Income Taxes

The Company's income tax expense is impacted by a number of factors, including the amount of taxable earnings derived in foreign jurisdictions with tax rates that are higher or lower than the U.S. Federal statutory rate, permanent items, state tax rates and the ability to utilize various tax credits and net operating loss carryforwards. The Company adjusts the quarterly provision for income taxes based on the estimated annual effective income tax rate and facts and circumstances known at each interim reporting period. The effective income tax rate from continuing operations is as follows:



	Three Months Ended February 28,				Six Months Ended February 28,
	2014		2013		2014		2013
Effective income tax rate	29.0	%	15.7	%	17.6	%	16.0	%

The increase in the second quarter effective income tax rate, relative to the prior year, is primarily due to discrete income tax reserve adjustments and to a lesser extent, changes in the mix of taxable earnings derived in foreign jurisdictions with tax rates that are lower than the U.S. Federal statutory rate. Income tax expense for the three months ended February 28, 2014 includes a $0.7 million benefit related to changes in foreign statutory tax rates, while the prior year comparable period included discrete tax benefits related to changes in tax laws and the reinstatement of the U.S. federal research and development tax credit (collectively $1.2 million) and a $2.4 million reversal of tax reserves. Effective income tax rates for the first half of fiscal 2014 and 2013 both reflect the benefits of tax minimization planning, increased foreign tax credits, the generation of net operating losses (from the liquidation of foreign legal entities) and discrete tax items.

The gross liability for unrecognized tax benefits, excluding interest and penalties, increased from $18.0 million at August 31, 2013 to $19.2 million at February 28, 2014. Substantially all of these unrecognized tax benefits, if recognized, would reduce the effective income tax rate. In addition, as of February 28, 2014 and August 31, 2013, the Company had liabilities totaling $3.4 million and $2.9 million, respectively, for the payment of interest and penalties related to its unrecognized income tax benefits.