Income Taxes

The provision for income taxes was comprised of the following:



	Three months ended April 30,
	2014			2013
Income tax expense (benefit)	$	(174	)	$	568
Effective tax rate	5.4		%	381		%

Generally, the provision for income taxes is the result of the mix of profits and losses earned in various tax jurisdictions with a broad range of income tax rates, withholding taxes (primarily in certain foreign jurisdictions), changes in tax reserves, and the application of valuation allowances on deferred tax assets. Accounting guidance requires for interim reporting that we evaluate our provision for income tax expense (benefit) based on our projected results of operations for the full year, and record adjustments in each quarter. Such adjustments consider period specific items and a separate determination of tax expense for entities in our consolidated group that are projected to have losses for which no tax benefit will be recognized.

Our effective tax rate is 5.4% for the three months ended April 30, 2014, after the inclusion of $10 in net unfavorable period specific items.

For our full year forecast, we have projected an 11% effective tax rate. This rate is inclusive of period specific items recognized through April 30, 2014. Our projected rate for the full year differs from tax computed at the U.S. federal statutory rate of 35% primarily due to:

•The benefit of lower tax rates on earnings of foreign subsidiaries; and

•Forecasted utilization of net operating loss carryforwards and tax credit carryforwards for which no previous benefit was recognized.

These differences are partially offset by:

•Repatriation of foreign subsidiary earnings to the U.S.;

•Non-deductible equity compensation expense; and

•Withholding taxes.

Actual results may differ significantly from our current projections. Further, our effective tax rate could fluctuate considerably on a quarterly basis, and could be significantly affected to the extent our actual mix of earnings among individual jurisdictions is different than our expectations.

We determine deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities. In addition, we record deferred tax assets for net operating loss carryforwards and tax credit carryforwards. We calculate the deferred tax assets and liabilities using the enacted tax rates and laws that will be in effect when we expect the differences to reverse. A valuation allowance is recorded when it is more likely than not that all or some portion of the deferred tax asset will not be realized. Since 2004, we have determined it is uncertain whether our U.S. entity will generate sufficient taxable income and foreign source income to utilize net operating loss carryforwards, research and experimentation credit carryforwards, and foreign tax credit carryforwards before expiration. Accordingly, we recorded a valuation allowance against those deferred tax assets for which realization does not meet the more likely than not standard. We have established valuation allowances related to certain foreign deferred tax assets based on historical losses as well as future expectations in certain jurisdictions. We will continue to evaluate the realizability of the deferred tax assets on a periodic basis.

As of April 30, 2014, we had a liability of $21,047 for income taxes associated with uncertain income tax positions. Of this liability, $372 was classified as short-term liabilities in income taxes payable in our condensed consolidated balance sheet as we generally anticipate the settlement of such liabilities will require payment of cash within the next twelve months. The remaining $20,675 of income tax associated with uncertain tax positions was classified as long-term liabilities. Certain liabilities may result in the reduction of deferred tax assets rather than settlement in cash. We are not able to reasonably estimate the timing of any cash payments required to settle the long-term liabilities and do not believe that the ultimate settlement of these liabilities will materially affect our liquidity.