INCOME TAXES

Earnings from operations before income taxes consisted of the following:



	Years Ended January 31,
(in thousands)	2015		2014		2013
United States	$	484,467	$	65,164	$	510,853
Foreign	253,070		189,702		132,723
	$	737,537	$	254,866	$	643,576

The settlement of the Arbitration Award, as discussed in "Note J - Commitments and Contingencies", resulted in a significant change in the composition of geographical earnings from operations for the year ended January 31, 2014. This change resulted in a lower effective tax rate for the year ended January 31, 2014 because of lower tax rates on foreign earnings.

Components of the provision for income taxes were as follows:



	Years Ended January 31,
(in thousands)	2015			2014			2013
Current:
Federal	$	130,901		$	39,028		$	167,462
State	18,193			9,897			28,461
Foreign	66,552			52,427			50,778
	215,646			101,352			246,701
Deferred:
Federal	25,156			(28,640		)	378
State	13,217			(2,265		)	223
Foreign	(661		)	3,050			(19,883		)
	37,712			(27,855		)	(19,282		)
	$	253,358		$	73,497		$	227,419

Reconciliations of the provision for income taxes at the statutory Federal income tax rate to the Company's effective income tax rate were as follows:



	Years Ended January 31,
	2015		2014		2013
Statutory Federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of Federal benefit	2.8		2.0		3.0
Foreign losses with no tax benefit	0.7		1.3		0.5
Undistributed foreign earnings	(4.2	)	(7.8	)	(3.4	)
Net change in uncertain tax positions	0.3		0.5		0.9
Domestic manufacturing deduction	(1.3	)	(2.5	)	(1.4	)
Other	1.1		0.3		0.7
	34.4	%	28.8	%	35.3	%

The Company has the intent to indefinitely reinvest any undistributed earnings of substantially all foreign subsidiaries. As of January 31, 2015 and 2014, the Company has not provided deferred taxes on approximately $612,000,000 and $542,000,000 of undistributed earnings. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances. U.S. Federal income taxes of approximately $107,000,000 and $98,000,000 would be incurred if these earnings were distributed.

Deferred tax assets (liabilities) consisted of the following:



	January 31,
(in thousands)	2015			2014
Deferred tax assets:
Pension/postretirement benefits	$	203,045		$	106,585
Accrued expenses	36,441			38,141
Share-based compensation	17,280			22,719
Depreciation	14,406			52,530
Amortization	11,415			11,305
Foreign and state net operating losses	22,911			27,806
Sale-leaseback	36,321			47,900
Inventory	72,715			66,227
Financial hedging instruments	14,050			14,141
Unearned income	11,188			11,407
Other	37,018			37,052
	476,790			435,813
Valuation allowance	(16,232		)	(17,693		)
	460,558			418,120
Deferred tax liabilities:
Foreign tax credit	(34,744		)	(40,246		)
Net deferred tax asset	$	425,814		$	377,874

The Company has recorded a valuation allowance against certain deferred tax assets related to foreign net operating loss carryforwards where management has determined it is more likely than not that deferred tax assets will not be realized in the future. The overall valuation allowance relates to tax loss carryforwards and temporary differences for which no benefit is expected to be realized. Tax loss carryforwards of approximately $98,000,000 exist in certain foreign jurisdictions. Whereas some of these tax loss carryforwards do not have an expiration date, others expire at various times from 2015 through 2022.

The following table reconciles the unrecognized tax benefits:



							January 31,
(in thousands)	2015			2014			2013
Unrecognized tax benefits at beginning of year	$	27,626		$	28,217		$	25,509
Gross increases – tax positions in prior period	960			345			4,426
Gross decreases – tax positions in prior period	(5,395		)	(391		)	(1,713		)
Gross increases – tax positions in current period	105			115			156
Settlements	(14,837		)	(284		)	—
Lapse of statute of limitations	(126		)	(376		)	(161		)
Unrecognized tax benefits at end of year	$	8,333		$	27,626		$	28,217

Included in the balance of unrecognized tax benefits at January 31, 2015, 2014 and 2013 are $5,251,000, $18,748,000 and $17,564,000 of tax benefits that, if recognized, would affect the effective income tax rate.

The Company recognizes interest expense and penalties related to unrecognized tax benefits within the provision for income taxes. During the years ended January 31, 2015, 2014 and 2013, the Company recognized approximately $1,802,000, $1,874,000 and $650,000 of expense associated with interest and penalties. Accrued interest and penalties are included within accounts payable and accrued liabilities and other long-term liabilities, and were $6,010,000 and $9,752,000 at January 31, 2015 and 2014.

At January 31, 2015, the Company's gross uncertain tax positions and the associated accrued interest and penalties decreased $19,293,000 and $3,742,000, respectively, from January 31, 2014 primarily as a result of the settlement of an audit conducted by the Internal Revenue Service ("IRS"). These decreases were primarily a result of payments due to federal and state taxing authorities. The effect of this settlement on the Consolidated Statements of Earnings was not material for the year ended

January 31, 2015.

The Company conducts business globally, and, as a result, is subject to taxation in the U.S. and various state and foreign jurisdictions. As a matter of course, tax authorities regularly audit the Company. The Company's tax filings are currently being examined by a number of tax authorities in several jurisdictions. Ongoing audits where subsidiaries have a material presence include New York City (tax years 2011–2012), as well as an audit that is being conducted by the IRS (tax years 2010–2012). Tax years from 2006–present are open to examination in U.S. Federal and various state, local and foreign jurisdictions. As part of these audits, the Company engages in discussions with taxing authorities regarding tax positions. As of January 31, 2015, unrecognized tax benefits are not expected to change materially in the next 12 months. Future developments may result in a change in this assessment.