Income Taxes

Income before income taxes and (Benefit from) provision for income taxes consisted of the following:



	Year Ended December 31,
	2014			2013			2012
	(In thousands)
Income (loss) before income taxes:
Domestic operations	$	53,153		$	(7,899	)	$	(73,467	)
Foreign operations	305,095			310,694			121,906
	$	358,248		$	302,795		$	48,439
Provision for (benefit from) income taxes:
Current:
Federal	$	798		$	(464	)	$	—
State	2,047			871			362
Foreign	74,618			83,299			83,119
	77,463			83,706			83,481
Deferred:
Domestic operations	$	(127,114	)	$	11,603		$	50,340
Foreign operations	(12,374		)	(1,657		)	(43,118		)
	(139,488		)	9,946			7,222
	$	(62,025	)	$	93,652		$	90,703

The Company’s (Benefit from) provision for income taxes differs from the amount that would be computed by applying the U.S. federal statutory rate as follows:



	Year Ended December 31,
	2014			2013			2012
	(In thousands)
Taxes calculated at the U.S. federal statutory rate	$	125,386		$	105,978		$	16,954
State taxes	2,323			871			362
Effect of tax rates on international operations	(34,619		)	(42,972		)	(24,070		)
Change in enacted international tax rates	(149		)	(5,217		)	(12,305		)
Changes in valuation allowance and tax reserves	(156,071		)	30,554			106,802
Other	1,105			4,438			2,960
(Benefit from) provision for income taxes	$	(62,025	)	$	93,652		$	90,703

Deferred income taxes, net reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. During the year ended December 31, 2014, adjustments were made retrospectively to provisional amounts recorded as of December 31, 2013, due to the finalization of the valuation of specific tax items related to the acquisitions consummated during the three months ended December 31, 2013. The significant components of deferred tax assets and liabilities, in addition to the reconciliation of the beginning and ending amount of gross unrecognized tax benefits below, include the impact of these retrospective adjustments. Significant components of the deferred tax assets and liabilities are as follows:



	December 31,
	2014			2013
	(In thousands)
Deferred tax assets:
Post-retirement benefit obligation	$	93,080		$	87,305
Expenses currently not deductible	116,648			155,488
Net operating loss carryforward	234,384			264,893
Tax credit carryforward	11,509			15,518
Depreciation and amortization	11,092			5,473
Other	22,291			6,596
Valuation allowance	(159,686		)	(360,910		)
Deferred tax assets, net	$	329,318		$	174,363
Deferred tax liabilities:
Depreciation and amortization	$	(360,602	)	$	(266,652	)
Post-retirement benefit obligation	(12,122		)	(17,844		)
Inventory	(16,696		)	(12,558		)
Other	(193,618		)	(59,036		)
Total deferred tax liabilities	$	(583,038	)	$	(356,090	)
Total deferred tax liabilities, net	$	(253,720	)	$	(181,727	)

The Company evaluates the recoverability of its deferred tax assets on a jurisdictional basis by considering whether deferred tax assets will be realized on a more likely than not basis. To the extent a portion or all of the applicable deferred tax assets do not meet the more likely than not threshold, a valuation allowance is recorded. During the year ended December 31, 2014, the valuation allowance decreased from $360.9 million to $159.7 million with a net decrease of $134.2 million recognized in (Benefit from) provision for income taxes, a decrease of $66.0 million recognized in Other comprehensive (loss) income and reclassifications and a $2.8 million decrease related to changes in foreign currency rates, which were partially offset by an increase of $1.8 million attributable to the acquisition made during the year. As a result of the effect of the Victor Acquisition on expected future income in the United States, the realizability of certain deferred assets were reassessed. The reduction of valuation allowances associated with this reassessment resulted in a non-cash income tax benefit of $145.4 million for the year ended December 31, 2014. During the year ended December 31, 2013, the valuation allowance increased from $357.6 million to $360.9 million with an increase of $30.6 million recognized in (Benefit from) provision for income taxes and an increase of $4.9 million attributable to acquisitions made during the year, which were offset by a decrease of $27.2 million recognized in Other comprehensive (loss) income, a net $3.4 million decrease related to international tax rate changes and reclassifications and a $1.6 million decrease related to changes in foreign currency rates. Consideration was given to U.S. tax planning strategies and future U.S. taxable income as to how much of the relevant deferred tax asset could be realized on a more likely than not basis.

The Company has U.S. net operating loss carryforwards of $346.8 million expiring in years 2017 through 2032, and alternative minimum tax credits of $10.2 million that may be carried forward indefinitely. Tax credit carryforwards include foreign tax credits that have been offset by a valuation allowance. The Company’s ability to use these various carryforwards to offset any taxable income generated in future taxable periods may be limited under Section 382 and other federal tax provisions.

For the years ended December 31, 2014, 2013 and 2012, all undistributed earnings of the Company’s controlled international subsidiaries are considered to be permanently reinvested outside the U.S. and no tax expense in the U.S. has been recognized under the applicable accounting standard for these reinvested earnings. The amount of unremitted earnings from the Company’s international subsidiaries, subject to local statutory restrictions, as of December 31, 2014 is $723.0 million. The amount of deferred tax liability that would have been recognized had such earnings not been indefinitely reinvested is not reasonably determinable.

The Company records a liability for unrecognized income tax benefits for the amount of benefit included in its previously filed income tax returns and in its financial results expected to be included in income tax returns to be filed for periods through the date of its Consolidated Financial Statements for income tax positions for which it is more likely than not that a tax position will not be sustained upon examination by the respective taxing authority. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (inclusive of associated interest and penalties):



	(In thousands)
Balance, December 31, 2012	$	85,723
Acquisitions	2,683
Addition for tax positions taken in prior periods	6,988
Addition for tax positions taken in the current period	7,730
Reduction for tax positions taken in prior periods	(31,156		)
Other, including the impact of foreign currency translation	(373		)
Balance, December 31, 2013	71,595
Acquisition	37,328
Addition for tax positions taken in prior periods	3,752
Addition for tax positions taken in the current period	894
Reduction for tax positions taken in prior periods	(27,601		)
Other, including the impact of foreign currency translation	(8,443		)
Balance, December 31, 2014	$	77,525

The Company is routinely examined by tax authorities around the world. Tax examinations remain in process in multiple countries, including but not limited to Sweden, Indonesia, France, Germany, Finland, Mexico, Brazil and various states. The Company files numerous group and separate tax returns in U.S. federal and state jurisdictions, as well as many international jurisdictions. In the U.S., tax years dating back to 2006 remain subject to examination, as well as the 2003 and 2005 tax years due to tax attributes available to be carried forward to open or future tax years. With some exceptions, other major tax jurisdictions generally are not subject to tax examinations for years beginning before 2008.

The Company’s total unrecognized tax benefits were $77.5 million and $71.6 million as of December 31, 2014 and 2013, respectively, inclusive of $14.7 million and $13.4 million, respectively, of interest and penalties. These amounts were offset by tax benefits of $0.1 million as of both December 31, 2014 and 2013. The net liabilities for uncertain tax positions as of December 31, 2014 and 2013 were $77.4 million and $71.5 million, respectively, and, if recognized, would favorably impact the effective tax rate. The Company records interest and penalties on uncertain tax positions as a component of (Benefit from) provision for income taxes, which was $2.5 million, $4.0 million and $1.3 million for the years ended December 31, 2014, 2013 and 2012, respectively.

Due to the difficulty in predicting with reasonable certainty when tax audits will be fully resolved and closed, the range of reasonably possible significant increases or decreases in the liability for unrecognized tax benefits that may occur within the next 12 months is difficult to ascertain. Currently, the Company estimates that it is reasonably possible that the expiration of various statutes of limitations, resolution of tax audits and court decisions may reduce its tax expense in the next 12 months up to $23.8 million.