Note 15. Taxes

Effective Tax Rate

The Company estimates its annual effective tax rate at the end of each fiscal quarter, taking into account estimations of annual pre-tax income, the geographic mix of pre-tax income and the Company's interpretations of tax laws and possible outcomes of audits.

The following table presents the provision (benefit) for income taxes and the effective tax rates:


	Three Months Ended April 30,						Six Months Ended April 30,
	2012			2011			2012			2011
	(in thousands)						(in thousands)
Income before income taxes	$	23,489		$	57,259		$	97,318		$	109,591
Provision (benefit) for income tax	$	2,518		$	(23,855	)	$	19,653		$	(19,749	)
Effective tax rate		10.7	%		(41.7	)%		20.2	%		(18.0	)%

The Company's effective tax rate for the three months ended April 30, 2012 is lower than the statutory federal income tax rate of 35% primarily due to the lower tax rates applicable to its non-U.S. operations as well as the U.S. federal R&D tax credit, partially offset by state taxes and non-deductible stock compensation. The effective tax rate increased in the three months ended April 30, 2012, as compared to the same period in fiscal 2011, primarily due to the tax impact of an IRS settlement for fiscal years 2006 through 2009 recorded in the second quarter of fiscal 2011. The effective tax rate increased in the six months ended April 30, 2012, as compared to the same period in fiscal 2011, primarily due to the IRS settlement in the second quarter of fiscal 2011 and the extension of the U.S. federal R&D credit in the first quarter of fiscal 2011. This extension resulted in an additional tax credit for ten months of fiscal 2010 as well as a full year credit for fiscal 2011, compared to only two months of credit in fiscal 2012 as a result of the expiration of the credit on December 31, 2011. The Company files income tax returns in the U.S. and various state and local jurisdictions. Its subsidiaries file tax returns in various foreign jurisdictions, including Ireland, Hungary, Taiwan and Japan. The Company remains subject to income tax examinations in the United States for fiscal years after 2009. The Company's subsidiary in Hungary remains subject to tax examinations for fiscal years after 2010 and the subsidiaries in Japan, Taiwan and Ireland remain subject to tax examinations for fiscal years after 2006.

The timing of the resolution of income tax examinations is highly uncertain as well as the amounts and timing of various tax payments that are part of the settlement process. This could cause large fluctuations in the balance sheet classification of current and non-current assets and liabilities. The Company believes that in the coming 12 months, it is reasonably possible that either certain audits will conclude or the statute of limitations on certain state and foreign income and withholding taxes will expire, or both. Given the uncertainty as to ultimate settlement terms, the timing of payment and the impact of such settlements on other uncertain tax positions, the range of the estimated potential decrease in underlying unrecognized tax benefits is between $35 and $87 million.

IRS Examinations

The Company is regularly audited by the IRS. In fiscal 2011, the Company reached a final settlement with the Examination Division of the IRS for its audits of fiscal years 2006 through 2009. As a result of the settlement, the Company's unrecognized tax benefits decreased by $35.9 million and the impact to other balance sheet tax accounts was not material. The net tax benefit resulting from the settlement was $32.8 million.

Non-U.S. Examinations

The Company's subsidiaries are being audited in a number of jurisdictions, including Taiwan (for fiscal 2008 and 2010) and Hungary (for fiscal 2011). The Company believes that it has adequately provided for potential tax adjustments in both jurisdictions, including interest and potential penalties. The Hungarian tax authorities have disallowed the Company's claim to tax benefits with respect to certain intercompany charges, which resulted in additional tax and interest for the years under examination and for subsequent years. On March 5, 2012, the Company reached a settlement with the Hungarian tax authorities with regard to its fiscal years 2007 and 2008. The settlement did not have a material impact on income tax expense, as the Company has adequately provided for potential tax adjustments, and resulted in a $5.1 million cash payment. On May 10, 2012 the Company reached a settlement with the Hungarian tax authorities for fiscal years 2009 and 2010. The settlement will not have a material impact on income tax expense but will result in future cash payments of $14.6 million. Including the cash payments above, the settlements of fiscal years 2007 through 2010 reduced unrecognized tax benefits by $27.0 million in the second quarter of fiscal 2012 and will reduce unrecognized tax benefits by $35.1 million in the third quarter of fiscal 2012.