Income Taxes

The components of Income from continuing operations before income taxes and Income taxes follow:



	2015			2014			2013
Income from continuing operations before income taxes:
U.S.	$	11,525		$	33,070		$	10,343
International	146,421			133,430			97,231
Income from continuing operations before income taxes	$	157,946		$	166,500		$	107,574
Income tax provision:
Current:
U.S. – federal	$	(210	)	$	22,673		$	8,356
U.S. – state	2,019			1,236			539
International	32,217			35,954			16,933
	34,026			59,863			25,828
Deferred:
U.S. – federal	7,670			(6,737		)	13,792
U.S. – state	(1,137		)	1,279			(110		)
International	(3,993		)	(8,446		)	(4,257		)
	2,540			(13,904		)	9,425
Income taxes	$	36,566		$	45,959		$	35,253

Deferred income tax assets and liabilities at December 31 consist of the tax effects of temporary differences related to the following:



	Assets						Liabilities
	2015			2014			2015			2014
Allowance for doubtful accounts	$	662		$	494		$	129		$	86
Depreciation and amortization	(1,610		)	(19,338		)	78,786			59,271
Inventory valuation	15,911			17,072			1,843			1,981
Other postretirement/postemployment costs	2,978			17,549			(12,774		)	(247		)
Tax loss carryforwards	13,412			13,977			(1,919		)	(56		)
Pension	1,663			21,968			(22,946		)	(1,005		)
Accrued compensation	2,975			15,418			(7,267		)	—
Goodwill	—			(13,772		)	14,545			57
Swedish tax incentive	—			—			4,647			4,255
Unrealized foreign currency gain	—			—			1,350			1,999
Other	4,374			4,398			7,513			5,763
	40,365			57,766			63,907			72,104
Valuation allowance	(14,401		)	(15,856		)	—			—
	$	25,964		$	41,910		$	63,907		$	72,104
Current deferred income taxes	$	24,825		$	31,849		$	1,543		$	1,957
Non-current deferred income taxes	1,139			10,061			62,364			70,147
	$	25,964		$	41,910		$	63,907		$	72,104

Net current deferred tax liabilities are recorded in accrued liabilities on the consolidated Balance Sheet.

The standards related to accounting for income taxes require that deferred tax assets be reduced by a valuation allowance if, based on all available evidence, it is more likely than not that the deferred tax asset will not be realized. Available evidence includes the reversal of existing taxable temporary differences, future taxable income exclusive of temporary differences, taxable income in carryback years and tax planning strategies.

Management believes that sufficient taxable income should be earned in the future to realize the net deferred tax assets principally in the United States. The realization of these assets is dependent in part on the amount and timing of future taxable income in the jurisdictions where deferred tax assets reside. The Company has tax loss carryforwards of $57,560; $1,756 of which relates to state tax loss carryforwards and $145 which relates to federal loss carryforward acquired in the Priamus deal and not limited by Section 382; $47,462 of which relates to international tax loss carryforwards with carryforward periods ranging from one to 15 years; and $8,197 of which relates to international tax loss carryforwards with unlimited carryforward periods. In addition, the Company has tax credit carryforwards of $242 with remaining carryforward periods ranging from one year to 5 years. As the ultimate realization of the remaining net deferred tax assets is dependent upon future taxable income, if such future taxable income is not earned and it becomes necessary to recognize a valuation allowance, it could result in a material increase in the Company’s tax expense which could have a material adverse effect on the Company’s financial condition and results of operations.

The Company has not recognized a deferred income liability on $959,857 of undistributed earnings of its international subsidiaries, since such earnings are considered to be reinvested indefinitely as defined per the indefinite reversal criterion within the accounting guidance for income taxes. If the earnings were distributed in the form of dividends, the Company would be subject, in certain cases, to both U.S. income taxes and foreign income and withholding taxes. Determination of the amount of this unrecognized deferred income tax liability is not practicable. During 2015, the Company repatriated a dividend from a portion of current year foreign earnings to the U.S. in the amount of $19,500. As a result of the dividend, tax expense increased by $6,821 and the 2015 annual consolidated effective income tax rate increased by 4.3 percentage points.

A reconciliation of the U.S. federal statutory income tax rate to the consolidated effective income tax rate from continuing operations follows:



	2015		2014		2013
U.S. federal statutory income tax rate	35.0	%	35.0	%	35.0	%
State taxes (net of federal benefit)	0.2		0.5		0.3
Foreign losses without tax benefit	1.1		1.1		0.8
U.S. Tax Court Decision	—		—		15.3
Foreign operations taxed at lower rates	(12.9	)	(9.9	)	(14.4	)
Repatriation from current year foreign earnings	4.3		2.6		1.1
Tax withholding refund	(1.9	)	—		—
Tax Holiday's	(3.2	)	(2.7	)	(6.2	)
Other	0.6		1.0		0.9
Consolidated effective income tax rate	23.2	%	27.6	%	32.8	%

The Aerospace and Industrial Segments were previously awarded a number of multi-year tax holidays in both Singapore and China. Tax benefits of $5,000 ($0.09 per diluted share), $4,513 ($0.08 per diluted share) and $6,746 ($0.12 per diluted share) were realized in 2015, 2014 and 2013, respectively. These holidays are subject to the Company meeting certain commitments in the respective jurisdictions. The significant tax holidays are due to expire in 2016 and 2017.

Income taxes paid globally, net of refunds, were $31,895, $33,146 and $158,092 in 2015, 2014 and 2013, respectively.

As of December 31, 2015, 2014 and 2013, the total amount of unrecognized tax benefits recorded in the consolidated balance sheet was $10,634, $8,560 and $8,027, respectively, which, if recognized, would have reduced the effective tax rate in prior years, with the exception of amounts related to acquisitions. A reconciliation of the unrecognized tax benefits for 2015, 2014 and 2013 follows:



	2015			2014		2013
Balance at January 1	$	8,560		$	8,027	$	9,321
Increase (decrease) in unrecognized tax benefits due to:
Tax positions taken during prior periods	1,691			533		9,944
Tax positions taken during the current period	—			—		3,350
Acquisition	598			—		556
Settlements with taxing authorities	—			—		(15,144		)
Lapse of the applicable statute of limitations	(215		)	$	—	$	—
Balance at December 31	$	10,634		$	8,560	$	8,027

The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. The Company recognized interest and penalties as a component of income taxes of $616, $0, and $9,614 in the years 2015, 2014, and 2013 respectively. The liability for unrecognized tax benefits include gross accrued interest and penalties of $1,923, $1,031 and $1,031 at December 31, 2015, 2014 and 2013, respectively.

The Company or its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by various taxing authorities, including the IRS in the U.S. and the taxing authorities in other major jurisdictions including China, Germany, Singapore, Sweden and Switzerland. With a few exceptions, tax years remaining open to examination in significant foreign jurisdictions include tax years 2010 and forward and for the U.S. include tax years 2012 and forward. The Company is under audit in the U.S. for tax year 2013 as well as several state audits for the period 2011 through 2013. No other matters are ongoing.