Notes Nine: INCOME TAXES

The provision for income taxes included the following for the years ended November 30:

Deferred income tax assets and (liabilities) consisted of the following as of November 30:

As of November 30, 2004, the Company had foreign net operating loss carry-overs of approximately $47,700,000. A full valuation allowance has been provided against these net operating losses. The balance of the valuation allowances applies to certain foreign deferred tax assets and certain other deferred tax assets that will likely not result in a tax benefit. Approximately $7,100,000 of the increase in the valuation allowances was related to the probable loss of deductions for executive compensation paid in connection with the termination of the two executive benefit programs. The balance of the increase was related to foreign net operating loss carry-overs and other foreign deferred tax assets for which no benefit has been recognized.

The tax provision represents effective tax rates of 75%, 32% and 36% of income before income taxes for the years ended November 30, 2004, 2003 and 2002, respectively. A reconciliation of income taxes provided at the effective income tax rate and the amount computed at the federal statutory income tax rate of 35% is as follows for the year ended November 30:

The 1996 through 1998 federal income tax returns are currently under examination by the U.S. Internal Revenue Service ("IRS"). While the audit is nearing completion, no assessments have been issued. Although it cannot predict with certainty the ultimate outcome of this examination, the Company believes it has adequately provided for any potential liabilities that may result.

In 2001, the Company filed federal and state income tax claims for research and development credits for tax years 1990 through 2000. The claims are currently under IRS review.

The cumulative amount of undistributed earnings of foreign subsidiaries that the Company currently does not intend to repatriate was $83,698,000 at November 30, 2004. The Company has provided no deferred taxes on the earnings, and the additional U.S. income tax on the unremitted foreign earnings, if repatriated, may be offset in whole or in part by foreign tax credits.

The Company intends to permanently reinvest the foreign earnings outside the U.S.,subject to its review of the new repatriation provisions in the 2004 American Jobs Creation Act (the "AJC Act"). The AJC Act creates a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad by providing an 85 percent dividends received deduction for certain dividends from controlled foreign corporations. The Company is currently reviewing whether any foreign earnings will be repatriated in 2005 under these provisions, and expects to complete its evaluation in the third quarter of 2005. At this time the Company cannot reasonably estimate an amount of unremitted earnings that may be repatriated.

Other areas of the AJC Act that impact the Company are also under review and are not expected to be material in the current or future years.