13. INCOME TAXES:

Total income tax expense (benefit) was allocated as follows (dollars in thousands):

	2014			2013			2012
Income from continuing operations	$	29,627		$	33,058		$	29,129
Income from discontinued operations	—			—			19,388
Stockholders’ equity:
Tax impact of stock options, warrants and restricted stock	(11,295		)	(357		)	1,310
	$	18,332		$	32,701		$	49,827

Income tax expense (benefit) attributable to earnings from continuing operations consists of (dollars in thousands):

	2014			2013			2012
Current:
U.S. Federal	$	23,506		$	32,782		$	22,919
Non-U.S.	928			716			295
State	3,096			3,138			3,687
	27,530			36,636			26,901
Deferred:
U.S. Federal	(5,436		)	(3,874		)	900
Non-U.S.	7,641			(574		)	2,359
State	(108		)	870			(1,031		)
	2,097			(3,578		)	2,228
Total	$	29,627		$	33,058		$	29,129

Earnings (loss) before income tax attributable to U.S. and non-U.S. continuing operations consist of (dollars in thousands):

	2014			2013		2012
U.S.	$	74,183		$	89,791	$	100,051
Non-U.S.	(35,753		)	386		(33,305		)
Total	$	38,430		$	90,177	$	66,746

Earnings before income taxes, as shown above, are based on the location of the entity to which such earnings are attributable. However, since such earnings may be subject to taxation in more than one country, the income tax provision shown above as U.S. or non-U.S. may not correspond to the earnings shown above.

Below is a reconciliation of income tax expense computed using the U.S. federal statutory income tax rate of 35% of earnings before income taxes to the actual provision for income taxes (dollars in thousands) for continuing operations:

	2014			2013			2012
Computed expected tax expense	$	13,451		$	31,562		$	23,361
Increase (reduction) in income taxes resulting from:
State income taxes, net of federal benefit	1,845			1,631			1,672
Research, experimentation and other tax credits	(5,251		)	(1,408		)	(518		)
Impairment of goodwill and intangibles not deductible for tax	5,368			—			5,031
Permanent differences between book and tax expense	814			(481		)	(9,507		)
Non-U.S. subsidiaries taxed at other than 35%	5,762			1,761			3,670
Adjustment to valuation allowances	7,738			726			4,598
Other, net	(100		)	(733		)	822
	$	29,627		$	33,058		$	29,129

In fiscal 2014, the Company recorded $7.7 million in valuation allowances for deferred tax assets related to foreign jurisdictions. In fiscal 2013, the Company recorded $0.7 million in additional valuation allowances for deferred tax assets principally related to a state jurisdiction and in fiscal 2012, the Company recorded $4.6 million in additional valuation allowances for deferred tax assets primarily consisting of $5.2 million related to a foreign jurisdiction, offset by other adjustments. The increases in valuation allowances were due to the change in management’s assessment of future projections in certain state and foreign jurisdictions.

	2012
Computed expected tax expense	$	18,650
Increase in income taxes resulting from:
State income taxes, net of federal benefit	737
Other, net	1
	$	19,388

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at March 31, 2014 and 2013 are presented below (dollars in thousands). In accordance with income tax accounting standards, as of March 31, 2014 the Company has not recognized deferred income taxes on approximately $30.7 million of undistributed earnings of foreign subsidiaries that are indefinitely reinvested outside the respective parent’s country. Calculation of the deferred income tax related to these earnings is not practicable.

	2014			2013
Deferred tax assets:
Accrued expenses not currently deductible for tax purposes	$	10,606		$	9,183
Revenue recognized for tax purposes in excess of revenue for financial reporting purposes	3,859			4,314
Net operating loss and tax credit carryforwards	43,568			45,746
Other	10,411			11,945
Total deferred tax assets	68,444			71,188
Less valuation allowance	43,436			35,981
Net deferred tax assets	25,008			35,207
Deferred tax liabilities:
Intangible assets, principally due to differences in amortization	$	(70,892	)	$	(66,959	)
Costs capitalized for financial reporting purposes in excess of amounts capitalized for tax purposes	(20,398		)	(24,869		)
Property and equipment, principally due to differences in depreciation	(11,074		)	(17,702		)
Total deferred tax liabilities	(102,364		)	(109,530		)
Net deferred tax liability	$	(77,356	)	$	(74,323	)

At March 31, 2014, the Company has net operating loss carryforwards of approximately $9.6 million and $61.9 million for U.S. federal and state income tax purposes, respectively. These net operating loss carryforwards expire in various amounts from 2014 through 2031. The Company has foreign net operating loss carryforwards of approximately $119.9 million. Of this amount, $116.3 million do not have expiration dates. The remainder expires in various amounts through 2023.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Based upon the Company’s history of profitability and taxable income and the reversal of taxable temporary differences in the U.S., management believes that with the exception of carryforwards in certain states it is more likely than not the Company will realize the benefits of these deductible differences. The Company has established valuation allowances against $56.3 million of loss carryforwards in the states where activity does not support the deferred tax asset.

Based upon the Company’s history of losses in certain non-U.S. jurisdictions, management believes it is more likely than not the Company will not realize the benefits of certain foreign carryforwards and has established valuation allowances for substantially all of its foreign deferred tax assets.

The following table sets forth changes in the total gross unrecognized tax benefit liabilities, including accrued interest, for the years ended March 31, 2014, 2013, and 2012. The entire liability, if recognized, would reduce the Company’s effective income tax rate in future periods.

(dollars in thousands)	2014			2013		2012
Balance at beginning of period	$	3,646		$	3,109	$	3,043
Additions based on tax positions related to the current year	902			342		189
Reduction due to expiration of statute of limitations	(3,037		)	—		(94		)
Adjustments to tax positions taken in prior years	946			195		(29		)
Balance at end of period included in other liabilities	$	2,457		$	3,646	$	3,109

The Company reports accrued interest and penalties related to unrecognized tax benefits in income tax expense. For the fiscal year ended March 31, 2014, the Company recognized a release of $0.4 million of tax-related interest expense and penalties and had $0.2 million of accrued interest and penalties at March 31, 2014. The Company expects that up to $0.2 million of the above balance could potentially be reversed within the next twelve months.

The Company files a consolidated U.S. federal income tax return and tax returns in various state and local jurisdictions. The Company’s subsidiaries also file tax returns in various foreign jurisdictions in which it operates. In the U.S., the statute of limitations for Internal Revenue Service examinations remains open for the Company’s federal income tax returns for fiscal years subsequent to 2010. The status of state and local and foreign tax examinations varies by jurisdiction. The Company does not anticipate any material adjustments to its financial statements resulting from tax examinations currently in progress.