Provision For Income Taxes

3 Months Ended

Feb. 28, 2012

Provision For Income Taxes [Abstract]

Provision For Income Taxes

13. PROVISION FOR INCOME TAXES

The effective tax rate was approximately 14% and 11% for the three months ended February 28, 2012 and 2011, respectively.

The provision for the three months ended February 28, 2012 and 2011 reflects a forecasted annual tax rate of 21% and 30%, respectively, offset by discrete items which are booked in the period they occur. The forecasted tax rate reflects the benefits resulting from the reorganization of certain foreign entities, lower foreign taxes, the release of the valuation allowance on certain domestic tax assets (fiscal year 2011), domestic manufacturing incentives, and federal and state research and development credits (federal R&D credit expired on December 31, 2011), partially offset by the impact of certain stock compensation charges and state income taxes.

In the three months ended February 28, 2012 we recognized a discrete benefit of $1.8 million primarily related to the lapse of various statutes of limitations and a true-up for prior period withholding taxes. In the three months ended February 28, 2011, we recognized a discrete benefit of $2.3 million primarily related to the reinstatement of the federal research and development credit which was retroactive to January 1, 2010.

In February 2009, the California 2009-2010 budget legislation was signed into law. One of the major components of this legislation is the ability to elect to apply a single sales factor apportionment for years beginning after January 1, 2011. As a result of our anticipated election of the single sales factor, we were required to re-measure our deferred taxes taking into account the reversal pattern and the expected California tax rate under the elective single sales factor. We estimated that by electing a single sales factor apportionment, our California deferred tax assets would decrease by approximately $1.1 million (net of federal benefit) and, accordingly, the tax impact of $1.1 million was recorded as a discrete item in the first quarter of fiscal year 2009. It is possible that current and future reductions in California taxable income due to electing the single sales factor apportionment will reduce the probability of fully benefitting our research and development credit carryforwards below the more-likely-than-not threshold which would require us to book a valuation allowance against those credits.

During the first quarter of fiscal year 2012, the amount of gross unrecognized tax benefits was increased by approximately $1.7 million primarily due to current period exposures offset by the expiration of certain statutes of limitations. The total amount of gross unrecognized tax benefits was $45.3 million as of February 28, 2012, of which $26.9 million would benefit tax expense if realized. We elected to include interest expense and penalties accrued on unrecognized tax benefits as a component of our income tax expense. We do not expect any significant changes to the amount of unrecognized tax benefit within the next twelve months.

We are subject to periodic corporate income tax audits in both the United States and foreign jurisdictions. As of February 28, 2012 we have several tax audits at various stages of completion. We believe that we have provided adequate reserves to cover any potential audit adjustments. The statute of limitations for our fiscal years 1994 through 2011 remains open for U.S. purposes. Most foreign jurisdictions have statutes of limitations that range from three to six years.