10. Income Taxes

The components of income from continuing operations before income taxes are as follows (in thousands):

	2016		2015		2014
U.S. Operations	$	23,996	$	33,161	$	26,965
Non-U.S. Operations		44,529		42,956		40,838
Total	$	68,525	$	76,117	$	67,803

The Company utilizes the asset and liability method of accounting for income taxes. Deferred income taxes are determined based on the estimated future tax effects of differences between the financial and tax bases of assets and liabilities given the provisions of the enacted tax laws. The components of the provision for income taxes on continuing operations (in thousands) were as shown below:

	2016			2015			2014
Current:
Federal	$	11,014		$	9,195		$	9,653
State		523			556			415
Non-U.S.		11,514			11,372			11,329
Total Current		23,051			21,123			21,397
Deferred:
Federal	$	(5,214	)	$	556		$	(2,017	)
State		(1,060	)		(495	)		(376	)
Non-U.S.		(482	)		(310	)		(950	)
Total Deferred		(6,756	)		(249	)		(3,343	)
Total	$	16,295		$	20,874		$	18,054

The following is a reconciliation from the U.S. Federal income tax rate on continuing operations to the total tax provision is as follows (in thousands):

	2016			2015			2014
Provision at statutory tax rate		35.0	%		35.0	%		35.0	%
State taxes		-0.5	%		0.1	%		0.0	%
Impact of foreign operations		-6.7	%		-5.0	%		-5.6	%
Federal tax credits		-1.8	%		-1.2	%		-0.7	%
Life insurance proceeds		0.0	%		0.0	%		-1.7	%
Contributions, net		-1.3	%		0.0	%		0.0	%
Other		-0.9	%		-1.5	%		-0.4	%
Effective income tax provision		23.8	%		27.4	%		26.6	%

Changes in the effective tax rates from period to period may be significant as they depend on many factors including, but not limited to, size of the Company’s income or loss and any one-time activities occurring during the period.

The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2016 was impacted by the following items: (i) a net benefit of $0.9 million related to a bargain-sale of idle property to a charitable organization, and (ii) a benefit of $0.7 million related to the R&D tax credit, and (iii) a benefit of $4.9 million due to the mix of income earned in jurisdictions with beneficial tax rates.

The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2015 was impacted by the following items: (i) a benefit of $0.5 million related to the R&D tax credit that expired during the fiscal year on December 31

, and (ii) a benefit of $4.0 million due to the mix of income earned in jurisdictions with beneficial tax rates.

The Company's income tax provision from continuing operations for the fiscal year ended June 30, 2014 was impacted by the following items: (i) a benefit of $0.5 million related to the R&D tax credit that expired during the fiscal year on December 31

, (ii) a benefit of $0.5 million related to a decrease in the statutory tax rate in the United Kingdom on prior period deferred tax liabilities recorded during the first quarter during the fiscal year, (iii) a benefit of

$1.1 million due to non-taxable life insurance proceeds

received in the third quarter and (iv) a benefit of $3.8 million due to the mix of income earned in jurisdictions with beneficial tax rates.

Significant components of the Company’s deferred income taxes are as follows (in thousands):

	2016			2015
Deferred tax liabilities:
Depreciation and amortization	$	(27,437	)	$	(31,126	)
Total deferred tax liability	$	(27,437	)	$	(31,126	)

Deferred tax assets:
Accrued compensation	$	3,707		$	3,911
Accrued expenses and reserves		6,154			6,680
Pension		29,730			19,624
Inventory		2,548			2,066
Other		1,432			1,741
Net operating loss and credit carry forwards		5,948			3,983
Total deferred tax asset	$	49,519		$	38,005

Less: Valuation allowance		(649	)		(656	)
Net deferred tax asset (liability)	$	21,433		$	6,223

The Company estimates the degree to which deferred tax assets, including net operating loss and credit carry forwards will result in a benefit based on expected profitability by tax jurisdiction and provides a valuation allowance for tax assets and loss carry forwards that it believes will more likely than not go unrealized. The valuation allowance at June 30, 2016 applies to state and foreign loss carry forwards, which management has concluded that it is more likely than not that these tax benefits will not be realized. The increase (decrease) in the valuation allowance from the prior year was less than $0.1 million.

As of June 30, 2016, the Company had gross state net operating loss ("NOL") and credit carry forwards of approximately $44.0 million and $2.7 million,

respectively, which may be available to offset future state income tax liabilities and expire at various dates from 2016 through 2035. In addition, the Company had foreign NOL carry forwards of approximately $2.6 million,

$1.3 million of which carry forward indefinitely and $1.3 million that carry forward for 10 years.

The Company’s income taxes currently payable for federal and state purposes have been reduced by the benefit of the tax deduction in excess of recognized compensation cost from employee stock compensation transactions. The provision for income taxes that is currently payable has not been adjusted by approximately $2.1 million and $2.1 million of such benefits as they have been allocated to additional paid in capital in 2016 and 2015, respectively.

A provision has not been made for U.S. or additional non-U.S. taxes on $194.5 million of undistributed earnings of international subsidiaries that could be subject to taxation if remitted to the U.S. It is not practicable to estimate the amount of tax that might be payable on the remaining undistributed earnings. Our intention is to reinvest these earnings permanently or to repatriate the earnings only when it is tax effective to do so. Accordingly, we believe that U.S. tax on any earnings that might be repatriated would be substantially offset by U.S. foreign tax credits.

The total provision for income taxes included in the consolidated financial statements was as follows (in thousands):

	2016			2015			2014
Continuing operations	$	16,295		$	20,874		$	18,054
Discontinued operations		(55	)		(259	)		(3,692	)
	$	16,240		$	20,615		$	14,362

The changes in the amount of gross unrecognized tax benefits during 2016, 2015 and 2014 were as follows (in thousands):

	2016			2015		2014
Beginning Balance	$	1,054		$	1,033	$	1,286
Additions based on tax positions related to the current year		2,125			17		25
Additions for tax positions of prior years		-			4		-
Reductions for tax positions of prior years		(201	)		-		(278	)
Ending Balance	$	2,978		$	1,054	$	1,033

If the unrecognized tax benefits in the table above were recognized in a future period, $2.5 million of the unrecognized tax benefit would impact the Company’s effective tax rate.

Within the next twelve months, the statute of limitations will close in various U.S., state and non-U.S. jurisdictions. As a result, it is reasonably expected that net unrecognized tax benefits from these various jurisdictions would be recognized within the next twelve months. The recognition of these tax benefits is not expected to have a material impact to the Company's financial statements. The Company does not reasonably expect any other significant changes in the next twelve months. The following tax years, in the major tax jurisdictions noted, are open for assessment or refund:

Country	Years Ending June 30,
United States		2014	to	2016
Canada		2012	to	2016
Germany		2011	to	2016
Ireland		2016	to	2016
Portugal		2013	to	2016
United Kingdom		2012	to	2016

The Company’s policy is to include interest expense and penalties related to unrecognized tax benefits within the provision for income taxes on the consolidated statements of operations. At both June 30, 2016 and June 30, 2015, the company had less than $0.1 million for accrued interest expense on unrecognized tax benefits.