INCOME TAXES

Earnings from operations before income taxes consisted of the following:



	Years Ended January 31,
(in millions)	2016		2015		2014
United States	$	502.5	$	484.5	$	65.2
Foreign	207.4		253.0		189.7
	$	709.9	$	737.5	$	254.9

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 millions)	2016			2015			2014
Current:
Federal	$	175.8		$	130.9		$	39.0
State	22.3			18.2			9.9
Foreign	49.8			66.5			52.5
	247.9			215.6			101.4
Deferred:
Federal	(15.4		)	25.2			(28.6		)
State	3.9			13.2			(2.3		)
Foreign	9.6			(0.7		)	3.0
	(1.9		)	37.7			(27.9		)
	$	246.0		$	253.3		$	73.5

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,
	2016		2015		2014
Statutory Federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of Federal benefit	2.4		2.8		2.0
Foreign losses with no tax benefit	—		0.7		1.3
Undistributed foreign earnings	(2.5	)	(4.2	)	(7.8	)
Net change in uncertain tax positions	0.5		0.3		0.5
Domestic manufacturing deduction	(1.3	)	(1.3	)	(2.5	)
Other	0.6		1.1		0.3
	34.7	%	34.4	%	28.8	%

The Company has the intent to indefinitely reinvest any undistributed earnings of all foreign subsidiaries. As of January 31, 2016 and 2015, the Company has not provided deferred taxes on approximately $685.0 million and $612.0 million 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 $118.0 million and $107.0 million would be incurred if these earnings were distributed.

Deferred tax assets (liabilities) consisted of the following:



	January 31,
(in millions)	2016			2015
Deferred tax assets:
Pension/postretirement benefits	$	166.7		$	203.0
Accrued expenses	34.3			36.4
Share-based compensation	18.3			17.3
Depreciation	6.6			14.4
Amortization	11.4			11.4
Foreign and state net operating losses	23.5			22.9
Sale-leaseback	30.4			36.3
Inventory	50.9			72.7
Financial hedging instruments	19.7			14.1
Unearned income	11.3			11.2
Other	53.6			37.1
	426.7			476.8
Valuation allowance	(19.5		)	(16.2		)
	407.2			460.6
Deferred tax liabilities:
Foreign tax credit	(25.1		)	(34.8		)
Net deferred tax asset	$	382.1		$	425.8

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 $84.0 million exist in certain foreign jurisdictions. Whereas some of these tax loss carryforwards do not have an expiration date, others expire at various times from 2018 through 2026.

The following table reconciles the unrecognized tax benefits:



							January 31,
(in millions)	2016			2015			2014
Unrecognized tax benefits at beginning of year	$	8.3		$	27.6		$	28.2
Gross increases – tax positions in prior period	1.0			1.0			0.3
Gross decreases – tax positions in prior period	(0.4		)	(5.4		)	(0.4		)
Gross increases – tax positions in current period	1.4			0.1			0.1
Settlements	—			(14.8		)	(0.3		)
Lapse of statute of limitations	(0.1		)	(0.2		)	(0.3		)
Unrecognized tax benefits at end of year	$	10.2		$	8.3		$	27.6

Included in the balance of unrecognized tax benefits at January 31, 2016, 2015 and 2014 are $9.1 million, $5.3 million and $18.7 million 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, 2016, 2015 and 2014, the Company recognized approximately $1.7 million, $1.8 million and $1.9 million 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 $7.8 million and $6.0 million at January 31, 2016 and 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, both in the U.S. and in foreign jurisdictions. Ongoing audits where subsidiaries have a material presence include New York City (tax years 2011–2013) and New York State (tax years 2012–2014), as well as an audit that is being conducted by the IRS (tax years 2010–2012). Tax years from 2010–present are open to examination in the U.S. Federal jurisdiction and 2006–present are open in various state, local and foreign jurisdictions. As part of these audits, the Company engages in discussions with taxing authorities regarding tax positions. At January 31, 2016, total unrecognized tax benefits were $10.2 million of which approximately $9.1 million, if recognized, would affect the effective income tax rate. Management believes it is reasonably possible that a majority of the total gross amount provided for unrecognized tax benefits will decrease in the next 12 months. Future developments may result in a change in this assessment.