Income Taxes

The Company's income before income taxes and income tax expense for continuing operations, each by tax jurisdiction, consisted of the following:



	Year ended December 31,
	2014			2013			2012
	(dollars in thousands)
Income before income taxes:
Domestic	$	85,000		$	49,480		$	12,150
Foreign	14,600			47,610			30,340
Total income before income taxes	$	99,600		$	97,090		$	42,490
Current income tax expense:
Federal	$	31,150		$	15,850		$	8,340
State and local	3,450			1,440			1,860
Foreign	6,890			9,650			4,190
Total current income tax expense	41,490			26,940			14,390
Deferred income tax expense (benefit):
Federal	(9,170		)	(4,490		)	(6,200		)
State and local	350			(1,020		)	(750		)
Foreign	200			(3,290		)	(1,380		)
Total deferred income tax expense	(8,620		)	(8,800		)	(8,330		)
Income tax expense	$	32,870		$	18,140		$	6,060

The components of deferred taxes at December 31, 2014 and 2013 are as follows:



	2014			2013
	(dollars in thousands)
Deferred tax assets:
Accounts receivable	$	1,710		$	1,240
Inventories	9,680			7,840
Accrued liabilities and other long-term liabilities	45,750			40,410
Tax loss and credit carryforwards	17,530			10,010
Gross deferred tax asset	74,670			59,500
Valuation allowances	(9,820		)	(6,530		)
Net deferred tax asset	64,850			52,970
Deferred tax liabilities:
Property and equipment	(19,640		)	(20,420		)
Goodwill and other intangible assets	(64,400		)	(66,440		)
Other, principally deferred income	(5,230		)	(6,310		)
Gross deferred tax liability	(89,270		)	(93,170		)
Net deferred tax liability	$	(24,420	)	$	(40,200	)

The following is a reconciliation of income tax expense computed at the U.S. federal statutory rate to income tax expense allocated to income from continuing operations before income taxes:



	2014			2013			2012
	(dollars in thousands)
U.S. federal statutory rate	35		%	35		%	35		%
Tax at U.S. federal statutory rate	$	34,860		$	33,990		$	14,880
State and local taxes, net of federal tax benefit	2,750			250			730
Differences in statutory foreign tax rates	(3,910		)	(8,550		)	(4,920		)
Change in recognized tax benefits	(1,960		)	(1,630		)	(1,320		)
Tax holiday^(a)	(420		)	(1,980		)	(1,160		)
Nontaxable gains	—			(5,460		)	—
Restructuring (benefits)/charges	—			2,230			(2,400		)
Noncontrolling interest	(280		)	(1,410		)	(790		)
Net change in valuation allowance	3,310			1,980			1,600
Other, net	(1,480		)	(1,280		)	(560		)
Income tax expense	$	32,870		$	18,140		$	6,060

__________________________

^(a)Tax holiday related to Thailand which expires on December 31, 2015.

The Company has recorded deferred tax assets on $33.6 million of various state operating loss carryforwards and $48.6 million of various foreign operating loss carryforwards. The majority of the state tax loss carryforwards expire between 2024 and 2027 and the majority of the foreign losses have indefinite carryforward periods.

In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations. As of December 31, 2014, the Company has not made a provision for U.S. or additional non-U.S. withholding taxes on approximately $219.4 million of undistributed earnings of non-U.S. subsidiaries that are considered to be permanently reinvested. Generally, such amounts become subject to U.S. taxation upon remittance of dividends and under certain other circumstances. It is not practicable to estimate the amount of deferred tax liability related to investments in these non-U.S. subsidiaries.

Unrecognized tax benefits

The Company has approximately $27.2 million and $31.6 million of unrecognized tax benefits ("UTBs") as of December 31, 2014 and 2013, respectively. If the unrecognized tax benefits were recognized, the impact to the Company's effective tax rate would be to reduce reported income tax expense for the years ended December 31, 2014 and 2013 approximately $21.2 million and $25.7 million, respectively.

A reconciliation of the change in the UTBs and related accrued interest and penalties for the years ended December 31, 2014 and 2013 is as follows:



	Unrecognized Tax Benefits
	(dollars in thousands)
Balance at December 31, 2012	$	21,730
Tax positions related to current year:
Additions	1,300
Tax positions related to prior years:
Additions	15,340
Reductions	(4,310		)
Settlements	—
Lapses in the statutes of limitations	(2,490		)
Balance at December 31, 2013	$	31,570
Tax positions related to current year:
Additions	280
Tax positions related to prior years:
Additions	270
Reductions	(2,050		)
Settlements	—
Lapses in the statutes of limitations	(2,870		)
Balance at December 31, 2014	$	27,200

In addition to the UTBs summarized above, the Company has recorded approximately $2.2 million and $1.8 million in potential interest and penalties associated with uncertain tax positions as of December 31, 2014 and 2013, respectively.

The decrease in UTBs related to prior years is primarily related to the change in currency exchange rates.

The Company is subject to U.S. federal, state and local, and certain non-U.S. income tax examinations for tax years 2002 through 2013. The Company is currently under audit by the Internal Revenue Service for tax year 2011. Additionally, there are currently two foreign income tax examinations in process. The Company does not believe that the results of these examinations will have a significant impact on the Company's tax position or its effective tax rate.

Management monitors changes in tax statutes and regulations and the issuance of judicial decisions to determine the potential impact to unrecognized tax benefits and is not aware of, nor does it anticipate, any material subsequent events that could have a significant impact on the Company's financial position during the next twelve months.