P. INCOME TAXES

Earnings from operations before income taxes consisted of the following:


	Years Ended January 31,
(in thousands)	2013		2012		2011
United States	$	510,853	$	448,780	$	352,126
Foreign		132,723		216,171		195,308

	$	643,576	$	664,951	$	547,434

Components of the provision for income taxes were as follows:


	Years Ended January 31,
(in thousands)	2013			2012			2011
Current:
Federal	$	167,462		$	181,935		$	149,815
State		28,461			35,109			36,580
Foreign		50,778			59,485			52,968

		246,701			276,529			239,363

Deferred:
Federal		378			(49,746	)		(52,452	)
State		223			(447	)		(8,220	)
Foreign		(19,883	)		(575	)		340

		(19,282	)		(50,768	)		(60,332	)

	$	227,419		$	225,761		$	179,031

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,
	2013			2012			2011
Statutory Federal income tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of Federal benefit		3.0			3.3			2.8
Foreign losses with no tax benefit		0.5			0.2			0.6
Undistributed foreign earnings		(3.4	)		(4.0	)		(4.0	)
Net change in uncertain tax positions		0.9			0.3			0.3
Domestic manufacturing deduction		(1.4	)		(1.6	)		(1.2	)
Other		0.7			0.8			(0.8	)

		35.3	%		34.0	%		32.7	%

The Company has the intent to indefinitely reinvest any undistributed earnings of primarily all foreign subsidiaries. As of January 31, 2013 and 2012, the Company has not provided deferred taxes on approximately $474,000,000 and $403,000,000 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 $87,000,000 and $71,000,000 would be incurred if these earnings were distributed.

Deferred tax assets (liabilities) consisted of the following:


	January 31,
(in thousands)	2013			2012
Deferred tax assets:
Pension/postretirement benefits	$	131,974		$	123,721
Accrued expenses		28,637			30,219
Share-based compensation		25,252			24,312
Depreciation		49,159			42,141
Amortization		11,711			11,425
Foreign and state net operating losses		27,976			20,891
Sale-leaseback		57,955			73,562
Inventory		59,071			35,426
Accrued exit charges		6,193			9,233
Financial hedging instruments		13,824			4,054
Unearned income		11,022			13,638
Other		25,115			16,804

		447,889			405,426
Valuation allowance		(14,181	)		(13,570	)

		433,708			391,856

Deferred tax liabilities:
Foreign tax credit		(47,913	)		(38,294	)

Net deferred tax asset	$	385,795		$	353,562

The Company has recorded a valuation allowance against certain deferred tax assets related to state and 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 $7,000,000 and $107,000,000 exist in certain state and foreign jurisdictions. Whereas some of these tax loss carryforwards do not have an expiration date, others expire at various times from 2014 through 2031.

The following table reconciles the unrecognized tax benefits:


	January 31,
(in thousands)	2013			2012			2011
Unrecognized tax benefits at beginning of year	$	25,509		$	32,273		$	32,226
Gross increases – tax positions in prior period		4,426			1,365			2,367
Gross decreases – tax positions in prior period		(1,713	)		(6,480	)		(2,003	)
Gross increases – current period tax positions		156			312			3,241
Settlements		—			(1,760	)		(1,394	)
Lapse of statute of limitations		(161	)		(201	)		(2,164	)

Unrecognized tax benefits at end of year	$	28,217		$	25,509		$	32,273

Included in the balance of unrecognized tax benefits at January 31, 2013, 2012 and 2011 are $17,564,000, $12,998,000 and $11,605,000 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, 2013, 2012 and 2011, the Company recognized approximately $650,000, $3,924,000 and $1,184,000 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 $7,878,000 and $7,228,000 at January 31, 2013 and 2012.

The Company is subject to taxation in the U.S. and various state and foreign jurisdictions. As a matter of course, various taxing authorities regularly audit the Company. The Company’s tax filings are currently being examined by a number of tax authorities in various jurisdictions. Ongoing audits where subsidiaries have a material presence include New York state (tax years 2008–2010), New York City (tax years 2009–2010), New Jersey (tax years 2006–2009) and Japan (tax years 2009–2011), as well as an audit that is being conducted by the Internal Revenue Service (tax years 2006–2009). Tax years from 2004–present are open to examination in U.S. Federal and various state, local and foreign jurisdictions. The Company believes that its tax positions comply with applicable tax laws and that it has adequately provided for these matters. However, the audits may result in proposed assessments where the ultimate resolution may result in the Company owing additional taxes. Management anticipates that it is reasonably possible that the total gross amount of unrecognized tax benefits will decrease by approximately $20,000,000 in the next 12 months, a portion of which may affect the effective tax rate; however, management does not currently anticipate a significant effect on net earnings. Future developments may result in a change in this assessment.