INCOME TAXES

Income before income tax expense consists of the following:



	2013		2012		2011
	(in thousands)
U.S. operations	$	31,975	$	59,478	$	67,379
Foreign operations	6,574		18,858		21,447
Total	$	38,549	$	78,336	$	88,826

15. INCOME TAXES (continued)

Income tax expense is comprised of the following:



	2013			2012		2011
	(in thousands)
Current:
Federal	$	6,360		$	16,766	$	16,794
State	1,892			3,240		3,561
Foreign	3,619			3,936		7,900
Total current:	11,871			23,942		28,255
Deferred
Federal	4,135			2,934		4,087
State	607			608		695
Foreign	(1,210		)	851		(2,222		)
Total deferred	3,532			4,393		2,560
Income tax expense	$	15,403		$	28,335	$	30,815

The following table sets forth the tax effects of temporary differences that give rise to the deferred tax assets and liabilities:



	December 31, 2013			December 31, 2012
	(in thousands)
Deferred tax assets
Accounts receivable, principally due to allowance for doubtful accounts	$	2,127		$	1,986
Inventories	3,649			3,340
Net operating loss carryforwards	8,817			8,433
Accrued pension	3,136			31,544
Stock-based compensation	7,347			4,966
Compensation-related accruals	3,364			3,209
Warranty	2,880			2,781
Obligation for postretirement benefits other than pension	3,770			4,187
Accrued liabilities and other items	8,721			4,755
Gross deferred tax assets	43,811			65,201
Valuation allowance	(8,991		)	(7,798		)
Net deferred tax assets	34,820			57,403
Deferred tax liabilities:
Intangibles	82,837			84,518
Plant and equipment	16,245			11,206
Gross deferred tax liabilities	99,082			95,724
Net deferred tax liabilities	$	(64,262	)	$	(38,321	)

Income taxes paid, net of refunds received, by the Company during 2013, 2012, and 2011, totaled $18.3 million, $26.7 million, and $13.5 million, respectively.

15. INCOME TAXES (continued)

As of December 31, 2013, the Company had net operating loss carryforwards totaling approximately $32.8 million in the United Kingdom, Germany, and Italy. The net operating loss carryforwards may be carried forward for a period of 5 years in Italy and indefinitely in the United Kingdom and Germany. The Company provides a valuation allowance against certain net foreign deferred tax assets (principally the net operating loss carryforwards) due to the uncertainty that they can be realized.

The following table sets forth a reconciliation of the statutory federal income tax rate to the effective income tax rate:



	2013		2012		2011
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
Increase (decrease) in the tax rate resulting from:
State taxes, net of federal effect	3.7	%	3.2	%	3.0	%
Effect of tax rates of other countries	0.2	%	(0.5	)%	(2.2	)%
Section 199 deduction	(1.7	)%	(1.5	)%	(1.7	)%
Change in Contingency Reserve	—	%	(1.9	)%	—	%
Limitation on Deduction of Officer’s Compensation	4.2	%	1.0	%	1.9	%
Other	(1.4	)%	0.9	%	(1.3	)%
Effective tax rate	40.0	%	36.2	%	34.7	%

The Company has not made provisions for U.S. federal and state income taxes as of December 31, 2013 on approximately $120.1 million of foreign earnings that are expected to be reinvested indefinitely. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to U.S. federal and state income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries.

As of December 31, 2013 and 2012 , the Company had unrecognized tax benefits of approximately $0.8 million and $1.2 million, respectively. The entire amount of the unrecognized tax benefits would reduce the effective tax rate if recognized.

The following table summarizes the activity related to our unrecognized tax benefits during 2013, 2012, and 2011:



	2013			2012			2011
	(in thousands)
Balance, beginning of the year	$	1,152		$	2,044		$	1,953
Additions for tax position related to the current year	125			125			189
Additions for tax position related to the prior year	7			191			—
Decreases for tax position related to the prior year	(316		)	(1,102		)	—
Prior year reductions
Lapse of statute of limitations	(131		)	(106		)	(137		)
Change in exchange rate	—			—			39
Balance, end of the year	$	837		$	1,152		$	2,044

During the year ended December 31, 2013, the Company reduced the accrual for interest and penalties by a nominal amount. As a result of the decrease in unrecognized tax benefits during the year ended December 31, 2012, the Company reduced the accrual for interest and penalties by $0.6 million, net of deferred taxes. During 2011, the Company recognized approximately $0.1 million of interest and penalties, net of deferred taxes. The Company has accrued approximately $0.1 million for the payment of interest and penalties at December 31, 2013 and 2012.

As of December 31, 2013, the Company is subject to U.S. Federal Income Tax examination for the tax years 2010 through 2013, and to non-U.S. income tax examination for the tax years 2005 to 2013. In addition, the Company is subject to state and local income tax examinations for the tax years 2004 through 2013.

There are no tax positions included in unrecognized tax benefits at December 31, 2013 for which it is reasonably possible that the total amounts could significantly change during the next twelve months.