13.	Income Taxes

The Company’s provision for income taxes consists of the following:

	Year Ended December 31,
	2018			2017			2016
Current:
Federal	$	32,072		$	15,753		$	11,717
State		9,639			1,775			2,047
Foreign		4,546			4,585			4,460
		46,257			22,113			18,224
Deferred:
Federal		22,225			18,213			40,213
State		1,910			4,139			3,029
Foreign		479			(2,777	)		(5,585	)
		24,614			19,575			37,657
Change in valuation allowance		(1,015	)		2,454			638
Provision for income taxes	$	69,856		$	44,142		$	56,519

The Company files U.S federal, U.S. state and foreign jurisdiction tax returns which are subject to examination up to the expiration of the statute of limitations. We believe the tax positions taken on our returns would be sustained upon an exam, or where a position is uncertain, adequate reserves have been recorded. As of

December 31, 2018,

the Company is

longer subject to income tax examinations for United States federal income taxes for tax years prior to

2015.

Due to the carryforward of net operating losses and research & development credits, the Company’s Wisconsin state income tax returns for tax years

2007

through

2017

remain open. In addition, the Company is subject to audit by various foreign taxing jurisdictions for the tax years

2012

through

2017.

The Company is regularly under examination in the various jurisdictions we operate. We are actively managing the examinations and working to address any open matters. While the Company does

not

believe any material taxes or penalties are due, there is a possibility that the ultimate tax outcome of an examination

may

result in differences from what was recorded. Such differences

may

affect the provision for income taxes in the period in which the determination is made, and could impact the Company’s financial results.

December 22, 2017,

the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but

not

limited to, reducing the U.S. federal corporate tax rate from

35%

21%,

requiring companies to pay a

one

-time transition tax on certain unrepatriated earnings of foreign subsidiaries, eliminating certain deductions, introducing new tax regimes, changing how foreign earnings are subject to U.S. tax, and enhancing and extending through

2026

the option to claim accelerated depreciation deductions on qualified property.

December 2017,

the SEC staff issued SAB

118,

which provides guidance on accounting for the tax effects of the Tax Act. SAB

118

provides a measurement period that should

not

extend beyond

one

year from the Tax Act enactment date for companies to complete the accounting under ASC

740.

In accordance with SAB

118,

the Company considers the tax expense recorded for the Tax Act to be complete at

December 31, 2018.

Significant components of deferred tax assets and liabilities are as follows:

	December 31,
	2018			2017
Deferred tax assets:
Accrued expenses	$	16,745		$	15,075
Deferred revenue		12,418			9,983
Inventories		8,500			7,933
Pension obligations		1,062			3,795
Stock-based compensation		5,960			5,522
Operating loss and credit carryforwards		25,585			23,771
Bad debt		1,363			1,101
Other		2,516			40
Valuation allowance		(5,802	)		(6,817	)
Total deferred tax assets		68,347			60,403

Deferred tax liabilitites:
Goodwill and intangible assets		108,899			70,556
Depreciation		25,429			22,563
Debt refinancing costs		4,206			5,189
Prepaid expenses		950			709
Total deferred tax liabilities		139,484			99,017

Net deferred tax liabilities	$	(71,137	)	$	(38,614	)

As of

December 31, 2018

and

2017,

deferred tax assets of

$163

and

$3,238,

and deferred tax liabilities of

$71,300

and

$41,852,

respectively, were reflected on the consolidated balance sheets.

The Company maintains a valuation allowance against the deferred tax assets of an entity when it is uncertain the entity will generate sufficient taxable income to utilize the asset. During

2018,

the valuation allowance decreased by

$1,015

primarily due to an increase in income allowing for a utilization of tax credits, partially offset by current losses in certain foreign subsidiaries.

December 31, 2018,

the Company had various state research & development and state manufacturing tax credit carryforwards of approximately

$10,349

and

$9,254,

respectively, which expire between

2019

and

2033.

The Company believes it will generate sufficient taxable income in these jurisdictions to fully utilize the credits prior to their expiration.

Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, were as follows:

	December 31,
	2018			2017
Unrecognized tax benefit, beginning of period	$	7,122		$	7,943
Increase in unrecognized tax benefit for positions taken in current period		580			251
Statute of limitation expirations		(1,818	)		(1,072	)
Settlements		(249	)		-
Unrecognized tax benefit, end of period	$	5,635		$	7,122

The unrecognized tax benefit as of

December

31,

2018

and

2017,

if recognized, would favorably impact the effective tax rate.

As of

December

31,

2018,

2017

and

2016,

total accrued interest of approximately

$37,

$131

and

$272,

respectively, and accrued penalties of approximately

$136,

$220

and

$425,

respectively, associated with net unrecognized tax benefits are included in the consolidated balance sheets. Interest and penalties are recorded as a component of income tax expense.

The Company does

not

expect a significant increase or decrease to the total amounts of unrecognized tax benefits related to continuing operations during the fiscal year ending

December

31,

2019.

The Tax Act includes a mandatory

one

-time tax on accumulated earnings of foreign subsidiaries, and as a result, all previously unremitted earnings for which

U.S. deferred tax liability had been accrued have now been subject to U.S. tax. Notwithstanding the U.S. taxation of these amounts, the Company intends to continue to invest these earnings, as well as the capital in these subsidiaries, indefinitely outside of the U.S. and do

not

expect to incur any significant additional taxes related to such amounts.

A reconciliation of the statutory tax rates and the effective tax rates for the years ended

December 31, 2018,

2017

and

2016

are as follows:

	Year Ended December 31,
	2018			2017			2016
U.S. statutory rate		21.0	%		35.0	%		35.0	%
State taxes		4.7			4.1			4.1
Research and development credits		(1.3	)		(1.4	)		(1.0	)
State credits		(1.0	)		(0.2	)		(0.2	)
Share-based compensation (1)		(0.5	)		(1.4	)		-
Tax Act impact		(0.2	)		(13.9	)		-
Other		(0.2	)		(0.9	)		(1.1	)
Effective tax rate		22.5	%		21.3	%		36.8	%

(

)

With the adoption of ASU

2016

2017,

excess tax benefits from equity awards are reflected within the provision for income taxes rather than within the consolidated balance sheet.