Income Taxes

The components of Income from continuing operations before income taxes and Income taxes follow:



	2014			2013			2012
Income from continuing operations before income taxes:
U.S.	$	33,070		$	10,343		$	8,853
International	133,430			97,231			83,409
Income from continuing operations before income taxes	$	166,500		$	107,574		$	92,262
Income tax provision:
Current:
U.S. – federal	$	22,673		$	8,356		$	579
U.S. – state	1,236			539			24
International	35,954			16,933			13,418
	59,863			25,828			14,021
Deferred:
U.S. – federal	(6,737		)	13,792			4,610
U.S. – state	1,279			(110		)	566
International	(8,446		)	(4,257		)	(6,765		)
	(13,904		)	9,425			(1,589		)
Income taxes	$	45,959		$	35,253		$	12,432

Deferred income tax assets and liabilities at December 31 consist of the tax effects of temporary differences related to the following:



	Assets						Liabilities
	2014			2013			2014			2013
Allowance for doubtful accounts	$	494		$	520		$	86		$	88
Depreciation and amortization	(19,338		)	1,886			59,271			96,305
Inventory valuation	17,072			17,292			1,981			4,241
Other postretirement/postemployment costs	17,549			3,065			(247		)	(14,536		)
Tax loss carryforwards	13,977			15,363			(56		)	(1,445		)
Pension	21,968			1,631			(1,005		)	(1,049		)
Accrued compensation	15,418			5,949			—			(9,381		)
Goodwill	(13,772		)	—			57			12,805
Swedish tax incentive	—			—			4,255			4,590
Contingent convertible debt interest	—			(12,848		)	—			—
Unrealized foreign currency gain	—			—			1,999			2,948
Other	4,398			6,555			5,763			3,735
	57,766			39,413			72,104			98,301
Valuation allowance	(15,856		)	(18,873		)	—			—
	$	41,910		$	20,540		$	72,104		$	98,301
Current deferred income taxes	$	31,849		$	18,226		$	1,957		$	3,795
Non-current deferred income taxes	10,061			2,314			70,147			94,506
	$	41,910		$	20,540		$	72,104		$	98,301

The standards related to accounting for income taxes require that deferred tax assets be reduced by a valuation allowance if, based on all available evidence, it is more likely than not that the deferred tax asset will not be realized. Available evidence includes the reversal of existing taxable temporary differences, future taxable income exclusive of temporary differences, taxable income in carryback years and tax planning strategies.

Management believes that sufficient taxable income should be earned in the future to realize the net deferred tax assets principally in the United States. The realization of these assets is dependent in part on the amount and timing of future taxable income in the jurisdictions where deferred tax assets reside. The Company has tax loss carryforwards of $51,416; $865 of which relates to state tax loss carryforwards; $46,690 of which relates to international tax loss carryforwards with carryforward periods ranging from one to 15 years; and $3,861 of which relates to international tax loss carryforwards with unlimited carryforward periods. In addition, the Company has tax credit carryforwards of $216 with remaining carryforward periods ranging from one year to 5 years. As the ultimate realization of the remaining net deferred tax assets is dependent upon future taxable income, if such future taxable income is not earned and it becomes necessary to recognize a valuation allowance, it could result in a material increase in the Company’s tax expense which could have a material adverse effect on the Company’s financial condition and results of operations.

The Company has not recognized deferred income taxes on $862,082 of undistributed earnings of its international subsidiaries, since such earnings are considered to be reinvested indefinitely. If the earnings were distributed in the form of dividends, the Company would be subject, in certain cases, to both U.S. income taxes and foreign income and withholding taxes. Determination of the amount of this unrecognized deferred income tax liability is not practicable. During 2014, the Company repatriated a dividend from a portion of current year foreign earnings to the U.S. in the amount of $12,500. As a result of the dividend, tax expense increased by $4,391 and the 2014 annual consolidated effective income tax rate increased by 2.6 percentage points.

A reconciliation of the U.S. federal statutory income tax rate to the consolidated effective income tax rate from continuing operations follows:



	2014		2013		2012
U.S. federal statutory income tax rate	35.0	%	35.0	%	35.0	%
State taxes (net of federal benefit)	0.5		0.3		0.3
Foreign losses without tax benefit	1.1		0.8		0.8
U.S. Tax Court Decision	—		15.3		—
Foreign operations taxed at lower rates	(12.6	)	(20.6	)	(23.7	)
Repatriation from current year foreign earnings	2.6		1.1		2.3
Other	1.0		0.9		(1.2	)
Consolidated effective income tax rate	27.6	%	32.8	%	13.5	%

The Aerospace and Industrial Segments were previously awarded a number of multi-year tax holidays in both Singapore and China. Tax benefits of $4,513 ($0.08 per diluted share), $6,746 ($0.12 per diluted share) and $6,026 ($0.11 per diluted share) were realized in 2014, 2013 and 2012, respectively. These holidays are subject to the Company meeting certain commitments in the respective jurisdictions. The tax holidays are due to expire in 2015 and 2016.

Income taxes paid globally, net of refunds, were $33,146, $158,092 and $15,876 in 2014, 2013 and 2012, respectively.

As of December 31, 2014, 2013 and 2012, the total amount of unrecognized tax benefits recorded in the consolidated balance sheet was $8,560, $8,027 and $9,321, respectively, which, if recognized, would have reduced the effective tax rate in prior years, with the exception of amounts related to acquisitions. A reconciliation of the unrecognized tax benefits for 2014, 2013 and 2012 follows:



	2014		2013			2012
Balance at January 1	$	8,027	$	9,321		$	6,965
Increase (decrease) in unrecognized tax benefits due to:
Tax positions taken during prior periods	533		9,944			—
Tax positions taken during the current period	—		3,350			—
Acquisition	—		556			2,528
Settlements	—		(15,144		)	(172		)
Balance at December 31	$	8,560	$	8,027		$	9,321

The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. The Company recognized interest and penalties as a component of income taxes of $0, $9,614, and $0 in the years 2014, 2013, and 2012 respectively. The liability for unrecognized tax benefits include gross accrued interest and penalties of $1,031, $1,031 and $0 at December 31, 2014, 2013 and 2012, respectively.

The Company or its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by various taxing authorities, including the IRS in the U.S. and the taxing authorities in other major jurisdictions such as Brazil, Canada, China, France, Germany, Mexico, Singapore, Sweden, Switzerland and the United Kingdom. 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 before 2003. See Note 21 of the Consolidated Financial Statements for a discussion of current IRS matters.