Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 12 Months Ended
Feb. 28, 2013
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES:

Income before income taxes was generated as follows:
 
For the Years Ended
 
February 28, 2013
 
February 29, 2012
 
February 28, 2011
(in millions)
 
 
 
 
 
Domestic
$
369.7

 
$
441.0

 
$
946.0

Foreign
146.7

 
93.0

 
(395.0
)
 
$
516.4

 
$
534.0

 
$
551.0



The income tax provision (benefit) consisted of the following:
 
For the Years Ended
 
February 28, 2013
 
February 29, 2012
 
February 28, 2011
(in millions)
 
 
 
 
 
Current:
 
 
 
 
 
Federal
$
47.8

 
$
85.2

 
$
(112.9
)
State
11.2

 
(45.9
)
 
21.7

Foreign
30.4

 
1.7

 
11.8

Total current
89.4

 
41.0

 
(79.4
)
 
 
 
 
 
 
Deferred:
 
 
 
 
 
Federal
42.7

 
76.6

 
31.8

State
(4.9
)
 
(20.5
)
 
4.6

Foreign
1.4

 
(8.1
)
 
34.5

Total deferred
39.2

 
48.0

 
70.9

Income tax provision (benefit)
$
128.6

 
$
89.0

 
$
(8.5
)


The foreign provision (benefit) for income taxes is based on foreign pretax earnings. Earnings of foreign subsidiaries would be subject to U.S. income taxation on repatriation to the U.S. The Company’s consolidated financial statements provide for anticipated tax liabilities on amounts that may be repatriated.

Deferred tax assets and liabilities reflect the future income tax effects of temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that apply to taxable income.

Significant components of deferred tax assets (liabilities) consist of the following:
 
February 28, 2013
 
February 29, 2012
(in millions)
 
 
 
Deferred tax assets:
 
 
 
Stock-based compensation
$
51.1

 
$
54.1

Net operating losses
23.5

 
23.0

Employee benefits
7.9

 
6.0

Insurance accruals
4.7

 
8.0

Unrealized foreign exchange
0.6

 
—

Inventory
—

 
14.0

Other accruals
52.5

 
43.7

Gross deferred tax assets
140.3

 
148.8

Valuation allowances
(14.6
)
 
(14.4
)
Deferred tax assets, net
125.7

 
134.4

 
 
 
 
Deferred tax liabilities:
 
 
 
Intangible assets
(408.6
)
 
(388.5
)
Property, plant and equipment
(207.0
)
 
(214.7
)
Provision for unremitted earnings
(44.9
)
 
(45.3
)
Investment in equity method investees
(41.3
)
 
(39.7
)
Inventory
(6.6
)
 
—

Derivative instruments
(1.4
)
 
(1.6
)
Unrealized foreign exchange
—

 
(10.8
)
Total deferred tax liabilities
(709.8
)
 
(700.6
)
Deferred tax liabilities, net
$
(584.1
)
 
$
(566.2
)


Amounts recognized in the Consolidated Balance Sheets consist of:
 
February 28, 2013
 
February 29, 2012
(in millions)
 
 
 
Current deferred tax assets
$
15.8

 
$
40.1

Long-term deferred tax assets
0.2

 
6.5

Current deferred tax liabilities
(0.5
)
 
(4.1
)
Long-term deferred tax liabilities
(599.6
)
 
(608.7
)
 
$
(584.1
)
 
$
(566.2
)


In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. Management considers the projected reversal of deferred tax liabilities and projected future taxable income in making this assessment. Based upon this assessment, management believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of any valuation allowances.

Operating loss carryforwards totaling $471.9 million at February 28, 2013, are being carried forward in a number of jurisdictions where the Company is permitted to use tax operating losses from prior periods to reduce future taxable income. Of these operating loss carryforwards, $459.5 million will expire in 2018 through 2032 and $12.4 million of operating losses in certain jurisdictions may be carried forward indefinitely.

The Company is subject to ongoing tax examinations and assessments in various jurisdictions. Accordingly, the Company provides for additional tax expense based on probable outcomes of such matters. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, the Company believes the reserves reflect the probable outcome of known tax contingencies. Unfavorable settlement of any particular issue would require the use of cash. Favorable resolution would be recognized as a reduction to the effective tax rate in the year of resolution. During the year ended February 28, 2013, various U.S. Federal, state, and international examinations were finalized. Tax benefits of $2.7 million were recorded related to the resolution of certain tax positions in connection with those examinations and the expiration of statutes of limitation.

A reconciliation of the total tax provision (benefit) to the amount computed by applying the statutory U.S. Federal income tax rate to income before provision for (benefit from) income taxes is as follows:
 
For the Years Ended
 
February 28, 2013
 
February 29, 2012
 
February 28, 2011
 
Amount
 
% of
Pretax
Income
 
Amount
 
% of
Pretax
Income
 
Amount
 
% of
Pretax
Income
(in millions, except % of pretax income data)
 
 
 
 
 
 
 
 
 
 
 
Income tax provision at statutory rate
$
180.7

 
35.0

 
$
186.9

 
35.0

 
$
192.9

 
35.0

State and local income taxes, net of federal income tax benefit
4.1

 
0.8

 
(43.2
)
 
(8.1
)
 
17.1

 
3.1

Net operating loss valuation allowance
3.7

 
0.7

 
3.6

 
0.7

 
46.8

 
8.5

Earnings of subsidiaries taxed at other than U.S. statutory rate
(59.6
)
 
(11.5
)
 
(66.7
)
 
(12.5
)
 
(46.8
)
 
(8.5
)
CWAE Divestiture
(2.5
)
 
(0.5
)
 
1.8

 
0.4

 
(19.7
)
 
(3.6
)
Deduction for investments and loans related to the CWAE Divestiture
—

 
—

 
—

 
—

 
(207.0
)
 
(37.5
)
Impairments and dispositions of nondeductible goodwill, equity method investments and other intangible assets
—

 
—

 
—

 
—

 
21.0

 
3.8

Miscellaneous items, net
2.2

 
0.4

 
6.6

 
1.2

 
(12.8
)
 
(2.3
)
Income tax provision (benefit) at effective rate
$
128.6

 
24.9

 
$
89.0

 
16.7

 
$
(8.5
)
 
(1.5
)


For the year ended February 28, 2013, the state and local income taxes, net of federal income tax benefit, includes benefits resulting from adjustments to the current and deferred state effective tax rates. For the year ended February 29, 2012, the state and local income taxes, net of federal income tax benefit, includes benefits resulting from a change in the method of filing certain state income tax returns. These benefits consist of the recognition of prior period income tax refunds, decreases in uncertain tax positions and adjustments to the current and deferred state effective tax rates. The effect of earnings of foreign subsidiaries includes the difference between the U.S. statutory rate and local jurisdiction tax rates, as well as the provision for incremental U.S. taxes on unremitted earnings of foreign subsidiaries offset by foreign tax credits and other foreign adjustments.

As of February 28, 2013, February 29, 2012, and February 28, 2011, the liability for income taxes associated with uncertain tax positions, excluding interest and penalties, was $100.6 million, $92.0 million and $154.4 million, respectively. A reconciliation of the beginning and ending unrecognized tax benefit liabilities is as follows:
 
For the Years Ended
 
February 28, 2013
 
February 29, 2012
 
February 28, 2011
(in millions)
 
 
 
 
 
Balance as of March 1
$
92.0

 
$
154.4

 
$
124.0

Increases as a result of tax positions taken during a prior period
1.3

 
11.0

 
9.5

Decreases as a result of tax positions taken during a prior period
(9.5
)
 
(37.0
)
 
(1.8
)
Increases as a result of tax positions taken during the current period
19.5

 
29.4

 
59.5

Decreases related to settlements with tax authorities
(0.3
)
 
(59.5
)
 
(36.0
)
Decreases related to lapse of applicable statute of limitations
(2.4
)
 
(6.3
)
 
(0.8
)
Balance as of last day of February
$
100.6

 
$
92.0

 
$
154.4



As of February 28, 2013, and February 29, 2012, the Company has $90.3 million and $85.6 million, respectively, of non-current unrecognized tax benefit liabilities, including interest and penalties, recorded on the Company’s Consolidated Balance Sheets. These liabilities are recorded as non-current as payment of cash is not anticipated within one year of the balance sheet date.

As of February 28, 2013, and February 29, 2012, the Company has $100.6 million and $92.0 million, respectively, of unrecognized tax benefit liabilities that, if recognized, would decrease the effective tax rate.

In accordance with the Company’s accounting policy, the Company recognizes interest and penalties related to unrecognized tax benefit liabilities as a component of the provision for income taxes on the Company’s Consolidated Statements of Comprehensive Income. For the years ended February 28, 2013, February 29, 2012, and February 28, 2011, the Company recorded $0.4 million, ($3.7) million and ($4.1) million of net interest expense (income), net of income tax effect, and penalties, respectively. As of February 28, 2013, and February 29, 2012, $8.3 million, net of income tax effect, and $7.9 million, net of income tax effect, respectively, were included in the liability for uncertain tax positions for the possible payment of interest and penalties.

Various U.S. Federal, state and foreign income tax examinations are currently in progress. It is reasonably possible that the liability associated with the Company’s unrecognized tax benefit liabilities will increase or decrease within the next twelve months as a result of these examinations or the expiration of statutes of limitation. As of February 28, 2013, the Company estimates that unrecognized tax benefit liabilities could change by a range of $2 million to $20 million. The Company files U.S. Federal income tax returns and various state, local and foreign income tax returns. Major tax jurisdictions where the Company is subject to examination by tax authorities include Australia, Canada, New Zealand, the U.K. and the U.S. With few exceptions, the Company is no longer subject to U.S. Federal, state, local or foreign income tax examinations for fiscal years prior to February 29, 2008.