Income Taxes

Our effective tax rate was 25.8 percent for the quarter ended March 31, 2014, compared to 25.0 percent for the quarter ended March 31, 2013. Our effective tax rate differs from the United States statutory tax rate primarily due to valuation allowances, earnings in countries with differing statutory tax rates, accruals related to uncertain tax positions, application of intraperiod tax allocation rules, and tax planning structures. At March 31, 2014 and December 31, 2013, we had $0.8 million and $1.3 million, respectively, of gross unrecognized tax benefits, exclusive of interest and penalties. During the quarter ended March 31, 2014, we recorded an income tax benefit, exclusive of interest and penalties, of $0.5 million due to the reversal of an accrual for an uncertain tax position that expired under the statute of limitations.

FASB ASC 740-20, "Income Taxes - Intraperiod Tax Allocation," requires that the provision for income taxes be allocated between continuing operations and other categories of earnings (such as discontinued operations or other comprehensive income) for each tax jurisdiction. In periods in which there is a year-to-date pre-tax loss from continuing operations and pre-tax income in other categories of earnings, the tax provision is first allocated to the other categories of earnings. A related tax benefit is then recorded in continuing operations. A tax benefit of $0.6 million was recorded in our income tax provision for the quarter ended March 31, 2014. There was no similar benefit recorded for the quarter ended March 31, 2013.

Our current and future provision for income taxes for 2014 is impacted by valuation allowances. In the United States, the Netherlands and Portugal, we have recorded valuation allowances against our deferred income tax assets. We review the need for valuation allowances on a quarterly basis, or more frequently, if events indicate that a review is required in order to assess the likelihood of the realization of our deferred tax assets. In assessing the need for recording or releasing a valuation allowance, we weigh all available positive and negative evidence. Examples of the evidence we consider are cumulative losses in recent years, losses expected in early future years, a history of potential tax benefits expiring unused, prudent and feasible tax planning strategies that could be implemented, and whether there was an unusual, infrequent or extraordinary item to be considered. Despite recent improvement in financial results in the U.S., management concluded that in consideration of the duration and magnitude of our U.S. operating losses, the current U.S. economic environment and the competitive landscape, it is our judgment that we have not yet achieved profitability of a duration and magnitude sufficient to release our valuation allowance against our deferred tax assets. Accordingly, we continue to maintain a valuation allowance related to our net deferred tax assets in the U.S. and certain foreign jurisdictions.

Income tax payments consisted of the following:



	Three months ended March 31,
(dollars in thousands)	2014		2013
Total income tax payments, net of refunds	$	2,728	$	2,269
Less: credits or offsets	912		385
Cash paid, net	$	1,816	$	1,884