Income Taxes

Income Before Income Taxes

Income before income taxes consists of the following:



	For the Year Ended December 31,
	2013		2012		2011
United States	$	67,355	$	79,812	$	42,429
Foreign	51,303		23,294		20,545
Income before income taxes	$	118,658	$	103,106	$	62,974

Provision

Significant components of the provision for income taxes are as follows:



	Year Ended December 31,
	2013			2012			2011
Current:
Federal	$	19,421		$	28,076		$	14,369
State and local	1,618			1,768			876
Foreign	11,864			5,456			5,976
Total current	32,903			35,300			21,221
Deferred:
Federal	21			(3,477		)	(962		)
State and local	(364		)	(684		)	(66		)
Foreign	(1,264		)	(357		)	(1,463		)
Total deferred	(1,607		)	(4,518		)	(2,491		)
Total provision	$	31,296		$	30,782		$	18,730

Effective Tax Rate Reconciliation

The reconciliation of income taxes computed at the U.S. federal statutory tax rate to income tax expense is as follows:



	Year Ended December 31,
	2013			2012			2011
Income tax expense at U.S. federal statutory rate	$	41,530		$	36,087		$	22,041
State income taxes, net of federal tax benefit	757			711			810
Foreign income, net of credit on foreign taxes	501			48			137
Effective tax rate differential of earnings outside of U.S.	(8,257		)	(4,983		)	(1,901		)
Foreign investment tax credit	—			(406		)	(777		)
Research & experimentation credits	(2,105		)	—			(350		)
Non-deductible (taxable) items	865			2,885			424
Change in uncertain tax positions	(347		)	(394		)	(28		)
Domestic production activities deduction	(2,237		)	(2,490		)	(1,626		)
Other items	589			(676		)	—
Income tax expense	$	31,296		$	30,782		$	18,730

Deferred Taxes

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:



	December 31,
	2013			2012
Deferred tax assets:
Accruals and reserves	$	25,478		$	27,625
Pensions	2,536			7,019
Inventory	4,350			2,775
Share-based compensation	6,107			5,220
Tax credit carryforwards	—			2,662
Foreign net operating loss carryforwards	594			1,440
State net operating loss carryforward	1,610			1,517
Other — net	844			1,331
Total deferred tax assets before valuation allowance	41,519			49,589
Valuation allowance	(1,250		)	(1,766		)
Total deferred tax assets, net of valuation allowance	$	40,269		$	47,823
Deferred tax liabilities:
Property, plant and equipment	$	17,248		$	15,705
Intangibles	53,314			59,396
Convertible notes	2,623			3,071
Total deferred tax liabilities	$	73,185		$	78,172
Net deferred tax liabilities	$	32,916		$	30,349
The net deferred tax liability is classified as follows:
Deferred income taxes	$	(14,675	)	$	(15,282	)
Other assets	(125		)	(654		)
Long-term deferred tax liabilities	47,716			46,285
Net deferred tax liabilities	$	32,916		$	30,349

Federal, State and Local Net Operating Loss Carryforwards: As a result of the SeQual acquisition, the Company has $19,552 of state net operating losses. California tax law will limit the use of these state net operating losses. The remaining state net operating losses expire between 2014 and 2031. In addition, the Company has state net operating losses in various other states which begin to expire in 2017. The gross deferred tax asset for the state net operating losses of $1,610 is partially offset by a valuation allowance of $740.

Foreign Net Operating Loss Carryforwards: As of December 31, 2013, cumulative foreign operating losses of $2,010 generated by the Company were available to reduce future taxable income. Approximately $451 of these operating losses expire between 2016 and 2021. The remaining $1,559 can be carried forward indefinitely. The deferred tax asset for the foreign operating losses of $594 is partially offset by a valuation allowance of $511.

Other Tax Information

The Company has not provided for income taxes on approximately $159,962 of foreign subsidiaries' undistributed earnings as of December 31, 2013, since the earnings retained have been reinvested indefinitely by the subsidiaries. It is not practicable to estimate the additional income taxes and applicable foreign withholding taxes that would be payable on the remittance of such undistributed earnings.

Cash paid for income taxes during the years ended December 31, 2013, 2012 and 2011 was $24,977, $19,193 and $17,130, respectively.

Unrecognized Income Tax Benefits

The reconciliation of beginning to ending unrecognized tax benefits is as follows:



	Year Ended December 31,
	2013			2012			2011
Unrecognized tax benefits at beginning of the year	$	3,339		$	2,440		$	2,468
Additions for tax positions of prior years	299			1,921			128
Reductions for tax positions of prior years	(1,921		)	—			(22		)
Reductions for settlements	—			(905		)	—
Lapse of statutes of limitation	(776		)	(117		)	(134		)
Unrecognized tax benefits at end of the year	$	941		$	3,339		$	2,440

Included in the balance of unrecognized tax benefits at December 31, 2013 and 2012 were $410 and $851, respectively, of income tax benefits which, if ultimately recognized, would impact the Company’s annual effective tax rate.

The Company had accrued approximately $93 and $106 for the payment of interest and penalties at December 31, 2013 and 2012, respectively. The Company recorded a net benefit of $8 for interest expense in the year ended December 31, 2013 due to the filing of an amended tax return which offset the accrual of interest expense related to existing uncertain tax positions. The Company accrued approximately $42 for both years ended December 31, 2012 and 2011 in additional interest associated with uncertain tax positions.

The Company is subject to income taxes in the U.S. federal jurisdiction, and various state and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years prior to 2009.

Due to the potential resolution of the federal examination and the expiration of various statutes of limitation, it is reasonably possible the Company's unrecognized tax benefits at December 31, 2013 may decrease within the next twelve months by approximately $22.