Income Taxes

The amounts of income from continuing operations before income taxes by U.S. and foreign jurisdictions for the years ended November 30, 2013, 2012, and 2011, respectively, is as follows (in thousands):



	2013			2012		2011
U.S.	$	(41,924	)	$	10,693	$	(1,786	)
Foreign	196,817			177,020		163,770
	$	154,893		$	187,713	$	161,984

The provision for income taxes from continuing operations for the years ended November 30, 2013, 2012, and 2011, respectively, is as follows (in thousands):



	2013			2012			2011
Current:
U.S.	$	15,388		$	17,301		$	1,988
Foreign	38,069			24,224			23,974
State	3,914			4,490			2,416
Total current	57,371			46,015			28,378
Deferred:
U.S.	(24,313		)	(13,420		)	355
Foreign	(7,336		)	(2,592		)	(1,444		)
State	(2,663		)	(439		)	(594		)
Total deferred	(34,312		)	(16,451		)	(1,683		)
Provision for income taxes	$	23,059		$	29,564		$	26,695

The following table presents the reconciliation of the provision for income taxes to the U.S. statutory tax rate for the years ended November 30, 2013, 2012, and 2011, respectively (in thousands):



	2013			2012			2011
Statutory U.S. federal income tax	$	54,213		$	65,700		$	56,694
State income tax, net of federal benefit	(62		)	1,523			873
Foreign rate differential	(62,448		)	(38,153		)	(34,385		)
Tax rate change	5,286			(2,162		)	(1,735		)
Valuation allowance	29,288			(1,429		)	342
Change in reserves	(1,387		)	586			744
Other	(1,831		)	3,499			4,162
Income tax expense	$	23,059		$	29,564		$	26,695
Effective tax rate expressed as a percentage of pre-tax earnings	14.9		%	15.7		%	16.5		%

The tax rate change reflects the impact of legislative changes to statutory rates as well as the impact of acquisitions on our global footprint and the related measurement of deferred taxes.

Undistributed earnings of our foreign subsidiaries were approximately $489.2 million at November 30, 2013. Those earnings are considered to be indefinitely reinvested, and do not include earnings from certain subsidiaries which are considered distributed. Accordingly, no provision for U.S. federal and state income taxes has been provided for those earnings. If we were to repatriate those earnings, in the form of dividends or otherwise, we would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable due to the complexity associated with the hypothetical calculation.

The significant components of deferred tax assets and liabilities as of November 30, 2013 and 2012 are as follows (in thousands):



	2013			2012
Deferred tax assets:
Accruals and reserves	$	22,209		$	11,141
Deferred revenue	773			7,062
Pension and postretirement benefits	9,254			7,698
Tax credits	14,211			3,406
Deferred stock-based compensation	49,453			33,992
Loss carryforwards	80,152			42,019
Other	4,933			6,148
Gross deferred tax assets	180,985			111,466
Valuation allowance	(46,664		)	(1,393		)
Realizable deferred tax assets	134,321			110,073
Deferred tax liabilities:
Fixed assets	(7,668		)	(8,396		)
Intangibles	(417,102		)	(185,828		)
Gross deferred tax liabilities	(424,770		)	(194,224		)
Net deferred tax liability	$	(290,449	)	$	(84,151	)

As of November 30, 2013, we had loss carryforwards for tax purposes totaling approximately $261.1 million, comprised of $84.1 million of U.S. net operating loss carryforwards and $177.0 million of foreign loss carryforwards, both of which will be available to offset future taxable income. If not used, the U.S. net operating loss carryforwards will begin to expire in 2018 and the foreign tax loss carryforwards generally may be carried forward indefinitely. We have analyzed the foreign net operating losses and placed valuation allowances on those where we have determined the realization is not more likely than not to occur.

As of November 30, 2013, we had approximately $8.0 million of foreign tax credit (FTC) carryforwards and approximately $7.0 million of research and development (R&D) credit carryforwards, both of which will be available to offset future U.S. tax liabilities. If not used, the FTC carryforwards will expire between 2016 and 2023, and the R&D credit carryforwards will expire between 2026 and 2027. We believe that it is more likely than not that we will realize our FTC and R&D tax credit assets.

The valuation allowance for deferred tax assets increased by $45.3 million in 2013. The increase is primarily attributable to foreign net operating losses, incurred and acquired, for which there is no objective indication that taxable income of the foreign entity will be generated in the future.

We have provided what we believe to be an appropriate amount of tax for items that involve interpretation of the tax law. However, events may occur in the future that will cause us to reevaluate our current reserves and may result in an adjustment to the reserve for taxes.

A summary of the activities associated with our reserve for unrecognized tax benefits, interest, and penalties follows (in thousands):



	Unrecognized Tax Benefits			Interest and Penalties
Balance at November 30, 2012	$	2,162		$	639
Additions:
Current year tax positions	370			—
Prior year tax positions	131			—
Acquired unrecognized tax benefits	606			164
Associated with interest	—			162
Decreases:
Lapse of statute of limitations	(1,063		)	(439		)
Prior year tax positions	(548		)	—
Balance at November 30, 2013	$	1,658		$	526

As of November 30, 2013, the total amount of unrecognized tax benefits was $2.2 million, of which $0.5 million related to interest and penalties. We include accrued interest and accrued penalties related to amounts accrued for unrecognized tax benefits in our provision for income taxes. The entire amount of unrecognized benefits at November 30, 2013 may affect the annual effective tax rate if the benefits are eventually recognized.

It is reasonably possible that we will experience a $0.7 million decrease in the reserve for unrecognized tax benefits within the next twelve months. We would experience this decrease in relation to uncertainties associated with the expiration of applicable statutes of limitation.

We and our subsidiaries file federal, state, and local income tax returns in multiple jurisdictions around the world. With few exceptions, we are no longer subject to income tax examinations by tax authorities for years before 2009.