11.

INCOME TAXES

The composition of income before taxes from domestic and foreign locations was as follows for the fiscal years ended June 30 (in thousands):


	2011		2010		2009
Domestic	$	368,102	$	248,304	$	164,794
Foreign		1,110		1,843		732

Income before taxes	$	369,212	$	250,147	$	165,526

The components of the income tax provision reflected in the accompanying consolidated statements of operations were as follows for the fiscal years ended June 30 (in thousands):


	2011		2010			2009
Current taxes:
Federal	$	95,805	$	101,895		$	61,162
State and local		19,852		15,605			8,138

Total current tax provision		115,657		117,500			69,300
Deferred tax provision (benefit)		24,047		(35,859	)		(8,179	)

Total provision for income taxes	$	139,704	$	81,641		$	61,121

The provision for income taxes reflected in the accompanying consolidated statements of operations varies from the amounts that would have been provided by applying the United States federal statutory income tax rate to earnings before income taxes as shown below for the fiscal years ended June 30:


	2011			2010			2009
U.S. Federal statutory income tax rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of U.S. federal income tax benefit		3.4	%		1.4	%		1.1	%
Increase in valuation allowance		0.0	%		2.0	%		0.6	%
Permanent items		0.3	%		0.1	%		-0.3	%
Uncertain tax positions		-0.7	%		-5.9	%		0.8	%
Other items, net		-0.2	%		0.0	%		-0.3	%

Effective income tax rate		37.8	%		32.6	%		36.9	%

Net deferred income tax assets and liabilities consisted of the following at June 30 (in thousands):


	2011			2010
Current deferred tax assets:
Allowance for doubtful accounts	$	75,431		$	50,297
Accrued wages		4,029			16,681
Other		2,896			4,131

Gross current deferred tax assets		82,356			71,109
Less valuation allowance		(5,552	)		(5,699	)

Total current deferred tax assets	$	76,804		$	65,410

Noncurrent deferred tax assets:
Interest rate swap	$	8,634		$	14,774
Deferred liabilities		25,236			20,879
Foreign and state net operating losses		11,145			9,764
Share-based compensation		12,744			8,811
Other		12,334			28,757

Gross noncurrent deferred tax assets		70,093			82,985
Less valuation allowance		(16,115	)		(16,953	)

Total noncurrent deferred tax assets		53,978			66,032

Noncurrent deferred tax liabilities:
Intangible assets		227,494			224,323
Property and equipment		48,023			20,193
Other		1,145			2,450

Total noncurrent deferred tax liabilities		276,662			246,966

Total net noncurrent deferred tax liabilities	$	222,684		$	180,934

At June 30, 2011, the Company had state net operating loss carry forwards of approximately $149.9 million available to offset future taxable income and a related deferred tax asset of $8.7 million. The carry forwards expire at varying dates beginning in fiscal 2013 through fiscal 2031. The Company has determined that it is currently "more-likely-than-not" that the deferred tax assets associated with $146.5 million of its state net operating loss carry forwards will not be realized and has established a valuation allowance equal to the gross deferred tax asset balance of $8.6 million related to these net operating loss carry forwards. In addition, certain of the Company's state net operating losses may be subject to annual limitations due to these states' adoption of the ownership change limitations imposed by Internal Revenue Code Section 382 or similar state provisions, which could result in the expiration of the state net operating loss carry forwards before they can be utilized.

At June 30, 2011, the Company had Canadian net operating loss carry forwards of approximately $9.6 million available to offset future taxable income and a related deferred tax asset of $2.4 million.

The recognition and measurement of tax benefits associated with uncertain income tax positions requires the use of judgment and estimates by management, which are inherently subjective. Changes in judgment about uncertain tax positions taken in previous periods may result from new information concerning an uncertain tax position, completion of an audit or the expiration of statutes of limitation. These changes may create volatility in the Company's effective tax rate in future periods.

A reconciliation of the beginning and ending balance of unrecognized tax benefits, excluding interest expense and the indirect benefits of state taxes, for the fiscal years ended June 30 is as follows (in thousands):


	2011			2010			2009
Unrecognized tax benefits, beginning of year	$	8,902		$	22,639		$	22,243
Increase in prior year unrecognized tax benefits		26			51			—
(Decrease) in prior year unrecognized tax benefits		(174	)		(539	)		(520	)
Increase in current year unrecognized tax benefits		943			3,070			692
(Decrease) in unrecognized tax benefits due to the expiration of statutes of limitation		(4,259	)		(16,319	)		(776	)

Unrecognized tax benefits, end of year	$	5,438		$	8,902		$	22,639

Of the Company's $5.4 million in unrecognized tax benefits, approximately $4.9 million, excluding interest expense and the indirect benefit of state taxes, would affect the annual effective tax rate if recognized. It is reasonably possible that the total amount of unrecognized tax benefits will decrease by $0.8 million within the next twelve months due to the expiration of certain statutes of limitation. The resulting benefit, if recognized, will be a discrete item in the third quarter of fiscal 2012.

The Company classifies interest expense and penalties accrued in connection with unrecognized tax benefits as income tax expense in its consolidated statement of operations, which is consistent with the Company's past accounting policy for interest and penalties related to tax liabilities. The total amount of interest recognized in the statement of operations for fiscal 2011 was $0.1 million. No penalties were recognized during fiscal 2011, and no amount was accrued for penalties on the consolidated balance sheet at June 30, 2011.

The statutes of limitation for the Company's U.S. income tax returns are closed for years through fiscal 2007. The statutes of limitation for the Company's state and local income tax returns for prior periods vary by jurisdiction. However, the statutes of limitation with respect to the major jurisdictions in which the Company files state and local tax returns are generally closed for years through fiscal 2006.