Note 13 — Income taxes

The following table summarizes the components of the provision for income taxes from continuing operations:

	2013			2012			2011
	(Dollars in thousands)
Current:
Federal	$	(2,974	)	$	20,959		$	(2,604	)
State		1,736			3,623			4,621
Foreign		36,400			30,476			48,600
Deferred:
Federal		(9,703	)		(34,629	)		(20,584	)
State		(1,825	)		(720	)		(961	)
Foreign		(87	)		(3,296	)		(3,294	)
	$	23,547		$	16,413		$	25,778

In December 2011, the Company sold its cargo and container businesses and recorded a gain on sale of $217.8 million along with related taxes of $91.0 million. The gain and related taxes are reported as discontinued operations. A significant portion of these tax charges are included as part of the deferred tax liability for unremitted foreign earnings.

At December 31, 2013, the cumulative unremitted earnings of other subsidiaries outside the United States, considered non-permanently reinvested, for which U.S. taxes have been provided, approximated $609.9 million. At December 31, 2013, the cumulative unremitted earnings of other subsidiaries outside the United States, considered permanently reinvested, for which no income or withholding taxes have been provided, approximated $353.9 million. Such earnings are expected to be reinvested indefinitely and, as a result, no deferred tax liability has been recognized with regard to such earnings. Determination of the deferred income tax liability on these unremitted earnings is not practicable principally because such liability, if any, is dependent on circumstances existing if and when remittance occurs.

The following table summarizes the United States and non-United States components of income from continuing operations before taxes:

	2013			2012			2011
	(Dollars in thousands)
United States	$	(3,544	)	$	(315,928	)	$	(10,952	)
Other		179,274			150,559			156,052
	$	175,730		$	(165,369	)	$	145,100

Reconciliations between the statutory federal income tax rate and the effective income tax rate are as follows:

	2013			2012			2011
Federal statutory rate		35.00	%		35.00	%		35.00	%
Goodwill impairment		—			(60.84	)		—
Tax effect of International items		(15.26	)		11.88			(15.36	)
State taxes, net of federal benefit		(0.32	)		(0.90	)		1.18
Uncertain tax contingencies		(4.06	)		4.85			(2.66	)
Contingent consideration reversals		(2.04	)		—			—
Other, net		0.08			0.08			(0.39	)
		13.40	%		(9.93	)%		17.77	%

The effective income tax rate for 2013 was 13.4% compared to (9.9%) for 2012. The effective tax rate for 2013 was impacted by the realization of net tax benefits resulting from the expiration of statutes of limitation for U.S. federal and state and foreign matters, tax benefits associated with U.S. and foreign tax return filings and the realization of tax benefits resulting from the resolution of a foreign tax matter. The effective income tax rate for 2012 was impacted by a $332 million goodwill impairment charge recorded in the first quarter of 2012, for which only $45 million was tax deductible.

The Company and its subsidiaries are routinely subject to examinations by various taxing authorities. In conjunction with these examinations and as a regular practice, the Company establishes and adjusts reserves with respect to its uncertain tax positions to address developments related to those positions. The Company realized a net benefit of approximately $7.1 million, $8.0 million and $3.9 million in 2013, 2012 and 2011, respectively, as a result of reducing its reserves with respect to uncertain tax positions. These reductions principally resulted from the expiration of a number of applicable statutes of limitations.

The following table summarizes significant components of the Company’s deferred tax assets and liabilities at December 31, 2013 and 2012:

	2013			2012
	(Dollars in thousands)
Deferred tax assets:
Tax loss and credit carryforwards	$	104,043		$	92,282
Pension		39,310			63,737
Reserves and accruals		39,478			39,485
Other		27,092			21,255
Less: valuation allowances		(86,510	)		(69,527	)
Total deferred tax assets		123,413			147,232
Deferred tax liabilities:
Property, plant and equipment		26,550			24,766
Intangibles — stock acquisitions		400,297			324,983
Unremitted foreign earnings		147,326			151,780
Other		12,030			13,129
Total deferred tax liabilities		586,203			514,658
Net deferred tax liability	$	(462,790	)	$	(367,426	)

Under the tax laws of various jurisdictions in which the Company operates, deductions or credits that cannot be fully utilized for tax purposes during the current year may be carried forward, subject to statutory limitations, to reduce taxable income or taxes payable in a future tax year. At December 31, 2013, the tax effect of such carryforwards approximated $104.0 million. Of this amount, $14.8 million has no expiration date, $0.6 million expires after 2013 but before the end of 2018 and $88.6 million expires after 2018. A portion of these carryforwards consists of tax losses and credits which were acquired in acquisitions by the Company and the utilization of these carryforwards are subject to an annual limitation imposed by Section 382 of the Internal Revenue Code, which limits a company’s ability to deduct prior net operating losses following a more than 50 percent change in ownership. The Vidacare Corporation acquisition in December 2013 included $7.4 million of tax losses, $0.5 million of which will not be realized as a result of the Section 382 limitation. A full valuation allowance on this component of the acquired tax losses was recorded in conjunction with the acquisition. The Hotspur Technologies acquisition in June 2012 included $10.8 million of tax losses, $2.5 million of which will not be realized as a result of the Section 382 limitation. A full valuation allowance on this component of the acquired tax losses was recorded in conjunction with the acquisition. Except as described above, with respect to Vidacare Corporation and Hotspur Technologies, it is not expected that the Section 382 limitation will prevent the Company from utilizing its loss carryforwards. The determination of state net operating loss carryforwards is dependent upon the United States subsidiaries’ taxable income or loss, the state’s proportion of taxable net income and other respective state laws, which can change from year to year and impact the amount of such carryforward.

The valuation allowance for deferred tax assets of $86.5 million and $69.5 million at December 31, 2013 and 2012, respectively, relates principally to the uncertainty of the Company’s ability to utilize certain deferred tax assets, primarily tax loss and credit carryforwards in various jurisdictions. The valuation allowance was calculated in accordance with applicable accounting standards, which require that a valuation allowance be established and maintained when it is “more likely than not” that all or a portion of deferred tax assets will not be realized.

Uncertain Tax Positions: The following table is a reconciliation of the beginning and ending balances for liabilities associated with unrecognized tax benefits for the twelve month periods ending December 31, 2013, 2012 and 2011:

	2013			2012			2011
	(Dollars in thousands)
Balance at January 1	$	62,108		$	75,026		$	89,281
Increase in unrecognized tax benefits related to prior years		—			1,110			1,855
Decrease in unrecognized tax benefits related to prior years		—			(6,134	)		(6,415	)
Unrecognized tax benefits related to the current year		1,838			4,256			4,246
Reductions in unrecognized tax benefits due to settlements		—			(8,816	)		(7,678	)
Reductions in unrecognized tax benefits due to lapse of applicable statute of limitations		(8,433	)		(3,503	)		(5,852	)
Increase (decrease) in unrecognized tax benefits due to foreign currency translation		258			169			(411	)
Balance at December 31	$	55,771		$	62,108		$	75,026

The total liabilities associated with the unrecognized tax benefits that, if recognized would impact the effective tax rate for continuing operations, were $22.5 million at December 31, 2013.

The Company accrues interest and penalties associated with unrecognized tax benefits in income tax expense in the consolidated statements of operations, and the corresponding liability is included in the consolidated balance sheets. The interest (benefit) expense (net of related tax benefits where applicable) and penalties reflected in income from continuing operations for the year ended December 31, 2013 was $1.3 million and $(0.8) million, respectively, ($0.8 million and $0.2 million, respectively, for the year ended December 31, 2012 and $(0.1) million and $0.3 million, respectively, for the year ended December 31, 2011). The corresponding liabilities in the consolidated balance sheets for interest and penalties were $5.7 million and $6.0 million, respectively, at December 31, 2013 ($6.5 million and $9.2 million, respectively, at December 31, 2012).

The taxable years that remain subject to examination by major tax jurisdictions are as follows:

	Beginning	Ending
United States	2010	2013
Canada	2005	2013
China	2008	2013
Czech Republic	2001	2013
France	2011	2013
Germany	2007	2013
Ireland	2009	2013
Italy	2009	2013
Malaysia	2008	2013
Singapore	2009	2013

The Company and its subsidiaries are routinely subject to income tax examinations by various taxing authorities. As of December 31, 2013, the most significant tax examinations in process are in the jurisdictions of Canada, Germany, the Czech Republic and Austria. The date at which these examinations may be concluded and the ultimate outcome of such examinations is uncertain. As a result of the uncertain outcome of these ongoing examinations, future examinations or the expiration of statutes of limitation, it is reasonably possible that the related unrecognized tax benefits for tax positions taken could materially change from those recorded as liabilities at December 31, 2013. Due to the potential for resolution of certain examinations, and the expiration of various statutes of limitation, it is reasonably possible that the Company’s unrecognized tax benefits may change within the next twelve months by a range of zero to $2.5 million.