8. Income Taxes

The Company’s provision for income taxes consists of the following:

	Year ended December 31,
	2013		2012			2011
Current:
Federal	$	48,287	$	34,170		$	14,312
State		5,648		3,854			1,885
Foreign		2,214		81			–
		56,149		38,105			16,197
Deferred:
Federal		42,003		21,972			15,632
State		5,523		3,048			1,887
Foreign		167		25			–
		47,693		25,045			17,519
Change in valuation allowance		335		(21	)		(271,393	)
Provision for income taxes	$	104,177	$	63,129		$	(237,677	)

The Company is the taxpaying entity and files a consolidated federal income tax return. Currently, the Company is not under examination by any major taxing jurisdiction to which the Company is subject. As of December 31, 2013, due to the carryforward of unutilized net operating losses and research and development credits, the Company is subject to U.S. Federal income tax examinations for the tax years 2006 through 2013, and to state income tax examinations for the tax years 2006 through 2013. In addition, the Company is subject to audit by various foreign taxing jurisdictions for the tax years 2007 through 2013.

Interest and penalties are recorded separately from income tax expense, as part of pre-tax book income. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2013, 2012 and 2011.

The Company was in a three year cumulative net loss position, due primarily to a 2008 goodwill and tradename impairment write-off, and therefore had not considered expected future taxable income in analyzing the realizability of the deferred tax assets as of December 31, 2010, resulting in a full valuation allowance against these net deferred tax assets. In the fourth quarter of 2011, the Company was no longer in a three-year cumulative loss position and, as part of the normal assessment of the future realization of the net deferred tax assets, determined that a valuation allowance was no longer required. As a result, the valuation allowance was reversed in the fourth quarter of 2011 and the Company recorded as a tax benefit of $271,393.

Significant components of deferred tax assets and liabilities are as follows:

	December 31,
	2013			2012
Deferred tax assets:
Goodwill and intangible assets	$	74,992		$	125,457
Accrued expenses		24,263			26,606
Deferred revenue		4,413			3,503
Inventories		4,483			2,544
Pension obligations		4,043			9,064
Stock-based compensation		6,609			6,408
Operating loss and credit carryforwards		976			24,915
Interest rate swaps		-			1,119
Other		2,089			36
Valuation allowance		(1,021	)		(806	)
Total deferred tax assets		120,847			198,846

Deferred tax liabilities:
Depreciation		15,163			12,274
Debt refinancing costs		7,494			-
Prepaid expenses		1,183			1,131
Total deferred tax liabilities		23,840			13,405
Net deferred tax asset	$	97,007		$	185,441

The net current and noncurrent components of deferred taxes included in the consolidated balance sheets are as follows:

	December 31,
	2013			2012
Net current deferred tax assets	$	26,869		$	48,687
Net long-term deferred tax assets		86,125			137,560
Net long-term deferred tax liabilities		(14,966	)		-
Valuation allowance		(1,021	)		(806	)
Net deferred tax assets	$	97,007		$	185,441

Acquired as part of the Ottomotores acquisition, Ottomotores Brazil generated net operating losses for multiple years. The realizability of the deferred tax assets associated with these net operating losses is uncertain so a valuation allowance has been recorded in the opening balance sheet as of December 8, 2012 as well as at December 31, 2012 and 2013.

At December 31, 2013, the Company has state net operating loss carryforwards of approximately $10, which expire between 2023 and 2025.

As a result of ownership changes, Section 382 of the Internal Revenue Code of 1986 as amended and similar state provisions can limit the annual deductions of net operating loss and tax credit carry forwards. Such annual limitations could result in the expiration of net operating loss and tax credit carry forwards before utilization. The Company has no such limitation as of December 31, 2012 and if a limitation was triggered in 2013, the Company believes any limitation would not be significant.

At December 31, 2013 and 2012, the Company has no reserves recorded for uncertain tax positions.

The Company considers the earnings of certain non-U.S. subsidiaries to be indefinitely invested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and the Company’s specific plans for reinvestment of those subsidiary earnings. The Company has not provided for additional U.S. income taxes on approximately $8,666 of undistributed earnings of consolidated non-U.S. subsidiaries. It is not practicable to estimate the amount of unrecognized withholding taxes and deferred tax liability on such earnings.

A reconciliation of the statutory tax rates and the effective tax rates for the years ended December 31, 2013, 2012 and 2011 are as follows:

	Year ended December 31,
	2013			2012			2011

U.S. statutory rate		35.0	%		35.0	%		35.0	%
State taxes		3.7			4.1			4.0
Valuation allowance		0.2			-			(312.3	)
Other		-1.5			1.3			-
Effective tax rate		37.4	%		40.4	%		(273.3	)%