Income Taxes



(In thousands)	2014			2013			2012
Components of income before income taxes*
U.S. income	$	58,209		$	48,621		$	67,043
Non-U.S. income	68,986			71,512			62,300
Income before income taxes	127,195			120,133			129,343
Provision for income taxes*
Current
Federal	$	23,659		$	18,656		$	18,774
State	1,349			1,492			2,556
Non-U.S.	21,101			18,453			19,438
Total current provision	46,109			38,601			40,768
Deferred
Federal	(3,650		)	(3,582		)	(518		)
State	317			(483		)	(125		)
Non-U.S.	(1,732		)	609			1,276
Total deferred provision	(5,065		)	(3,456		)	633
Provision for income taxes	41,044			35,145			41,401

*The components of income before income taxes and the provision for income taxes relate to continuing operations.

Included in discontinued operations is tax expense of $0.6 million in 2014, $1.4 million in 2013 and $1.1 million in 2012.

Cash flows from operations in the Consolidated Statement of Cash Flows include a deferred income tax (benefit) provision from discontinued operations of $(0.3) million, $0.2 million and $(0.4) million in 2014, 2013 and 2012, respectively.

Reconciliation of the U.S. federal income tax rates to our effective tax rate:



	2014		2013		2012
U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes—U.S.	0.8		0.6		1.2
Taxes on non-U.S. income	(2.2	)	(4.5	)	(1.0	)
Research and development credit	(0.7	)	(1.5	)	—
Manufacturing deduction credit	(1.0	)	(1.1	)	(2.0	)
Valuation allowances	(0.6	)	0.5		(0.2	)
Other	1.0		0.3		(1.0	)
Effective income tax rate	32.3	%	29.3	%	32.0	%

Components of deferred tax assets and liabilities:



	December 31,
(In thousands)	2014			2013
Deferred tax assets
Book expenses capitalized for tax	$	6,336		$	7,204
Post-retirement benefits	23,335			18,027
Inventory reserves	3,147			5,550
Vacation allowances	932			1,036
Net operating losses and tax credit carryforwards	7,479			6,711
Post employment benefits	2,382			757
Foreign tax credit carryforwards	11,231			2,227
Stock options	10,157			10,185
Liability insurance	3,918			3,686
Basis of capital assets	1,009			891
Warranties	3,210			3,049
Reserve for doubtful accounts	1,948			1,569
Accrued payroll	4,319			2,475
Other	5,801			6,838
Total deferred tax assets	85,204			70,205
Valuation allowances	(3,763		)	(4,938		)
Net deferred tax assets	81,441			65,267
Deferred tax liabilities
Property, plant and equipment	(9,269		)	(8,935		)
Pension	(22,195		)	(40,833		)
Intangibles	(30,180		)	(25,212		)
Other	(2,045		)	(2,455		)
Total deferred tax liabilities	(63,689		)	(77,435		)
Net deferred taxes	17,752			(12,168		)

At December 31, 2014, we had net operating loss carryforwards of approximately $28.4 million, all of which are in non-U.S. tax jurisdictions. Net operating loss carryforwards of $1.6 million will expire in 2016, which are offset by valuation allowances. The remainder either have a valuation allowance or may be carried forward for a period of at least seven years.

No deferred U.S. income taxes have been provided on undistributed earnings of non-U.S. subsidiaries, which amounted to $334.7 million as of December 31, 2014. These earnings are considered to be reinvested for an indefinite period of time. Because we currently do not have any plans to repatriate these funds, we cannot determine the impact of local taxes, withholding taxes and foreign tax credits associated with the future repatriation of such earnings and, therefore, cannot reasonably estimate the associated tax liability. In cases where we intend to repatriate a portion of the undistributed earnings of our foreign subsidiaries, we provide U.S. income taxes on such earnings.

A reconciliation of the change in the tax liability for unrecognized tax benefits for the years ended December 31, 2014 and 2013 is as follows:



(In thousands)	2014			2013
Beginning balance	$	5,888		$	9,520
Adjustments for tax positions related to the current year	4,072			(3,628		)
Adjustments for tax positions related to prior years	3			97
Statute expiration	(106		)	(101		)
Ending balance	9,857			5,888

The total amount of unrecognized tax benefits, if recognized, would reduce our future effective tax rate. We have recognized tax benefits associated with these liabilities in the amount of $5.2 million and $5.1 million at December 31, 2014 and 2013, respectively.

We recognize interest related to unrecognized tax benefits in interest expense and penalties in operating expenses. Our liability for accrued interest and penalties related to uncertain tax positions was $0.5 million at December 31, 2013. During 2014, we increased interest related to uncertain tax positions by $0.3 million. Our liability for accrued interest and penalties related to uncertain tax positions was $0.8 million at December 31, 2014.

We file a U.S. federal income tax return along with various state and foreign income tax returns. Examinations of our U.S. federal returns have been completed through 2010, with the 2010 tax year closed by statute. Various state and foreign income tax returns may be subject to tax audits for periods after 2008.