On the Surface

We performed our annual goodwill impairment evaluation as of October 31, 2007. As a result of this evaluation, we determined
that there was no impairment of the recorded goodwill amounts.
Income Taxes. Our provision for income taxes is based on our current period income, changes in deferred income tax assets and
liabilities, income tax rates, changes in uncertain tax benefits, and tax planning opportunities available to us in the various jurisdictions in
which we operate. Tax laws are complex and subject to different interpretations by the taxpayer and the respective governmental taxing
authorities. We use significant judgment in determining our annual effective income tax rate and evaluating our tax positions. We prepare
and file tax returns based on our interpretation of tax laws and regulations, and we record estimates based on these judgments and
interpretations. We cannot be sure that the tax authorities will agree with all of the tax positions taken by us. The actual income tax liability
for each jurisdiction in any year can, in some instances, be ultimately determined several years after the tax return is filed and the financial
statements are published.
We adopted the provisions of FIN No. 48 effective April 1, 2007. We evaluate our tax positions using the recognition threshold
and measurement attribute in accordance with this interpretation. We determine whether it is more-likely-than-not that a tax position will
be sustained upon examination, including resolution of related appeals or litigation processes, based on the technical merits of the position.
In evaluating whether a tax position has met the more-likely-than-not recognition threshold, we presume that the position will be examined
by the appropriate taxing authority and that the taxing authority will have full knowledge of all relevant information. A tax position that
meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50 percent likely of
being realized upon ultimate settlement. The appropriate unit of account for determining what constitutes an individual tax position, and
whether the more-likely-than-not recognition threshold is met for a tax position, is a matter of judgment based on the individual facts and
circumstances of that position evaluated in light of all available evidence. We review and adjust our tax estimates periodically because of
ongoing examinations by and settlements with the various taxing authorities, as well as changes in tax laws, regulations and precedent.
We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and
the tax basis of assets and liabilities. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based
on historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences, and
the implementation of tax planning strategies. If we are unable to generate sufficient future taxable income in certain tax jurisdictions, or if
there is a material change in the effective income tax rates or time period within which the underlying temporary differences become
taxable or deductible, we could be required to increase our valuation allowance, which would increase our effective income tax rate and
could result in an adverse impact on our consolidated financial position, results of operations, or cash flows.
We believe that adequate accruals have been made for income taxes. Differences between the estimated and actual amounts
determined upon ultimate resolution, individually or in the aggregate, are not expected to have a material adverse effect on our
consolidated financial position, but could possibly be material to our consolidated results of operations or cash flow for any one period.
Taxes.”
Additional information regarding income taxes is included in Note 9 to our consolidated financial statements titled, “Income
Self-Insurance Liabilities. We record a liability for self-insured risk retention for general and product liabilities, workers’ compensation,
and automobile liabilities. We maintain a captive insurance company, Global Risk Insurance Company (“GRIC”), to fund losses. We engage
a third-party actuary that uses GRIC’s historical loss experience and actuarial methods to determine the estimated liability. This liability
includes estimated amounts for both loss reserves and incurred but not reported claims. We review the assumptions and the valuations
provided by third-party actuaries annually to determine the adequacy of our estimated self-insurance risk-retention liability. Losses greater
than the limits established by GRIC are covered by third-party insurance policies, which are subject to the terms and conditions of those
policies. Our accrual for the GRIC self-insured risk retention as of March 31, 2008 and 2007 was $16.4 million and $16.6 million,
respectively.
We are also self-insured for employee medical claims. We estimate a liability for incurred but not reported claims based upon
recent claims experience.
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