Note 10: INCOME TAXES

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

Deferred income tax assets/(liabilities) were comprised of the following as of November 30:

As of November 30, 2007, the Company had foreign net operating loss carry-overs of approximately $46,100,000. A full valuation allowance has been provided against these net operating losses except for $18,300,000 of net operating losses generated by its subsidiary in the Netherlands, which has shown recent profitability. 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 $6,291,000 in 2007, compared to 2006. This net decrease included a $7,782,000 decrease in the valuation allowance for foreign net operating loss carry-overs and other foreign deferred tax assets for which no benefit has been recognized. Included in this decrease was a release of $3,200,000 of valuation allowance related to the Company’s subsidiary in the Netherlands due to profitability in 2007 and a change in projected profitability in the future. The decrease was offset by a net increase in the valuation allowance related to executive compensation deductions. During the fourth quarter of 2007, the Company recognized a charge to income from continuing operations of approximately $1,200,000 primarily related to an additional valuation allowance for deferred tax assets associated with the Company’s subsidiary in the Netherlands. This charge represents a correction, rather than a change in estimate, of amounts recorded in prior period financial statements. Management believes this to be immaterial to prior interim and annual financial statements.

The tax provision represents effective tax rates of 18.5%, 23.0% and 35.0% of income before income taxes for the years ended November 30, 2007, 2006 and 2005, 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 35.0% is as follows for the year ended November 30:

The Company files tax returns in numerous jurisdictions and is subject to audit in these jurisdictions. During the year ended November 30, 2007, the Company was not under federal audit; and the statute of limitations for 2003 expired. The statute is still open for 2004 and forward. In December 2007, the Internal Revenue Service began an examination of the Company’s 2005-2006 federal income tax returns. 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 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 $7,200,000 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 with 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 was $98,000,000 at November 30, 2007. 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.