Income Taxes

Earnings (loss) from continuing operations before income taxes consist of the following (in thousands):



	2013			2012			2011
Domestic	$	(68,410	)	$	(26,258	)	$	(24,977	)
Foreign	30,070			31,958			12,497
	$	(38,340	)	$	5,700		$	(12,480	)

The Company has provided for income taxes (benefits) from continuing operations as follows (in thousands):



	2013			2012			2011
Current:
Federal	$	(700	)	$	(9,411	)	$	3,244
State	300			716			580
Foreign	11,043			21,154			13,008
	10,643			12,459			16,832
Deferred:
Federal	3,011			3,968			(3,474		)
Foreign	(994		)	348			(4,078		)
	2,017			4,316			(7,552		)
Income Taxes	$	12,660		$	16,775		$	9,280

Included in the 2013 and 2012 Federal current tax benefit is a benefit of $1,220,000 and $7,126,000 related to an intra-period allocation to continuing operations. A charge in an equal amount is in discontinued operations. A reconciliation to the effective income tax rate from the federal statutory rate is as follows:



	2013		2012		2011
Statutory federal income tax rate	(35.0	)%	35.0	%	(35.0	)%
State and local income taxes, net of federal income tax benefit	0.5		8.2		3.0
Tax credits	(25.9	)	(8.5	)	(9.9	)
Foreign taxes at less than the federal statutory rate (including tax holidays)	(12.0	)	(60.7	)	(39.9	)
Federal and foreign valuation allowance	48.2		302.2		51.0
Non-deductible extinguishment and debt finance costs	—		1.2		20.6
Withholding taxes	0.8		12.3		(0.3	)
Compensation	0.6		1.3		2.5
Dividends	61.9		(1.8	)	21.1
Life insurance	(1.7	)	(11.3	)	(5.5	)
Foreign branch activity	(2.0	)	(14.7	)	(11.3	)
Uncertain tax positions	1.5		155.5		0.9
Goodwill and intangible asset impairment (Asia/Pacific)	—		—		113.1
Foreign tax audit settlement	—		—		(39.6	)
Other, net	(3.9	)	(124.4	)	3.7
	33.0	%	294.3	%	74.4	%

The foreign tax audit settlement in 2011 relates to a tax settlement in Germany as the German government agreed to follow a European Court of Justice case and a German Tax Court case that impacted an open tax return year for a benefit of $4,947,000 or $0.15 per diluted share. The increase in 2012 uncertain tax positions relates primarily to a foreign audit of years prior to 2012.

At December 31, 2013, total deferred tax assets were $126,350,000, total deferred tax liabilities were $40,723,000 and the tax valuation allowance total was $120,470,000 for a net deferred income tax liability of $34,843,000 compared to total deferred tax assets of $111,107,000, total deferred tax liabilities of $43,052,000 and a tax valuation allowance total of $100,314,000 for a net deferred income tax liability of $32,259,000 at December 31, 2012.

Significant components of deferred income tax assets and liabilities at December 31, 2013 and 2012 are as follows (in thousands):



	2013			2012
Current deferred income tax assets (liabilities), net:
Loss carryforwards	$	—		$	107
Bad debt	6,931			7,280
Warranty	6,104			4,929
State and local taxes	2,787			2,761
Other accrued expenses and reserves	3,939			2,575
Inventory	1,702			2,331
Compensation and benefits	1,688			2,439
Product liability	487			292
Valuation allowance	(27,300		)	(22,592		)
Other, net	406			(2,258		)
	$	(3,256	)	$	(2,136	)
Long-term deferred income tax assets (liabilities), net:
Goodwill & intangibles	(25,919		)	(25,894		)
Convertible debt	(659		)	(810		)
Fixed assets	(13,115		)	(14,089		)
Compensation and benefits	22,967			22,388
Loss and credit carryforwards	62,738			48,747
Product liability	3,562			3,812
State and local taxes	13,039			11,608
Valuation allowance	(93,170		)	(77,722		)
Other, net	(1,030		)	1,837
	$	(31,587	)	$	(30,123	)
Net Deferred Income Taxes	$	(34,843	)	$	(32,259	)

The Company recorded a valuation allowance for its domestic net deferred tax assets due to a domestic loss recognized in each year from 2007 through 2013 (except for discontinued gains). In addition, during 2007 through 2013, the Company also recorded valuation allowances for certain foreign country net deferred tax assets where recent performance results in a three year cumulative loss. The Company made net payments for income taxes of $6,349,000, $10,837,000, and $14,290,000 during the years ended December 31, 2013, 2012 and 2011, respectively.

At December 31, 2013, the Company had foreign tax loss carryforwards of approximately $52,056,000 which are non-expiring, of which $52,056,000 are offset by valuation allowances. At December 31, 2013, the Company also had $397,000,000 of domestic state and local tax loss carryforwards, of which $154,000,000 expire between 2014 and 2017, $162,000,000 expire between 2018 and 2027 and $81,000,000 expire after 2027. The Company has domestic federal tax credit carryforwards of $28,244,000 of which $4,080,000 expire between 2014 and 2018 and $23,017,000 expire between 2019 and 2022, $900,000 expire in 2031 and $247,000 are indefinite.

As of December 31, 2013 and 2012, the Company had a liability for uncertain tax positions, excluding interest and penalties of $10,343,000 and $9,401,000, respectively. The Company does not believe there will be a material change in its unrecognized tax positions over the next twelve months.

The total liabilities associated with unrecognized tax benefits that, if recognized, would impact the effective tax rates were $10,343,000 and $9,401,000 at December 31, 2013 and 2012, respectively.

A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows (in thousands):



	2013			2012
Balance at beginning of year	$	9,851		$	4,075
Additions to:
Positions taken during the current year	942			516
Positions taken during a prior year	55			6,055
Exchange rate impact	313			—
Deductions due to:
Exchange rate impact	—			(14		)
Positions taken during a prior year	—			(118		)
Settlements with taxing authorities	(36		)	(621		)
Lapse of statute of limitations	(292		)	(42		)
Balance at end of year	$	10,833		$	9,851

The Company recognizes interest and penalties associated with uncertain tax positions in income tax expense. During 2013, 2012 and 2011 the (expense) benefit for interest and penalties was $(676,000), $(3,309,000) and $20,000, respectively. The Company had approximately $5,181,000 and $4,029,000 of accrued interest and penalties as of December 31, 2013 and 2012, respectively.

Included in the balance of uncertain tax positions in Other Long-Term Obligations at the end of 2013 is an accrual of tax ($6,275,000) and interest ($4,498,000) resulting from a foreign audit related to years before 2012.

The Company and its subsidiaries file income tax returns in the U.S. and certain foreign jurisdictions. The Company is subject to U.S. federal income tax examinations for calendar years 2010 to 2013, and is subject to various U.S. state income tax examinations for 2009 to 2013. With regards to foreign income tax jurisdictions, the Company is generally subject to examinations for the periods 2007 to 2013.