million, respectively.  In addition, in fiscal 2009, the Company reversed valuation allowances previously recorded for deferred tax assets on certain acquired companies, resulting in an additional $7.4 million reduction in goodwill.

Earnings (loss) before income tax attributable to U.S. and non-U.S. operations consist of (dollars in thousands):

	2011			2010			2009
U.S.	$	99,250		$	87,507		$	63,197
Non-U.S.	(93,615		)	(10,749		)	(983		)
Total	$	5,635		$	76,758		$	62,214

Earnings before income taxes, as shown above, are based on the location of the entity to which such earnings are attributable.  However, since such earnings may be subject to taxation in more than one country, the income tax provision shown above as U.S. or non-U.S. may not correspond to the earnings shown above.

Below is a reconciliation of income tax expense (benefit) computed using the U.S. federal statutory income tax rate of 35% of earnings before income taxes to the actual provision for income taxes (dollars in thousands):

	2011			2010			2009
Computed expected tax expense (benefit)	$	1,972		$	26,865		$	21,775
Increase (reduction) in income taxes resulting from:
State income taxes, net of federal benefit, exclusive of benefit of reduction in valuation reserves	2,079			2,124			1,949
Reserves for tax items	(3,336		)	1,015			384
Research, experimentation and other tax credits	(561		)	(1,167		)	—
Impairment of goodwill and intangibles not deductible for tax	28,006			—			—
Other permanent differences between book and tax expense	(58		)	1,967			(4,474		)
Non-U.S. subsidiaries taxed at other than 35%	4,409			1,655			6,684
Adjustment to valuation reserves	1,312			(1,149		)	(2,144		)
Other, net	254			1,289			536
	$	34,077		$	32,599		$	24,710

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at March 31, 2011 and 2010 are presented below.  In accordance with income tax accounting standards, as of March 31, 2011 the Company has not recognized deferred income taxes on approximately $34.4 million of undistributed earnings of foreign subsidiaries that are indefinitely reinvested outside the respective parent’s country.  Calculation of the deferred income tax related to these earnings is not practicable.

(dollars in thousands)

	2011			2010
Deferred tax assets:
Accrued expenses not currently deductible for tax purposes	$	12,531		$	11,897
Revenue recognized for tax purposes in excess of revenue for financial reporting purposes	1,718			—
Investments, principally due to differences in basis for tax and financial reporting purposes	2,050			1,776
Property and equipment, principally due to differences in depreciation	—			4,728
Net operating loss and tax credit carryforwards	51,489			50,943
Other	13,554			12,994
Total deferred tax assets	81,342			82,338
Less valuation allowance	36,377			30,578
Net deferred tax assets	44,965			51,760
Deferred tax liabilities:
Intangible assets, principally due to differences in amortization	$	(68,140	)	$	(64,854	)
Costs capitalized for financial reporting purposes in excess of amounts capitalized for tax purposes	(33,339		)	(36,294		)
Property and equipment, principally due to differences in depreciation	(15,366		)	—
Revenue recognized for financial reporting purposes in excess of revenue for tax purposes	—			(22		)
Total deferred tax liabilities	(116,845		)	(101,170		)
Net deferred tax liability	$	(71,880	)	$	(49,410	)

At March 31, 2011, the Company has net operating loss carryforwards of approximately $21.7 million and $79.6 million for U.S. federal and state income tax purposes, respectively.  These net operating loss carryforwards expire in various amounts from 2011 through 2028.  The Company has foreign net operating loss carryforwards of approximately $135.1 million. Of this amount, $127.9 million do not have expiration dates.  The remainder expires in various amounts through 2016.  The increase in the valuation allowance noted in the table above is due primarily to current year foreign losses.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Based upon the Company’s history of profitability and taxable income and the reversal of taxable temporary differences in the U.S., management believes that with the exception of carryforwards in certain states it is more likely than not the Company will realize the benefits of these deductible differences.  The Company has established valuation allowances against $48.5 million of loss carryforwards in the states where activity does not support the deferred tax asset.

Based upon the Company’s history of losses in certain non-U.S. jurisdictions, management believes it is more likely than not the Company will not realize the benefits of certain foreign carryforwards and has established valuation allowances for substantial portions of its foreign deferred assets.  The goodwill recorded related to the purchase of certain non-U.S. based subsidiaries includes valuation allowances recorded against their deferred tax assets because these companies had not yet demonstrated consistent and/or sustainable profitability.

The following table sets forth changes in the total gross unrecognized tax benefit liabilities, including accrued interest, for the years ended March 31, 2011 and 2010.  The entire liability, if recognized, would reduce the Company’s effective income tax rate in future periods.

(dollars in thousands)

	2011			2010		2009
Balance at beginning of period	$	6,379		$	5,364	$	4,980
Additions based on tax positions related to the current year	360			566		—
Reduction due to lapsing of statute of limitations	(3,460		)	—		—
Adjustments to tax positions taken in prior years	(236		)	449		384
Balance at end of period included in other liabilities	$	3,043		$	6,379	$	5,364

The Company reports accrued interest and penalties related to unrecognized tax benefits in income tax expense.  For the fiscal year ended March 31, 2011, the Company recognized $0.3 million of tax-related interest expense and penalties and had $0.4 million of accrued interest and penalties at March 31, 2011.  During the fiscal year ended March 31, 2011, the expiration of the statute of limitations resulted in a reduction to the unrecognized tax benefits related to certain tax credits by approximately $3.5 million.

The Company files a consolidated U.S. federal income tax return and tax returns in various state and local jurisdictions.  The Company’s subsidiaries also file tax returns in various foreign jurisdictions in which it operates.  In the U.S., the statute of limitations for Internal Revenue Service examinations remains open for the Company’s federal income tax returns for fiscal years subsequent to 2007. The status of state and local and foreign tax examinations varies by jurisdiction.  The Company does not anticipate any material adjustments to its financial statements resulting from tax examinations currently in progress.