The fair valued benefit prescribed to the legal settlement portion was $57.0 million and was recorded in the fourth quarter of fiscal year 2011.



We expect operating expenses to increase in the first quarter of fiscal year 2014, relative to the fourth quarter of fiscal year 2013, primarily due to employee-related costs, including supporting infrastructure costs related to planned hiring.



Interest Income and Interest Expense

 

Interest income, net of interest expense consists of interest earned on cash, cash equivalents and marketable securities. Interest income, net of interest expense, was $16.6 million, $16.1 million and $15.9 million in fiscal years 2013, 2012 and 2011, respectively. This increase was primarily due to the result of higher average cash balances offset by lower interest rates. 



Other Income and Expense



Other income and expense primarily consists of realized gains and losses on the sale of marketable securities and foreign currency translation.  Other expense, net of other income was $2.8 million, $1.0 million and $0.5 million in fiscal years 2013, 2012 and 2011, respectively. These changes were primarily driven by an increase in foreign currency translation losses. 

  

Income Taxes

 

We recognized income tax expense of $99.5 million, $82.3 million and $18.0 million during fiscal years 2013, 2012 and 2011, respectively. Income tax expense as a percentage of income before taxes, or our annual effective tax rate, was 15.0%, 12.4%, and 6.7% in fiscal years 2013, 2012 and 2011, respectively.



Our effective tax rate on income or loss before tax for the fiscal years was lower than the United States federal statutory rate of 35% due to income or loss earned in jurisdictions, including British Virgin Islands, Hong Kong, China, Taiwan and United Kingdom, where the tax rate is lower than the United States federal statutory tax rate of 35%, favorable recognition in these fiscal years of the U.S. federal research tax credit and the expiration of statutes of limitations in certain non-U.S. jurisdictions for which we had not previously recognized related tax benefits.



We expect our effective tax rate to be approximately 16% in the first quarter of fiscal year 2014, excluding any discrete tax events that may occur, which, if realized, may increase or decrease our effective tax rate in such quarter.



Please refer to Note 14 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information. 



Liquidity and Capital Resources 

 

As of January 27, 2013, we had $3.73 billion in cash, cash equivalents and marketable securities, an increase of $598.3 million from the end of fiscal year 2012. Our portfolio of cash equivalents and marketable securities is managed on our behalf by several financial institutions which are required to follow our investment policy, which requires the purchase of top-tier investment grade securities, the diversification of asset types and includes certain limits on our portfolio duration.



Operating activities

 

Operating activities generated cash of $824.2 million, $909.2 million and $675.8 million during fiscal years