6. Income Taxes

The Company is required to recognize the impact of a tax position that is more likely than not to be sustained upon examination based upon the technical merits of the position, including resolution of any appeals. Based on the Company’s evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. The evaluation was performed for the tax years which remain subject to examination by major tax jurisdictions as of December 31, 2013, which are the years ended December 31, 2007 through December 31, 2013. The Company has occasionally been assessed interest or penalties by major tax jurisdictions; these assessments historically have not materially impacted the Company’s financial results. Interest expense assessed by tax jurisdictions is included with interest expense and assessed penalties are included in selling, general and administrative expenses.

The Company evaluates uncertain tax positions for recognition and measurement in the consolidated financial statements. To recognize a tax position, the Company determines whether it is more likely than not that the tax positions will be sustained upon examination, including resolution of any related appeals or litigation, based on the technical merits of the position. A tax position that meets the more likely than not threshold is measured to determine the amount of benefit to be recognized in the consolidated financial statements. The amount of tax benefit recognized with respect to any tax position is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. The Company had no uncertain tax positions that required recognition in the consolidated financial statements at December 31, 2013 and 2012. If it is more likely than not that the related tax benefits will not be realized, a valuation allowance would be established to reduce deferred tax assets. As of December 31, 2013 and 2012, the Company determined that a valuation allowance was not necessary.

Income before income taxes consisted of the following:


	Year ended December 31,
	2013		2012		2011
	(In thousands)
Domestic	$	98,883	$	65,271	$	45,159
Foreign		125,214		96,851		84,845

Total	$	224,097	$	162,122	$	130,004

The income tax provision (benefit) consists of the following:


	Year ended December 31,
	2013			2012			2011
	(In thousands)
Current:
Federal	$	30,962		$	20,033		$	13,127
Foreign		24,543			22,542			23,122

Total current		55,505			42,575			36,249

Deferred:
Federal		(1,299	)		440			(891	)
Foreign		64			(102	)		(621	)

Total deferred		(1,235	)		338			(1,512	)

Total	$	54,270		$	42,913		$	34,737

The difference between the effective income tax rate reflected in the provision for income taxes and the U.S. federal statutory rate was as follows:


	Year ended December 31,
	2013			2012			2011
Federal income tax statutory rate		35.0	%		35.0	%		35.0	%
Foreign income tax rate differential		(6.0	)		(5.5	)		(5.2	)
Foreign development tax incentive		(2.6	)		(1.6	)		(0.3	)
Manufacturing benefit		(1.4	)		(1.2	)		(1.3	)
Other		(0.8	)		(0.3	)		(1.5	)

Effective income tax rate		24.2	%		26.4	%		26.7	%

Deferred income taxes 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. Based upon existing market conditions and the Company’s earnings prospects, it is anticipated that all deferred tax assets will be realized in future years. Significant components of the Company’s deferred tax assets and liabilities are as follows:


	December 31,
	2013			2012
	(In thousands)
Deferred tax assets:
Inventory	$	9,086		$	9,846
Inventory reserve		7,807			7,079
Allowance for doubtful accounts		396			430
Reserve for accrued liabilities		370			183
Stock options		4,323			4,242
Other		2,969			2,058

Total deferred tax assets		24,951			23,838
Deferred tax liability:
Property, plant and equipment		(9,804	)		(9,926	)

Net deferred tax asset	$	15,147		$	13,912

Undistributed earnings of the Company’s foreign subsidiaries are considered to be indefinitely reinvested and, accordingly, no provision for U.S. federal income taxes has been provided thereon. The estimate of undistributed earnings of the Company’s foreign subsidiaries amounted to $547 million as of December 31, 2013. Upon distribution of those earnings in the form of dividends or otherwise, the Company may be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable.

On January 2, 2013, the “American Taxpayer Relief Act of 2012” extended the Research and Development tax credit retroactive to January 1, 2012 and was extended through December 31, 2013. The Research and Development credit for 2012 of $1.2 million was recognized on the Company’s 2012 U.S. federal income tax return but was recorded for financial statement purposes in the first quarter of 2013 in accordance with ASC 740.

The Company paid $41.0 million, $37.9 million and $31.9 million in income taxes in 2013, 2012 and 2011, respectively.