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Income Taxes
9 Months Ended
Nov. 30, 2011
Income Taxes [Abstract]  
Income Taxes
12. Income Taxes

The interim provision for income taxes is measured using an estimated annual effective tax rate, adjusted for discrete items that occur within the periods presented.  The comparison of our effective tax rate between periods is significantly impacted by the level and mix of earnings and losses by tax jurisdiction, foreign income tax rate differentials, amount of permanent book to tax differences, and the effects of valuation allowances on certain loss jurisdictions.

The provision for income taxes for the three months ended November 30, 2011 was $4.0 million on pre-tax income of $0.7 million, which represents an effective tax rate of 552%.  The provision for income taxes for the nine months ended November 30, 2011 was $15.3 million on pre-tax income of $30.1 million, which represents an effective tax rate of 50.8%.  For both the three and nine month periods ended November 30, 2011, the effective tax rate is higher than the U.S. federal statutory rate of 35%. The increase in the effective tax rate was primarily due to the level and mix of income and losses by jurisdiction.  The Company recorded an income tax provision on income from domestic operations, and income from certain foreign operations taxed at rates lower than the U.S. federal statutory tax rate; however tax benefit on losses incurred by certain foreign operations were not recognized due to valuation allowances. The increased effective tax rate was partially offset by the change in the tax rate for state net deferred assets and tax benefits derived from tax credits associated with research and experimentation activities.
 
The income tax benefit for the three months ended November 30, 2010 was $3.5 million on pre-tax loss of $8.1 million, which represents an effective tax rate of 43.6%.  The provision for income taxes for the nine months ended November 30, 2010 was $7.0 million on pre-tax income of $16.0 million, which represents an effective tax rate of 43.8%.  For both the three months and nine month periods ended November 30, 2010, the effective tax rate was higher than the U.S. federal statutory rate of 35%.  The increase in the effective tax rate was primarily due to the level and mix of income and losses by jurisdiction. The Company recorded an income tax provision on income from domestic operations and income from certain foreign operations taxed at rates lower than the U.S. federal statutory rate; however an income tax benefit was not recognized on losses incurred by certain foreign operations due to valuation allowances.

As required by the authoritative guidance on accounting for income taxes, the Company evaluates the realizability of deferred tax assets on a jurisdictional basis at each reporting date.  Accounting for income taxes requires that a valuation allowance be established when it is more-likely-than-not that all or a portion of the deferred tax assets will not be realized.  In circumstances where there is sufficient negative evidence indicating that the deferred tax assets are not more-likely-than-not realizable, a valuation allowance is established.  The Company determined that there is sufficient negative evidence to maintain the valuation allowances against our federal and certain state and foreign deferred tax assets as a result of historical losses in the most recent three-year period in the U.S. and certain foreign jurisdictions.  The Company intends to maintain valuation allowances until sufficient positive evidence exists to support a reversal.
 
The Company has unrecognized tax benefits of $5.0 million and $4.0 million (excluding interest and penalties) as of November 30, 2011 and February 28, 2011, respectively.  The accrued liabilities for interest and penalties were $0.7 million and $0.6 million at November 30, 2011 and February 28, 2011, respectively.  Interest and penalties are recorded as a component of the provision for income taxes in our condensed consolidated statements of operations.  As of November 30, 2011 and February 28, 2011, the total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate were approximately $3.5 million and $2.5 million, respectively.  The Company regularly assesses the adequacy of the provisions for income tax contingencies in accordance with the applicable authoritative guidance on accounting for income taxes.  As a result, the Company may adjust the reserves for unrecognized tax benefits for the impact of new facts and developments, such as changes to interpretations of relevant tax law, assessments from taxing authorities, settlements with taxing authorities, and lapses of statutes of limitation.  Further, the Company believes that it is reasonably possible that the total amount of unrecognized tax benefits at November 30, 2011 could decrease by approximately $0.4 million in the next twelve months as a result of settlement of certain tax audits or lapses of statutes of limitation.  Such decreases may involve the payment of additional taxes, the adjustment of deferred taxes including the need for additional valuation allowances, and the recognition of tax benefits.  The Company's income tax returns are subject to ongoing tax examinations in several jurisdictions in which the Company operates.  The Company also believes that it is reasonably possible that new issues may be raised by tax authorities or developments in tax audits may occur which would require increases or decreases to the balance of reserves for unrecognized tax benefits; however, an estimate of such changes cannot reasonably be made.
 
The Company files U.S. federal, U.S. state, and foreign tax returns, and is generally no longer subject to tax examinations for fiscal years prior to 2008 (in the case of certain foreign tax returns, calendar year 2007).