Income Taxes

The provision for income taxes for the years ended December 31 consists of the following:



	2013			2012			2011
Current:
Federal	$	85,173		$	134,276		$	113,937
State	15,845			22,072			19,416
International	81,052			52,708			88,509
	182,070			209,056			221,862
Deferred:
Federal	22,973			9,690			25,729
State	2,438			2,572			3,328
International	(25,138		)	(17,676		)	(40,434		)
	273			(5,414		)	(11,377		)
	$	182,343		$	203,642		$	210,485

The principal causes of the difference between the U.S. federal statutory tax rate of 35% and effective income tax rates for the years ended December 31 are as follows:



	2013			2012			2011
United States	$	326,990		$	441,526		$	405,508
International	255,229			268,833			404,293
Income before income taxes	$	582,219		$	710,359		$	809,801

Provision at statutory tax rate	$	203,777		$	248,626		$	283,430
State taxes, net of federal benefit	11,885			16,019			14,784
International effective tax rate differential	(22,059		)	(43,008		)	(48,785		)
Change in valuation allowance	(8,253		)	(6,266		)	(49,826		)
Other non-deductible expenses	2,840			2,764			4,744
Changes in tax accruals	(1,336		)	(10,613		)	12,437
Other	(4,511		)	(3,880		)	(6,299		)
Provision for income taxes	$	182,343		$	203,642		$	210,485

During 2013, the company recorded an increase in the provision for income taxes, inclusive of penalties, of $20,809 ($.20 per share on both a basic and diluted basis) and interest expense of $1,623 ($1,236 net of related taxes or $.01 per share on both a basic and diluted basis) relating to the settlement of certain international tax matters.

During 2011, the company recorded a net reduction in the provision for income taxes of $28,928 ($.25 per share on both a basic and diluted basis) principally due to a reversal of a valuation allowance on certain deferred tax assets as a result of a realignment of the company's international business operations.

At December 31, 2013, the company had a liability for unrecognized tax benefits of $45,987 (substantially all of which, if recognized, would favorably affect the company's effective tax rate), of which approximately $317 is expected to be paid over the next twelve months. The company does not believe there will be any other material changes in its unrecognized tax positions over the next twelve months.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31 is as follows:



	2013			2012			2011
Balance at beginning of year	$	46,980		$	63,498		$	66,110
Additions based on tax positions taken during a prior period	22,170			448			10,850
Reductions based on tax positions taken during a prior period	(3,684		)	(11,824		)	(2,389		)
Additions based on tax positions taken during the current period	7,593			8,014			7,602
Reductions related to settlement of tax matters	(24,450		)	(8,288		)	(12,879		)
Reductions related to a lapse of applicable statute of limitations	(2,622		)	(4,868		)	(5,796		)
Balance at end of year	$	45,987		$	46,980		$	63,498

Interest costs related to unrecognized tax benefits are classified as a component of "Interest and other financing expense, net" in the company's consolidated statements of operations. In 2013, 2012, and 2011 the company recognized $267, $18, and $2,068, respectively, of interest expense related to unrecognized tax benefits. At December 31, 2013 and 2012, the company had a liability for the payment of interest of $10,637 and $10,599, respectively, related to unrecognized tax benefits.

In many cases the company's uncertain tax positions are related to tax years that remain subject to examination by tax authorities. The following describes the open tax years, by major tax jurisdiction, as of December 31, 2013:



United States - Federal		2010 - present
United States - States		2007 - present
Germany (a)		2010 - present
Hong Kong		2006 - present
Italy (a)		2008 - present
Sweden		2007 - present
United Kingdom		2011 - present

(a) Includes federal as well as local jurisdictions.

Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated balance sheets. These temporary differences result in taxable or deductible amounts in future years.

The significant components of the company's deferred tax assets and liabilities, included primarily in "Other current assets," "Other assets," "Accrued expenses," and "Other liabilities" in the company's consolidated balance sheets, consist of the following at December 31:



	2013			2012
Deferred tax assets:
Net operating loss carryforwards	$	92,784		$	95,960
Inventory adjustments	43,009			45,201
Allowance for doubtful accounts	16,513			17,008
Accrued expenses	52,664			56,222
Interest carryforward	64,717			46,876
Stock-based compensation awards	11,507			14,266
Other comprehensive income items	6,206			15,055
Other	1,470			3,381
	288,870			293,969
Valuation allowance	(16,156		)	(24,409		)
Total deferred tax assets	$	272,714		$	269,560

Deferred tax liabilities:
Goodwill	$	(54,261	)	$	(31,107	)
Depreciation	(65,309		)	(61,896		)
Intangible assets	(66,919		)	(61,690		)
Total deferred tax liabilities	$	(186,489	)	$	(154,693	)
Total net deferred tax assets	$	86,225		$	114,867

At December 31, 2013, the company had international tax loss carryforwards of approximately $237,579, of which $30,000 have expiration dates ranging from 2014 and 2033, and the remaining $207,579 have no expiration date. Deferred tax assets related to these international tax loss carryforwards were $67,415 with a corresponding valuation allowance of $11,168.

The company also has Federal net operating loss carryforwards of approximately $64,514 at December 31, 2013 which relate to acquired subsidiaries. These Federal net operating losses expire in various years beginning after 2020. The company has an agreement with the sellers of an acquired business to reimburse them for the company's utilization of certain Federal net operating loss carryforwards.

Valuation allowances reflect the deferred tax benefits that management is uncertain of the ability to utilize in the future.

Cumulative undistributed earnings of international subsidiaries were $2,813,169 at December 31, 2013. No deferred Federal income taxes were provided for the undistributed earnings as they are permanently reinvested in the company's international operations.

Income taxes paid, net of income taxes refunded, amounted to $235,102, $179,408, and $236,872 in 2013, 2012, and 2011, respectively.