14.	Income Taxes

Income from continuing operations for the three years ended December 31, was as follows:

	2011		2010		2009
U.S. operations	$	40,282	$	26,297	$	12,103
Foreign operations		8,448		8,430		(36,423	)
Total	$	48,730	$	34,727	$	(24,320	)

Income tax expense (benefit) for the three years ended December 31, was as follows:

	2011			2010			2009
Current:
Federal	$	10,321		$	6,756		$	(337	)
Foreign		2,277			3,005			1,284
State		1,450			1,214			236
	$	14,048		$	10,975		$	1,183
Deferred:
Federal	$	2,330		$	(10,541	)	$	1,897
Foreign		(203	)		(248	)		(1,444	)
State		(158	)		(262	)		285
	$	1,969		$	(11,051	)	$	738
Total:
Federal	$	12,651		$	(3,785	)	$	1,560
Foreign		2,074			2,757			(160	)
State		1,292			952			521
	$	16,017		$	(76	)	$	1,921

U.S. income taxes have not been provided on approximately $22,282 of undistributed earnings of non-U.S. subsidiaries. We do not have any plans to repatriate the undistributed earnings. Any repatriation from foreign subsidiaries that would result in incremental U.S. taxation is not being considered. It is management's belief that reinvesting these earnings outside the U.S. is the most efficient use of capital.

We have Dutch and German tax loss carryforwards of approximately $6,460 and $15,271, respectively. If unutilized, the Dutch tax loss carryforward will expire after 9 years. The German tax loss carryforward has no expiration date. Because of the uncertainty regarding realization of the Dutch tax loss carryforward, a valuation allowance was established. This valuation allowance decreased in 2011 due to results of operations and an intercompany transaction that had no impact on 2011 Net Earnings.

We have foreign tax credit carryforwards of approximately $8,554. If unutilized, foreign tax credit carryforwards will expire in 2020. Based upon evaluation, as of December 31, 2011, no valuation allowance has been recorded.

A valuation allowance for the remaining deferred tax assets is not required since it is more likely than not that they will be realized through carryback to taxable income in prior years, future reversals of existing taxable temporary differences and future taxable income.

Our effective income tax rate varied from the U.S. federal statutory tax rate for the three years ended December 31, was as follows:

	2011			2010			2009
Tax at statutory rate		35.0	%		35.0	%		(35.0	%)
Increases (decreases) in the tax rate from:
State and local taxex, net of federal benefit		2.0			0.7			1.1
Effect of foreign operations		0.5			0.5			(7.0	)
International restructuring		-			(31.4	)		(9.4	)
Goodwill impairment - non-deductible		-			-			56.9
Effect of changes in valuation allowances		-			0.1			(0.7	)
Domestic production activities deduction		(1.6	)		(3.0	)		0.8
Other, net		(3.0	)		(2.1	)		1.2
Effective income tax rate		32.9	%		(0.2	%)		7.9	%

Deferred tax assets and liabilities were comprised of the following as of December 31:

	2011			2010			2009
Deferred tax assets:
Inventories, principally due to additional costs inventoried for
tax purposes and changes in inventory reserves	$	426		$	1,081		$	867
Employee wages and benefits, principally due to accruals for
financial reporting purposes		20,910			17,948			16,050
Warranty reserves accrued for financial reporting purposes		2,625			2,175			1,803
Accounts receivable, principally due to allowance for doubtful
accounts and tax accounting method for equipment rentals		1,464			1,252			1,396
Tax loss carryforwards		5,915			12,725			12,987
Valuation allowance		(3,229	)		(9,170	)		(9,131	)
Tax credit carryforwards		8,554			10,119			2,385
Other		1,777			1,937			1,177
Total deferred tax assets	$	38,442		$	38,067		$	27,534
Deferred tax liabilities:
Property, Plant and Equipment, principally due to differences in
depreciation and related gains	$	9,167		$	8,562		$	8,592
Goodwill and Intangible Assets		7,093			8,390			9,086
Total deferred tax liabilities	$	16,260		$	16,952		$	17,678
Net deferred tax assets	$	22,182		$	21,115		$	9,856

The valuation allowance at December 31, 2011, principally applies to Dutch tax loss carryforwards that, in the opinion of management, are more likely than not to expire unutilized. However, to the extent that tax benefits related to these carryforwards are realized in the future, the reduction in the valuation allowance will reduce income tax expense.

In 2011 and 2010 we recorded tax benefits directly to Shareholders' Equity of $1,266 and $1,724, respectively, relating to our stock plans. In 2009, we recorded tax benefits directly to Shareholders' Equity of $120 relating to our ESOP and stock plans.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Balance at January 1, 2011	$	5,272
Decreases as a result of tax positions taken during a prior period		(765	)
Increases as a result of tax positions taken during the current year		828
Decreases for tax positions related to acquired entities during a prior period		-
Decreases relating to settlements with taxing authorities		(193	)
Reductions as a result of a lapse of the applicable statute of limitations		(1,551	)
Decreases as a result of foreign currency fluctuations		(167	)
Balance at December 31, 2011	$	3,424

Included in the balance of unrecognized tax benefits at December 31, 2011 are potential benefits of $3,209 that, if recognized, would affect the effective tax rate from continuing operations.

We recognize potential accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. In addition to the liability of $3,424 for unrecognized tax benefits as of December 31, 2011 was approximately $427 for accrued interest and penalties. To the extent interest and penalties are not assessed with respect to uncertain tax positions, the amounts accrued will be revised and reflected as an adjustment to income tax expense.

We are subject to U.S. federal income tax as well as income tax of numerous state and foreign jurisdictions. We are generally no longer subject to U.S. federal tax examinations for taxable years before 2008 and with limited exceptions, state and foreign income tax examinations for taxable years before 2004.

The Internal Revenue Service has just begun an examination of our income tax return for the 2009 tax year. It is possible that the examination phase of the audit may conclude in the next 12 months, and that the related unrecognized tax benefits for tax positions taken may change from those recorded as liabilities for uncertain tax positions in our financial statements at December 31, 2011. Although the outcome of this matter cannot currently be determined, we believe adequate provision has been made for any potential unfavorable financial statement impact. We are currently undergoing income examinations in various state and foreign jurisdictions covering 2004 to 2010. Although the final outcome of these examinations cannot be currently determined, we believe that we have adequate reserves with respect to these examinations.

We do not anticipate that total unrecognized tax benefits will change significantly within the next 12 months.