Income Taxes

The Company's income before income taxes and income tax expense for continuing operations, each by tax jurisdiction, consisted of the following:



	Year ended December 31,
	2013			2012			2011
	(dollars in thousands)
Income before income taxes:
Domestic	$	50,150		$	11,920		$	49,060
Foreign	47,610			30,340			30,680
Total income before income taxes	$	97,760		$	42,260		$	79,740
Current income tax expense:
Federal	$	16,080		$	8,250		$	4,500
State and local	1,460			1,860			2,490
Foreign	9,650			4,190			9,890
Total current income tax expense	27,190			14,300			16,880
Deferred income tax expense (benefit):
Federal	(4,490		)	(6,200		)	10,390
State and local	(1,020		)	(750		)	830
Foreign	(3,290		)	(1,380		)	830
Total deferred income tax expense	(8,800		)	(8,330		)	12,050
Income tax expense	$	18,390		$	5,970		$	28,930

The components of deferred taxes at December 31, 2013 and 2012 are as follows:



	2013			2012
	(dollars in thousands)
Deferred tax assets:
Accounts receivable	$	1,240		$	1,110
Inventories	7,840			5,670
Accrued liabilities and other long-term liabilities	40,410			34,880
Tax loss and credit carryforwards	10,010			6,740
Gross deferred tax asset	59,500			48,400
Valuation allowances	(6,530		)	(4,440		)
Net deferred tax asset	52,970			43,960
Deferred tax liabilities:
Property and equipment	(20,420		)	(19,800		)
Goodwill and other intangible assets	(66,440		)	(60,990		)
Other, principally deferred income	(6,310		)	(3,860		)
Gross deferred tax liability	(93,170		)	(84,650		)
Net deferred tax liability	$	(40,200	)	$	(40,690	)

The following is a reconciliation of income tax expense computed at the U.S. federal statutory rate to income tax expense allocated to income from continuing operations before income taxes:



	2013			2012			2011
	(dollars in thousands)
U.S. federal statutory rate	35		%	35		%	35		%
Tax at U.S. federal statutory rate	$	34,220		$	14,790		$	27,910
State and local taxes, net of federal tax benefit	270			730			2,440
Differences in statutory foreign tax rates	(8,550		)	(4,920		)	(2,250		)
Change in recognized tax benefits	(1,630		)	(1,320		)	(700		)
Tax holiday^(a)	(1,980		)	(1,160		)	—
Nontaxable gains	(5,460		)	—			—
Restructuring (benefits)/charges	2,230			(2,400		)	1,300
Noncontrolling interest	(1,410		)	(790		)	—
Net change in valuation allowance	1,980			1,600			130
Other, net	(1,280		)	(560		)	100
Income tax expense	$	18,390		$	5,970		$	28,930

__________________________

^(a)Tax holiday related to Thailand which expires on December 31, 2015.

The Company has recorded deferred tax assets of $2.5 million related to various state operating loss carryforwards and $6.8 million related to various foreign operating loss carryforwards. The majority of the state tax loss carryforwards expire between 2024 and 2027 and the majority of the foreign losses have indefinite carryforward periods.

In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations. As of December 31, 2013, the Company has not made a provision for U.S. or additional non-U.S. withholding taxes on approximately $228.0 million of undistributed earnings of non-U.S. subsidiaries that are considered to be permanently reinvested. Generally, such amounts become subject to U.S. taxation upon remittance of dividends and under certain other circumstances. It is not practicable to estimate the amount of deferred tax liability related to investments in these non-U.S. subsidiaries.

Unrecognized tax benefits

The Company has approximately $31.6 million and $21.7 million of unrecognized tax benefits ("UTBs") as of December 31, 2013 and 2012, respectively. If the unrecognized tax benefits were recognized, the impact to the Company's effective tax rate would be to reduce reported income tax expense for the years ended December 31, 2013 and 2012 approximately $25.7 million and $14.0 million, respectively.

A reconciliation of the change in the UTBs and related accrued interest and penalties for the years ended December 31, 2013 and 2012 is as follows:



	Unrecognized Tax Benefits
	(dollars in thousands)
Balance at December 31, 2011	$	13,390
Tax positions related to current year:
Additions	3,990
Tax positions related to prior years:
Additions	6,760
Reductions	(320		)
Settlements	(720		)
Lapses in the statutes of limitations	(1,370		)
Balance at December 31, 2012	$	21,730
Tax positions related to current year:
Additions	1,300
Tax positions related to prior years:
Additions	15,340
Reductions	(4,310		)
Settlements	—
Lapses in the statutes of limitations	(2,490		)
Balance at December 31, 2013	$	31,570

In addition to the UTBs summarized above, the Company has recorded approximately $1.8 million and $1.6 million in potential interest and penalties associated with uncertain tax positions as of December 31, 2013 and 2012, respectively.

The increase in UTBs related to prior years is primarily due to the Company's business acquisitions during 2013. The Company maintains an indemnification asset for the acquired UTBs and corresponding interest and penalties.

The Company is subject to U.S. federal, state and local, and certain non-U.S. income tax examinations for tax years 2002 through 2013. The Company is currently under audit by the Internal Revenue Service for tax year 2011. Additionally, there are currently two foreign income tax examinations in process. The Company does not believe that the results of these examinations will have a significant impact on the Company's tax position or its effective tax rate.

Management monitors changes in tax statutes and regulations and the issuance of judicial decisions to determine the potential impact to unrecognized tax benefits and is not aware of, nor does it anticipate, any material subsequent events that could have a significant impact on the Company's financial position during the next twelve months.