Taxes

The Company’s provision for income taxes is determined using an estimate of its annual effective tax rate for each of its legal entities in accordance with the accounting guidance for income taxes. Where the Company has entities with losses and does not expect to realize the tax benefits in the foreseeable future, those entities are excluded from the effective tax calculation. Non-recurring and discrete items that impact tax expense are recorded in the period incurred.

The effective tax rate was 58.1% and 48.9% for the three months ended March 31, 2013 and 2012, respectively. Our provision for income taxes differs from the computed statutory rate in the United States due primarily to disallowed stock compensation expense deductions and a valuation allowance in certain foreign jurisdictions. For the three months ended March 31, 2013 and 2012 the Company had a benefit from income taxes of $3.1 million and a provision for income taxes of $1.6 million, respectively.

During the three months ended March 31, 2013, the Company recorded an $8.2 million tax windfall benefit that has the effect of reducing taxes payable and increasing additional paid-in capital based on our expected utilization of excess income tax benefits in the year from the settlement of employee stock based awards.

As of March 31, 2013, the Company had U.S. net operating loss carryforwards of approximately $88.2 million, foreign net operating loss carryforwards of approximately $19.4 million, and domestic and foreign research and experimentation tax credit carryforwards of $3.7 million. Certain net operating losses expire in 2014, although the Company expects to utilize them prior to their expiration. The earliest net operating loss with a deferred tax asset established expires in 2019. The utilization of domestic and foreign net operating loss and tax credit carryforwards may be subject to annual limitations due to ownership changes, including as a result of acquisitions, as provided by the local tax law. The Company has not recorded a deferred tax liability for undistributed earnings of $2.9 million of certain foreign subsidiaries, since such earnings are considered to be reinvested indefinitely. If the earnings were distributed, the Company would be subject to federal income and foreign withholding taxes. Determination of an unrecognized deferred income tax liability with respect to such earnings is not practicable.