Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

13.Income Taxes

Income before income taxes was generated in the United States and globally as follows:

(table only in thousands)	2022		2021		2020
Domestic	$	11,971	$	771	$	3,495
Foreign		11,718		3,903		8,349
	$	23,689	$	4,674	$	11,844

Certain of the Company’s undistributed earnings of its foreign subsidiaries are not permanently reinvested, as management intends to repatriate foreign-held cash as needed to meet domestic cash needs for operating, investing, and financing activities. A liability of $1.3 million has been recorded for the deferred taxes on such undistributed foreign earnings as of December 31, 2022. The deferred taxes are attributable primarily to the foreign withholding taxes that would become payable should the Company repatriate cash held in its foreign operations.

Income tax expense (benefit) consisted of the following for the years ended December 31:

(table only in thousands)	2022			2021			2020
Current:
Federal	$	5,009		$	354		$	(239	)
State		836			278			241
Foreign		1,755			1,972			2,632
		7,600			2,604			2,634
Deferred:
Federal		(3,001	)		426			1,638
State		(231	)		45			313
Foreign		1,058			(384	)		(913	)
		(2,174	)		87			1,038
	$	5,426		$	2,691		$	3,672

The income tax expense (benefit) differs from the statutory rate due to the following:

(table only in thousands)	2022			2021			2020
Tax expense at statutory rate	$	4,975		$	981		$	2,487
Increase (decrease) in tax resulting from:
State income tax, net of federal benefit		340			334			503
Change in uncertain tax position reserves		3			2			(115	)
Other permanent differences		383			22			601
Impact of rate differences and adjustments		376			1,003			101
United States tax credits and incentives		(626	)		300			153
Foreign tax credits and incentives		(895	)		(265	)		(794	)
Change in valuation allowance		(526	)		(489	)		(218	)
Foreign withholding taxes on repatriation of foreign earnings		139			244			242
Earnout expense (income)		(48	)		233			293
Investment in joint venture		375			237			(1,341	)
Net effect GILTI and FDII		565			—			1,598
Other		365			89			162
	$	5,426		$	2,691		$	3,672

Deferred income taxes reflect the future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and tax credit carry forwards. The net deferred tax liabilities consisted of the following at December 31:

(table only in thousands)	2022			2021
Gross deferred tax assets:
Accrued expenses	$	692		$	775
Reserves on assets		2,228			1,576
Share-based compensation awards		452			400
Minimum pension		1,247			1,239
Net operating loss carry-forwards		3,142			3,001
Tax credit carry-forwards		2,349			2,464
Investment in joint venture		815			1,226
Leases		2,564			2,424
Research and development costs		3,224			—
Other		69			582
Valuation allowances		(4,950	)		(5,476	)
	$	11,832		$	8,211
Gross deferred tax liabilities:
Depreciation		(727	)		(881	)
Goodwill and intangibles		(13,310	)		(11,501	)
Prepaid expenses and inventory		(783	)		(132	)
Withholding tax on unremitted foreign earnings		(1,254	)		(1,114	)
Leases		(2,564	)		(2,424	)
Revenue recognition		(1,031	)		(44	)
		(19,669	)		(16,096	)
Net deferred tax liabilities	$	(7,837	)	$	(7,885	)

As of December 31, 2022, state and local net operating loss carry forwards total $48.3 million, which expire from 2023 to 2042. The Company has recorded a valuation allowance on certain of these net operating loss carry forwards to reflect expected realization. The Company also has net operating loss carry forwards in foreign jurisdictions totaling $8.8 million. A valuation allowance of $6.1 million has been established against these losses in foreign jurisdictions. As of December 31, 2022 and 2021, the Company has recorded a valuation reserve in the amount of $5.0 million and $5.5 million, respectively. The changes in the valuation allowance resulted in additional income tax expense (benefit) of $(0.5) million, $(0.5) million, and $(0.2) million in 2022, 2021, and 2020, respectively.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carry forward periods), projected future taxable

income, and tax-planning strategies in making this assessment. Based on this assessment, management believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 2022. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

The Company accounts for uncertain tax positions pursuant to FASB ASC Topic 740. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. A reconciliation of the beginning and ending amount of uncertain tax position reserves included in other liabilities on the Consolidated Balance Sheets is as follows:

(table only in thousands)	2022		2021
Balance as of January 1,	$	141	$	139
Additions for tax positions taken in prior years		3		2
Reductions of tax positions taken in prior years		—		—
Reductions for settlements on tax positions of prior years		—		—
Balance as of December 31,	$	144	$	141

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The reserve for uncertain tax positions includes $0.1 million of interest and penalties as of December 31, 2022 and 2021. The favorable settlement of all uncertain tax positions would impact the Company’s effective income tax rate. Tax years going back to 2017 remain open for all significant state and foreign authorities.