Note 10: 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, 2006, the Company had foreign net operating loss carry-overs of approximately $63,200,000. 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. The net valuation allowance decreased by $422,000 in 2006, compared to 2005. This net decrease included a $1,700,000 increase related to executive compensation deductions,offset by a net decrease 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 23%, 35% and 93% of income before income taxes for the years ended November 30, 2006, 2005 and 2004, 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 years ended November 30:

The Company files tax returns in numerous jurisdictions and is subject to audit in these jurisdictions. In 2006, the Internal Revenue Service ("IRS") finalized its examination of the Company's 1996 through 1998 federal income tax returns as well as its returns for 1999 through 2002. The results of these examinations, which included a concurrent review of the Company's claims for research and development credits for tax years 1998-2000, are reflected in the financial statements. In addition, the financial statements reflect settlements with other local and foreign jurisdictions. The net impact to the Company's financial statements as a result of these federal, foreign and local jurisdiction settlements was a reduction of approximately $7,200,00 in income taxes payable.

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.

In November 2006, the Company repatriated approximately $13,000,000 of earnings from its subsidiary in New Zealand (funds generated by this subsidiary's portion of the sale of the Coatings Business). The Company intends to permanently reinvest the remaining unrepatriated foreign earnings. The cumulative amount of undistributed earnings of foreign subsidiaries is $61,578,000 at November 30, 2006. 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.