Income Taxes

9 Months Ended

Oct. 31, 2011

Income Taxes [Abstract]

Income Taxes

11. Income Taxes

Current income taxes payable of $2,145,000 at October 31, 2011 consists of approximately $1,010,000 of domestic federal and state taxes and $1,135,000 of foreign taxes. Current income taxes payable of $1,276,000 at January 31, 2011 consists entirely of foreign taxes.

The Company and its subsidiaries file consolidated and separate income tax returns in the United States federal jurisdiction and in foreign jurisdictions. The Company is subject to United States federal income tax examinations for all tax years beginning with its fiscal year ended January 31, 2008. In connection with the refund request resulting from a net operating loss carryback, the Company’s United States federal income tax returns for the years ended January 31, 2009 and 2010 were reviewed by the IRS. The result of this review was a decrease in taxable income of approximately $370,000, which resulted in an additional refund of $66,000 and an alternative minimum tax credit carryforward of $54,000.

The Company is subject to examination by taxing authorities throughout the world, including foreign jurisdictions such as Australia, Canada, Colombia, Hungary, Peru, Russia, Singapore, and the United Kingdom. With few exceptions, the Company and its subsidiaries are no longer subject to foreign income tax examinations for tax years before 2003. With respect to ongoing audits, the Company’s Canadian income tax returns for the years ended January 31, 2004, 2005 and 2006 have been examined by Canadian tax authorities. Assessments for those years and for the effect of certain matters in subsequent years totaling approximately $8,400,000, including penalties and interest, have been issued. The issues involved relate primarily to the deductibility of depreciation charges and whether those deductions should be taken in Canada or in the United States. Accordingly, the Company has filed requests for competent authority assistance with the Canadian Revenue Agency (“CRA”) and with the IRS seeking to avoid potential double taxation. In addition, the Company has filed a protest with the CRA and the Province of Alberta. In connection with this protest, the Company has been required to make prepayments totaling approximately $3,500,000 against the assessment.

The effective tax rate for the three and nine months ended October 31, 2011 was approximately 25.3% and 28.1%, respectively. These rates are less than the federal statutory rate of 34% primarily due to the effect of lower tax rates in certain foreign jurisdictions and the determination that earnings from these jurisdictions have been permanently reinvested outside of the United States. The effective tax rate for the three and nine months ended October 31, 2010 was 34.1% and 25.8%, respectively. The effective rate for the nine month period was less than the federal statutory rate primarily due to the effect of the non-taxable gain from bargain purchase in business combination recognized in the period (Note 4).