(In thousands, except per share amounts) Significant components of the Company’s net deferred tax assets are as follows: Valuation allowances are provided against deferred tax assets where it is considered more-likely-than-not that the Company will not realize  the benefit of such assets. The remaining net deferred tax asset is the amount management believes is more-likely-than-not of being  realized. The realization of these deferred tax assets can be impacted by changes to tax laws, statutory rates and future income levels.  U.S. federal income taxes are provided on the portion of non-U.S. subsidiaries income that is not considered to be permanently  reinvested outside the U.S. and may be remitted to the U.S. At June 30, 2012, undistributed earnings of non-U.S. subsidiaries  considered to be permanently reinvested and for which no U.S. tax has been provided totaled approximately $79,800. Determination of  the net amount of the unrecognized tax liability with respect to these earnings is not practicable; however, foreign tax credits would be  available to partially reduce U.S. income taxes in the event of a distribution. Undistributed earnings of non-U.S. subsidiaries not  considered permanently reinvested totaled approximately $13,600. U.S. taxes totaling $2,804 have been accrued on these earnings.  The Company and its subsidiaries file income tax returns in U.S. federal, various state, local and foreign jurisdictions. The following is  a reconciliation of the Company’s total gross unrecognized income tax benefits: 26 Applied Industrial Technologies, Inc. and Subsidiaries Unrecognized Income Tax Benefits  Consolidated Balance Sheets  June 30,  2012  2011  Deferred tax assets:  Compensation liabilities not currently deductible  $  37,341  $_{ }$  $  36,746  Expenses and reserves not currently deductible  6,151  $_{ }$  5,498  Goodwill and intangibles  6,518  $_{ }$  9,075  Net operating loss carryforwards (expiring in years 2015-2027)  444  $_{ }$  432  Foreign tax credits (expiring in years 2020 and 2022)  4,092  $_{ }$  4,090  Other  480  $_{ }$  677  Total deferred tax assets  55,026  $_{ }$  56,518  Less: Valuation allowance  (157) (158)  Deferred tax assets, net of valuation allowance  54,869  $_{ }$  56,360  Deferred tax liabilities:  Inventories  (6,021) (4,755)  Unremitted foreign earnings  (2,804) (2,804)  Depreciation and differences in property bases  (11,602) (2,062)  Total deferred tax liabilities  (20,427) (9,621)  Net deferred tax assets  $  34,442  $_{ }$  $  46,739  The net deferred tax asset is classified as follows:  Other current assets  $  12,189  $_{ }$  $  5,510  Deferred tax assets (long-term)  26,424  $_{ }$  43,447  Other liabilities  (4,171) (2,218)  Net deferred tax assets  $  34,442  $_{ }$  $  46,739  Year Ended June 30,  2012  2011  2010  Unrecognized Income Tax Benefits at beginning of the year  $  1,181  $  1,842   $  1,860  Current year tax positions  331  153  130  Prior year tax positions  398  50  46  Expirations of statutes of limitations  (371) (273)  (194)  Settlements  — (591) — Unrecognized Income Tax Benefits at end of year  $  1,539  $  1,181   $  1,842  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)