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, 2005, the Company had foreign net operating loss carry-overs of approximately $57,800,000. A full valuation allowance has been provided against these net operating losses. The balance of the valuation allowance applies to certain foreign deferred tax assets and certain other deferred tax assets that will likely not result in a tax benefit. Approximately $6,500,000 of the net decrease in valuation allowances was due to a decrease related to executive compensation deductions (primarily due to the write-off of the related deferred tax asset), offset by an increase in 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 38%, 75% and 32% NOTE 11 of income before income taxes for the years ended November 30, 2005, 2004 and 2003, 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 IRS 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.A portion of these credits was reflected in the financial statements in 2001.The claims are currently under IRS examination in connection with the 1996-1998 examination. The Company has reached a proposed settlement with the IRS regarding these credits at the local level; however, the proposed settlement, along with the ultimate results of the 1996-1998 examination,must be reviewed by the Joint Committee of Taxation before it can be considered final. Therefore, the financial statements have not been adjusted to reflect the results of this proposed settlement, which, while not material, would be favorable to the Company if finalized as proposed.

In November 2005, the Company repatriated approximately $36,000,000 of earnings from three of its foreign subsidiaries under the provisions of the 2004 American Jobs Creation Act ("AJCA").The AJCA created a one-time 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 intends to permanently reinvest the remaining unrepatriated foreign earnings. The cumulative amount of undistributed earnings of foreign subsidiaries is $48,884,000 at November 30, 2005. 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.