Note 15 – Income Taxes

Due to the Company’s organization in Bermuda and the ownership structure of its foreign subsidiaries, many of which are not owned directly or indirectly by a U.S. parent company, an immaterial amount of our foreign income is subject to U.S. taxation on a permanent basis under current law. Additionally, our intellectual property is largely owned by our foreign subsidiaries, resulting in proportionally higher earnings in jurisdictions with lower statutory tax rates, which decreases our overall effective tax rate.

For the three months ended November 30, 2017, income tax expense as a percentage of pre-tax loss was (58.4)%, compared to expense of 3.7% for the same period last year, primarily due to the recognition of tax benefits from impairment charges over the course of the year in relation to pre-tax income, as opposed to the periods in which the charges were incurred.

For the nine months ended November 30, 2017, income tax expense as a percentage of pre-tax loss was (59.5)% compared to expense of 7.0% for the same period last year, primarily due to the recognition of tax benefits from impairment charges over the course of the year in relation to pre-tax income as opposed to the periods in which the charges were incurred. As a result, the expected tax benefit from impairment charges of $52.8 million will be recognized entirely in the fourth quarter of fiscal 2018 relative to pre-tax income. Income taxes for the nine months ended November 30, 2017 also included:

$2.6 million in excess tax benefits from share-based compensation settlements and exercises; and

$2.8 million of tax benefits related to the resolution of uncertain tax positions.

Income taxes for the nine months ended November 30, 2016 included tax benefits of $1.4 million related the resolution of uncertain tax positions, $1.6 million in excess tax benefits from share-based compensation settlements and exercises, and $1.2 million in tax benefits due to the finalization of certain tax returns.