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Income Taxes | 12 Months Ended
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Dec. 31, 2015
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Consolidated income before income taxes consisted of:
(Dollars in thousands) | 2015 |  | 2014 |  | 2013
Domestic | $ | 14,832 |  |  | $ | 9,604 |  |  | $ | 2,201 |
International | 51,341 |  |  | 71,620 |  |  | 47,521 |
Total | $ | 66,173 |  |  | $ | 81,224 |  |  | $ | 49,722 |
Foreign earnings repatriated to the U.S. previously reported as U.S. income have been reclassified in both 2014 and 2013 to conform to the current year presentation. The income tax expense in the consolidated statements of operations consisted of:
(Dollars in thousands) | Current |  | Deferred |  | Total
2015 |  |  |  |  |
Domestic | $ | 993 |  |  | $ | 4,272 |  |  | $ | 5,265 |
International | 15,192 |  |  | (604 | ) |  | 14,588 |
Total | $ | 16,185 |  |  | $ | 3,668 |  |  | $ | 19,853 |
2014 |  |  |  |  |
Domestic | $ | 2,205 |  |  | $ | 6,984 |  |  | $ | 9,189 |
International | 17,172 |  |  | 1,451 |  |  | 18,623 |
Total | $ | 19,377 |  |  | $ | 8,435 |  |  | $ | 27,812 |
2013 |  |  |  |  |
Domestic | $ | (7,075 | ) |  | $ | 6,187 |  |  | $ | (888 | )
International | 12,667 |  |  | (260 | ) |  | 12,407 |
Total | $ | 5,592 |  |  | $ | 5,927 |  |  | $ | 11,519 |
Deferred tax assets and liabilities as of December 31, 2015 and 2014, were comprised of the following:
(Dollars in thousands) | 2015 |  | 2014
Deferred tax assets |  |  |
Accrued employee benefits and compensation | $ | 9,284 |  |  | $ | 9,168 |
Postretirement benefit obligations | 5,434 |  |  | 7,866 |
Tax loss and credit carryforwards | 9,318 |  |  | 16,533 |
Reserves and accruals | 5,075 |  |  | 4,230 |
Depreciation and amortization | — |  |  | 17,862 |
Other | 3,474 |  |  | 2,550 |
Total deferred tax assets | 32,585 |  |  | 58,209 |
Less deferred tax asset valuation allowance | (6,202 | ) |  | (7,691 | )
Total deferred tax assets, net of valuation allowance | 26,383 |  |  | 50,518 |
Deferred tax liabilities |  |  |
Depreciation and amortization | 17,492 |  |  | 14,303 |
Other | 187 |  |  | 344 |
Total deferred tax liabilities | 17,679 |  |  | 14,647 |
Net deferred tax asset | $ | 8,704 |  |  | $ | 35,871 |
At December 31, 2015, the Company had state net operating loss carryforwards ranging from $0.5 million to $8.5 million in various state taxing jurisdictions, which expire between 2016 and 2034. We also had approximately $7.6 million of credit carryforwards in Arizona, which will expire between 2016 and 2030, and a $1.3 million capital loss carryforward, which will expire in 2017. In addition, the Company had a $0.2 million net operating loss carryforward in one of our Chinese entities that will expire in 2018. We believe that it is more likely than not that the benefit from the China and state net operating loss carryforwards as well as our state credit and capital loss carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance of $6.2 million relating to these carryforwards. We currently have approximately $10.1 million of foreign tax credits that begin to expire in 2020, $6.1 million of research and development credits that begin to expire in 2026, and $0.5 million of minimum tax credits that can be carried forward indefinitely. As a result of certain realization requirements, the table of deferred tax assets and liabilities shown above does not include certain deferred tax assets as of December 31, 2015 for which the benefit thereof was postponed by tax deductions related to equity compensation in excess of compensation recognized for financial reporting. Those deferred tax assets include foreign tax credits of $10.1 million, research and development credits of $2.1 million and minimum tax credits of $0.4 million. Equity will be increased by these amounts if and when such deferred tax assets are ultimately realized by a reduction of taxes payable. We had a valuation allowance of $6.2 million at December 31, 2015 and $7.7 million at December 31, 2014, against certain of our deferred tax assets, primarily carryfowards expected to expire unused. In 2015, we reversed the valuation allowance on California deferred tax assets due to positive factors from the Arlon acquisition. No valuation allowance has been provided on our other deferred tax assets, as we believe it is more likely than not that all such assets will be realized in the applicable jurisdictions. We reached this conclusion after considering the availability of taxable income in prior carryback years, tax planning strategies, and the likelihood of future taxable income exclusive of reversing temporary differences and carryforwards in the respective jurisdictions or entities. Differences between forecasted and actual future operating results or changes in carryforward periods could adversely impact the amount of deferred tax asset considered realizable. In appropriate circumstances we have the opportunity to undertake a tax planning strategy to ensure that our tax credit carryforwards do not expire unutilized. This strategy is based upon our ability to make a federal tax election to capitalize certain expenses that will result in generating taxable income to allow us to utilize our tax credit carryforwards before they expire. We would undertake such a strategy to realize these tax credit carryforwards prior to expiration as it is reasonable, prudent, and feasible. Income tax expense differs from the amount computed by applying the United States federal statutory income tax rate to income before income taxes. The reasons for this difference were as follows:
(Dollars in thousands) | 2015 |  | 2014 |  | 2013
Tax expense at Federal statutory income tax rate | $ | 23,161 |  |  | $ | 28,429 |  |  | $ | 17,403 |
International tax rate differential | (4,792 | ) |  | (6,772 | ) |  | (2,541 | )
Foreign source income, net of tax credits | 2,449 |  |  | 5,195 |  |  | (786 | )
State tax, net of federal | (416 | ) |  | — |  |  | — |
Unrecognized tax benefits | 148 |  |  | 603 |  |  | (2,197 | )
General business credits | (908 | ) |  | (604 | ) |  | (702 | )
Acquisition related expenses | 453 |  |  | 590 |  |  | — |
Valuation allowance change | (1,489 | ) |  | 388 |  |  | — |
Other | 1,247 |  |  | (17 | ) |  | 342 |
Income tax expense (benefit) | $ | 19,853 |  |  | $ | 27,812 |  |  | $ | 11,519 |
The Company’s effective tax rate for 2015 was 30.0% compared to 34.2% in 2014 and 23.2% in 2013. In 2015, the difference between the Company’s effective tax rate and the statutory federal tax rate was favorably impacted by taxable income generated in countries with a lower tax rate to that of the United States, research and development credits, a tax benefit related to a change in the effective state rate and release of valuation allowance on certain state tax attributes. The rate was unfavorably impacted by reserves for uncertain tax positions, change in prior estimates and non-deductible expenses. The rate decreased from 2014 primarily due to a reduction in the level of repatriation of current foreign earnings, increased reversals of uncertain tax benefits, and deferred state tax benefits due to the acquisition of Arlon, partially offset with a shift of earnings from low tax to high tax jurisdictions. Included in the 2015 effective tax rate are releases of reserves for uncertain tax positions for which an indemnity receivable had been recorded. The reversal of the receivable has been recorded in "Other income (expense), net." U.S. income taxes have not been provided on $179.1 million of undistributed earnings of foreign subsidiaries since it is the Company’s intention to permanently reinvest such earnings or to distribute them only when it is tax efficient to do so. It is impracticable to estimate the total tax liability, if any, that would be created by the future distribution of these earnings. If circumstances change and it becomes apparent that some, or all of the undistributed earnings as of December 31, 2015 will not be indefinitely reinvested, the provision for the tax consequence, if any, will be recorded in the period when circumstances change. Income taxes paid, net of refunds, were $18.7 million, $14.5 million, and $11.1 million, in 2015, 2014, and 2013, respectively. Unrecognized tax benefits, excluding potential interest and penalties, for the years ended December 31, 2015 and December 31, 2014, were as follows:
(Dollars in thousands) |  |  |
| 2015 |  | 2014
Beginning balance | $ | 9,368 |  |  | $ | 9,148 |
Gross increases - current period tax positions | 4,229 |  |  | 1,763 |
Gross increases - tax positions in prior periods | 1,428 |  |  | 335 |
Foreign currency exchange | (475 | ) |  | (230 | )
Lapse of statute of limitations | (3,979 | ) |  | (1,648 | )
Ending balance | $ | 10,571 |  |  | $ | 9,368 |
Included in the balance of unrecognized tax benefits as of December 31, 2015 were $10.6 million of tax benefits that, if recognized, would impact the effective tax rate. Also included in the balance of unrecognized tax benefit as of December 31, 2015 were $0.1 million of tax benefits that, if recognized, would result in adjustments to other tax accounts; primarily deferred taxes. We recognize interest accrued related to unrecognized tax benefit as income tax expense. Related to the unrecognized tax benefits noted above, at December 31, 2015 and 2014, we had accrued potential interest and penalties of approximately $1.3 million and $1.2 million, respectively. We recorded net income tax expense of $0.1 million and $0.1 million during 2015 and 2014, respectively, and a net tax benefit of $0.9 million during 2013. It is possible that up to $8.3 million of our currently unrecognized tax benefits could be recognized within 12 months as a result of projected resolutions of worldwide tax disputes or the expiration of the statute of limitations. We are subject to taxation in the U.S. and various state and foreign jurisdictions. Our tax years from 2012 through 2015 are subject to examination by the tax authorities. With few exceptions, we are no longer subject to U.S. federal, state, local and foreign examinations by tax authorities for the years before 2012.

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