For the three and nine months ended April 30, 2011, the Company generated operating losses. The Company also generated book and taxable income in certain U.S. state and specific foreign jurisdictions for the three and nine months ended April 30, 2011, without consideration of windfall tax benefits. For the three and nine months ended April 30, 2010, the Company generated consolidated book income and taxable income in certain U.S. state and foreign jurisdictions.

The Company has maintained a valuation allowance fully offsetting its gross deferred tax assets in accordance with the provisions of ASC 740, “Accounting for Income Taxes,” which requires an assessment of both positive and negative evidence regarding the realizability of these deferred tax assets. The valuation allowance is reviewed quarterly and is maintained until management determines there is sufficient positive evidence such that it is more likely than not that its deferred tax assets will be realized to support a reversal. In determining net deferred tax assets and valuation allowances, management is required to make judgments and estimates related to projections of profitability, the timing and extent of the utilization of net operating loss carryforwards, applicable tax rates, transfer pricing methodologies and tax planning strategies. Any release of the valuation allowance will be recorded as a tax benefit increasing net income, an adjustment to acquisition intangibles, or an adjustment to additional paid-in capital. The Company believes it may release a portion of this valuation allowance during fiscal year 2012, although the exact timing is subject to change based on the level of profitability for the remainder of fiscal year 2011, management’s visibility into future period results, and the implementation of certain tax strategies. Any valuation allowance release will not affect the amount of cash paid for income taxes.