effective tax rate. In 2013, we recognized tax benefits for a greater proportion of these losses as compared to 2012. We have recorded valuation allowances against the deferred tax assets associated with losses for which we may not realize a related tax benefit. 

In 2012, our effective tax rate was higher than the 35% U.S. federal statutory rate and our effective tax rate in 2011 primarily due to the adverse impact of foreign jurisdiction losses of subsidiaries primarily located outside of Europe for which we may not realize a tax benefit. The adverse impact of these losses was partially offset by the favorable impact of earnings in lower tax rate jurisdictions primarily related to our European operations. Additionally, our effective tax rate in 2012 was more volatile as compared to 2011 due to the lower level of pre-tax income generated during the year, relative to our tax expense. Our effective tax rate in 2012 was also adversely impacted by acquisitions (including integrations), audit developments, nondeductible expenses, and changes in tax law such as the expiration of the U.S. federal research and development credit at the end of 2011. 

We have tax benefits relating to excess stock-based compensation deductions that are being utilized to reduce our U.S. taxable income. As of December 31, 2013, our federal net operating loss carryforward was approximately $275 million and we had approximately $295 million of federal tax credits potentially available to offset future tax liabilities. 

Non-GAAP Financial Measures

Regulation G, Conditions for Use of Non-GAAP Financial Measures, and other SEC regulations define and prescribe the conditions for use of certain non-GAAP financial information. Our measures of “Free cash flow,” operating expenses with and without stock-based compensation, and the effect of exchange rates on our consolidated statements of operations, meet the definition of non-GAAP financial measures. 

Free cash flow is used in addition to and in conjunction with results presented in accordance with GAAP and free cash flow should not be relied upon to the exclusion of GAAP financial measures. 

Free cash flow, which we reconcile to “Net cash provided by (used in) operating activities,” is cash flow from operations reduced by “Purchases of property and equipment, including internal-use software and website development,” which are included in cash flow from investing activities. We use free cash flow, and ratios based on it, to conduct and evaluate our business because, although it is similar to cash flow from operations, we believe it typically will present a more conservative measure of cash flow from operations since purchases of property and equipment, including internal-use software and website development, are a necessary component of ongoing operations. 

Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. For example, free cash flow does not incorporate the portion of payments representing principal reductions of debt, property and equipment acquired under capital leases and other leases accounted for as financing arrangements, or