Income Taxes

Income tax expense from continuing operations consists of the following:



	Year Ended December 31,
	2015			2014			2013
	(In thousands)
Current:
Federal	$	—		$	2		$	(496	)
State and local	125			(79		)	70
Foreign	2,789			3,096			4,148
	2,914			3,019			3,722
Deferred:
Federal	2,382			3,824			3,396
State and local	(316		)	209			611
Foreign	1,582			(1,117		)	(1,301		)
	3,648			2,916			2,706
Income tax expense	$	6,562		$	5,935		$	6,428

U.S. and foreign income (loss) from continuing operations before income taxes are as follows:



	Year Ended December 31,
	2015		2014			2013
	(In thousands)
United States	$	2,077	$	(1,600	)	$	(3,487	)
Foreign	8,077		(11,222		)	2,308
Income (loss) before income taxes	$	10,154	$	(12,822	)	$	(1,179	)

U.S. and foreign income tax expense are as follows:



	Year Ended December 31,
	2015		2014		2013
	(In thousands)
United States	$	2,191	$	3,956	$	3,581
Foreign	4,371		1,979		2,847
Income tax expense	$	6,562	$	5,935	$	6,428

Income tax expense differs from the amounts computed by applying the statutory U.S. Federal income tax rate to income (loss) before income taxes as a result of the following:



	Year Ended December 31,
	2015			2014			2013
	(In thousands)
Income tax expense (benefit) at the federal statutory rate of 35%	$	3,554		$	(4,488	)	$	(413	)
Increase (decrease) resulting from:
State income taxes, net of federal income tax benefit	(235		)	95			443
Non-deductible other costs	1,353			2,623			1,329
Valuation allowance	515			6,200			6,752
Foreign cash repatriation	1,245			(530		)	(2,783		)
Impact of foreign tax	(822		)	(5,719		)	(1,002		)
Provision for uncertain tax position	914			8,621			2,208
Other	38			(867		)	(106		)
Income tax expense	$	6,562		$	5,935		$	6,428

The components of the net deferred tax asset or liability are as follows:



	December 31,
	2015			2014
	(In thousands)
Deferred tax assets:
Accrued expenses	$	6,070		$	10,741
Federal tax credit carryforwards	18,587			16,944
U.S. net operating loss ("NOL") carryforwards	19,311			18,452
Foreign NOL carryforwards	8,127			8,818
Other	6,508			5,714
Total gross deferred tax assets	58,603			60,669
Less valuation allowance	(55,978		)	(56,942		)
Deferred tax assets, net	2,625			3,727
Deferred tax liabilities:
Goodwill	(30,013		)	(27,947		)
Other	(2,373		)	(1,830		)
Total gross deferred tax liabilities	(32,386		)	(29,777		)
Net deferred tax liability	$	(29,761	)	$	(26,050	)

Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against net deferred tax assets. We are required to estimate income taxes in each jurisdiction where we operate. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items. These differences result in deferred tax assets and liabilities, which are included in the Consolidated Balance Sheets. We assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent recovery is believed unlikely, we establish a valuation allowance. Changes in the valuation allowance for deferred tax assets impact our income tax expense during the period.

The establishment of a valuation allowance does not impair our ability to utilize the deferred tax assets, such as net operating loss and tax credit carryforwards, upon achieving sufficient profitability. As we generate domestic taxable income in future periods, we do not expect to record significant related domestic income tax expense until the valuation allowance is significantly reduced. As we are able to determine that it is more likely than not that we will be able to utilize the deferred tax assets, we will reduce our valuation allowance. At December 31, 2015, we have Federal net operating loss ("NOL") and Federal tax credit carryforwards of approximately $47 million and $23 million, respectively. U.S. NOL carryforwards of $2 million begin to expire in 2022 while the remaining NOL carryforwards do not begin to expire until 2031. Our Federal tax credit carryforwards are subject to certain annual usage limits, but do not begin to expire until 2025. At December 31, 2015, we also have approximately $57 million of foreign NOL carryforwards. We have recorded a valuation allowance for most all of our foreign NOL carryforwards, as we do not believe it is more likely than not that we will utilize them. Approximately 53% of the foreign NOL carryforwards may expire.

At December 31, 2015, we estimate the undistributed earnings and profits of our foreign subsidiaries that would be subject to U.S. taxes totaled approximately $51 million. Quantification of the U.S. deferred tax liability associated with indefinitely reinvested earnings and profits is not practicable.

We account for uncertain tax positions by recognizing the financial statement effects of a tax position only when based upon the technical merits, it is "more-likely-than-not" that the tax position will be sustained upon examination. The changes in the balance of our unrecognized tax benefits were as follows:



	Unrecognized Tax Benefits
	(In thousands)
Balance at January 1, 2013	$	5,474
Increases related to prior year tax positions (net)	51
Increases related to current year tax positions	2,157
Balance at December 31, 2013	7,682
Increases related to prior year tax positions (net)	71
Increases related to current year tax positions	7,116
Balance at December 31, 2014	14,869
Decreases related to prior year tax positions (net)	(599		)
Increases related to current year tax positions	1,775
Decreases related to settlements with tax authorities	(1,135		)
Lapse of statute of limitations	(188		)
Balance at December 31, 2015	$	14,722

Our unrecognized tax benefits totaled $14.7 million at December 31, 2015. During 2015, the significant fluctuation in the Euro to the U.S. dollar conversion rate reduced the overall outstanding liability by $0.7 million, this has been netted against the current year increase. If recognized, all of these benefits would affect our future income tax expense, prior to the impact of any related valuation allowance. We believe that it is not reasonably possible that any significant unrecognized tax benefits will be released in the next twelve months. Note that the amounts recorded for our unrecognized tax benefits represent management estimates, and actual results could differ which would impact our effective tax rate. Interest and penalties related to income tax liabilities are included in income tax expense in the consolidated statements of operations. During 2015, $0.3 million of interest and penalties were recorded related to unrecognized tax benefits. We did not record a material amount of interest and penalties during 2014, and 2013. Cumulative interest and penalties related to unrecognized tax benefits totaled $0.5 million at December 31, 2015.

We file a U.S. Federal income tax return and tax returns in nearly all U.S. states, as well as in numerous foreign jurisdictions. We are routinely subject to examination by various domestic and foreign tax authorities. The outcome of tax audits is always uncertain and could result in cash tax payments that could be material. Additionally, tax audits may take long periods of time to ultimately resolve. We do not believe the outcome of any tax audits at December 31, 2015, will have a material adverse effect on our consolidated financial position or results of operations. With limited exception, we are no longer subject to U.S. Federal and state income tax audits for years through 2011. Our most significant foreign operations and the most recent year for which they are no longer subject to tax examination are as follows: Germany-2012; India-2009; Netherlands-2011; Norway-2004; and the UK-2013.