Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

13. Income Taxes

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

(table only in thousands)	2020		2019		2018
Domestic	$	3,495	$	11,565	$	6,230
Foreign		8,349		1,779		(3,733	)
	$	11,844	$	13,344	$	2,497

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 $0.9 million has been recorded for the deferred taxes on such undistributed foreign earnings as of December 31, 2020. 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)	2020			2019			2018
Current:
Federal	$	(239	)	$	(4,526	)	$	5,166
State		241			(616	)		1,660
Foreign		2,632			1,719			2,834
		2,634			(3,423	)		9,660
Deferred:
Federal		1,638			(604	)		1,144
State		313			(220	)		56
Foreign		(913	)		(116	)		(1,242	)
		1,038			(940	)		(42	)
	$	3,672		$	(4,363	)	$	9,618

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

(table only in thousands)	2020			2019			2018
Tax expense at statutory rate	$	2,487		$	2,802		$	524
Increase (decrease) in tax resulting from:
State income tax, net of federal benefit		503			(707	)		1,337
Change in uncertain tax position reserves		(115	)		(236	)		73
Permanent differences related to divestitures		—			(4,201	)		7,048
Other permanent differences		601			(842	)		693
Impact of rate differences and adjustments		101			884			57
United States tax credits and incentives		153			(2,124	)		(354	)
Foreign tax credits and incentives		(794	)		(1,386	)		(1,088	)
Change in valuation allowance		(218	)		198			1,521
Net deemed distribution on repatriation of foreign earnings		—			—			(1,713	)
Foreign withholding taxes on repatriation of foreign earnings		242			646			666
Earnout expense (income)		293			—			(69	)
Investment in joint venture		(1,341	)		—			—
Net effect GILTI and FDII		1,598			399			(172	)
Other		162			204			1,095
	$	3,672		$	(4,363	)	$	9,618

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)	2020			2019
Gross deferred tax assets:
Accrued expenses	$	731		$	1,167
Reserves on assets		1,777			1,566
Share-based compensation awards		334			410
Minimum pension		2,188			1,946
Net operating loss carry-forwards		3,531			3,141
Tax credit carry-forwards		2,518			2,940
Investment in joint venture		1,505			—
Other		645			371
Depreciation		—			140
Leases		2,556			2,999
Valuation allowances		(5,965	)		(5,810	)
	$	9,820		$	8,870
Gross deferred tax liabilities:
Depreciation		(1,159	)		—
Goodwill and intangibles		(11,565	)		(9,855	)
Prepaid expenses and inventory		(438	)		(554	)
Withholding tax on unremitted foreign earnings		(871	)		(646	)
Leases		(2,602	)		(3,010	)
Revenue recognition		(155	)		(748	)
		(16,790	)		(14,813	)
Net deferred tax liabilities	$	(6,970	)	$	(5,943	)

As of December 31, 2020, the Company has federal net operating loss carry forwards of $0.6 million. Federal net operating losses of $0.1 million will expire in 2037.  The remaining net operating losses can be carried forward indefinitely until the loss is fully recovered.  State and local net operating loss carry forwards total $49.4 million, which expire from 2021 to 2040.  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 $10.3 million. A full valuation allowance has been established against substantially all of these losses in foreign jurisdictions. As of December 31, 2020 and 2019, the Company has recorded a valuation reserve in the amount of $6.0 million and $5.8 million, respectively. The changes in the valuation allowance resulted in additional income tax expense (benefit) of $(0.2) million, $0.2 million, and $1.5 million in 2020, 2019, and 2018, 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, 2020. 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)	2020			2019
Balance as of January 1,	$	254		$	939
Additions for tax positions taken in prior years		2			4
Reductions of tax positions taken in prior years		(117	)		(240	)
Reductions for settlements on tax positions of prior years		—			(449	)
Balance as of December 31,	$	139		$	254

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The reserve for uncertain tax positions includes zero and $0.1 million of interest and penalties as of December 31, 2020 and 2019, respectively. The favorable settlement of all uncertain tax positions would impact the Company’s effective income tax rate. Tax years going back to 2015 remain open for all significant state and foreign authorities.