INCOME TAXES

12 Months Ended

Mar. 31, 2011

INCOME TAXES

INCOME TAXES

15.   INCOME TAXES

Components of income (loss) before income taxes are as follows:

	Fiscal Year Ended March 31,					Five Months Ended March 31,			Fiscal Year Ended October 31,
	2011		2010			2010			2009			2008
			(Unaudited)
Domestic	$	29,926	$	(38,182	)	$	2,688		$	(78,825	)	$	15,339
Foreign		33,697		(56,733	)		(24,974	)		(47,125	)		92,416
Income (loss) from continuing operations before income taxes	$	63,623	$	(94,915	)	$	(22,286	)	$	(125,950	)	$	107,755

Provision for current and deferred income taxes consists of the following:

			Fiscal Year Ended March 31,						Five Months Ended March 31,			Fiscal Year Ended October 31,
			2011			2010			2010			2009			2008
						(Unaudited)
Current:
	U.S. federal		$	3,193		$	(3,666	)	$	(4,566	)	$	(3,870	)	$	1,524
	U.S. state and local			1,521			52			124			(779	)		2,197
	Foreign			6,189			8,925			5,404			6,475			11,887
Total current income taxes				10,903			5,311			962			1,826			15,608
Deferred:
		U.S. federal		(798	)		8,486			3,458			3,633			(2,079	)
		U.S. state and local		(45	)		293			255			(40	)		(9	)
		Foreign		(241	)		(945	)		(409	)		(932	)		(249	)
Total deferred income taxes				(1,084	)		7,834			3,304			2,661			(2,337	)
Provision for income taxes			$	9,819		$	13,145		$	4,266		$	4,487		$	13,271

A reconciliation of our effective tax rate to the U.S. statutory federal income tax rate is as follows:

	Fiscal Year Ended March 31,						Five Months Ended March 31,			Fiscal Year Ended October 31,
	2011			2010			2010			2009			2008
				(Unaudited)
U.S. federal statutory rate		35.0	%		(35.0	)%		(35.0	)%		(35.0	)%		35.0	%
Foreign tax rate differential		(7.1	)%		29.0	%		47.1	%		22.1	%		(19.9	)%
State and local taxes, net of U.S. federal benefit		1.3	%		(1.3	)%		0.8	%		(1.9	)%		1.9	%
Federal valuation allowance		(19.8	)%		15.1	%		(4.7	)%		23.9	%		(8.8	)%
Convertible debt		0.0	%		1.2	%		4.4	%		0.0	%		0.0	%
Other		6.0	%		4.8	%		6.5	%		(5.5	)%		4.1	%
Effective tax rate		15.4	%		13.8	%		19.1	%		3.6	%		12.3	%

The effects of temporary differences that gave rise to our deferred tax assets and liabilities were as follows:

			March 31, 2011			March 31, 2010			October 31, 2009
Current deferred tax assets and (liabilities):
	Sales returns and allowances (including bad debt)		$	4,883		$	8,693		$	8,473
	Inventory reserves			798			1,589			4,307
	Deferred rent			3,405			2,006			2,097
	Deferred revenue			2,741			3,011			747
	Other			16,881			15,748			11,802
	Capitalized software and depreciation			(19,706	)		(34,122	)		(49,726	)
	Total current deferred tax assets (liabilites)			9,002			(3,075	)		(22,300	)
	Less: Valuation allowance			(9,002	)		—			—
		Net current deferred tax liability(a)		—			(3,075	)		(22,300	)
Non-current deferred tax assets:
	Equity compensation			2,535			2,575			2,534
	Domestic net operating loss carryforward			116,652			127,630			123,188
	Foreign tax credit carryforward			7,348			6,986			6,599
	Foreign net operating loss carryforwards			11,947			14,299			9,189
	Intangible amortization			1,100			2,866			(432	)
	Capitalized software and depreciation			(25,522	)		(14,066	)		7,991
	Total non-current deferred tax asset			114,060			140,290			149,069
	Less: Valuation allowance			(117,021	)		(141,231	)		(130,024	)
		Net non-current deferred tax (liability) asset(b)		(2,961	)		(941	)		19,045
		Deferred taxes, net	$	(2,961	)	$	(4,016	)	$	(3,255	)

(a)

Included in accrued expenses and other current liabilities as of March 31, 2010 and October 31, 2009.

(b)

Included in other assets as of October 31, 2009.

The valuation allowance is primarily attributable to net operating losses for which no benefit is provided due to uncertainty with respect to their realization. The net deferred tax liability is the result of deferred tax liabilities related to goodwill which cannot be used to offset deferred tax assets.

At March 31, 2011, we had domestic net operating loss carryforwards totaling $312,483, which will begin to expire in 2026. In addition, we had foreign net operating loss carryforwards of $76,231, of which $61,323 will begin to expire in 2016, $1,614 will expire in 2023, and the remainder may be carried forward indefinitely.

The total amount of undistributed earnings of foreign subsidiaries was approximately $200,900 at March 31, 2011, $172,700 at March 31, 2010 and $209,200 at October 31, 2009. It is our intention to reinvest undistributed earnings of our foreign subsidiaries and thereby indefinitely postpone their remittance. Accordingly, no provision has been made for foreign withholding taxes or U.S. income taxes which may become payable if undistributed earnings of foreign subsidiaries are repatriated. It is not practicable to estimate the tax liability that would arise if these earnings were remitted.

We are regularly audited by domestic and foreign taxing authorities. Audits may result in tax assessments in excess of amounts claimed and the payment of additional taxes. We believe that our tax return positions comply with applicable tax law and that we have adequately provided for reasonably foreseeable assessments of additional taxes. Additionally, we believe that any assessments in excess of the amounts provided for will not have a material adverse impact on the Consolidated Financial Statements.

As of March 31, 2011 and 2010 and October 31, 2009, we had gross unrecognized tax benefits, including interest and penalties, of $15,091, $10,929 and $24,637, respectively, all of which would affect our effective tax rate if realized.

The aggregate changes to the liability for gross uncertain tax positions, excluding interest and penalties, were as follows:

		Fiscal Year Ended March 31,						Five Months Ended March 31,			Fiscal Year Ended October 31,
		2011			2010			2010			2009			2008
					(Unaudited)
Balance, beginning of period		$	9,195		$	13,182		$	18,423		$	18,412		$	18,960
Additions:
	Current year tax positions		1,077			6,318			1,942			5,630			537
	Prior year tax positions		4,097			2,237			—			3,316			2,256
Reduction of prior year tax positions			—			(6,034	)		(4,350	)		(4,013	)		(2,759	)
Settlements			—			(7,033	)		(6,487	)		(4,762	)		(512	)
Lapse of statute of limitations			(1,273	)		—			—			—			(70	)
Other, net			256			525			(333	)		(160	)		—
Balance, end of period		$	13,352		$	9,195		$	9,195		$	18,423		$	18,412

We recognize interest and penalties related to uncertain tax positions in the provision for income taxes in our Consolidated Statements of Operations. For the fiscal year ended March 31, 2011, we recognized an increase in interest and penalties of approximately $5. For the fiscal year ended March 31, 2010, five months ended March 31, 2010 and fiscal year ended October 31, 2009, we recognized a decrease in interest and penalties of approximately $2,507, $4,480 and $1,773, respectively. The gross amount of interest and penalties accrued as of March 31, 2011 and 2010, and October 31, 2009 was approximately $1,739, $1,734, and $6,214, respectively.

We are generally no longer subject to audit for U.S. federal income tax returns for periods prior to the fiscal year ended October 31, 2007 and state income tax returns for periods prior to the fiscal year ended October 31, 2004. With some exceptions, we are no longer subject to income tax examinations in non-U.S. jurisdictions for years prior to our fiscal year ended October 31, 2005. U.S. federal taxing authorities have completed examinations of our income tax returns through the fiscal years ended October 31, 2006 and have recently informed us of their intent to audit subsequent years through fiscal year ending October 31, 2009. Certain U.S. state taxing authorities are currently examining our income tax returns for fiscal years ending October 31, 2004 through October 31, 2006. In addition, tax authorities in certain non-U.S. jurisdictions are currently examining our tax returns. The determination as to further adjustments to our gross unrecognized tax benefits during the next 12 months is not practicable.

We believe that we have provided for any reasonably foreseeable outcomes related to our tax audits and that any settlement will not have a material adverse effect on our consolidated financial position, cash flows or results of operations. However, there can be no assurances as to the possible outcomes.