Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Income Statement Components

Earnings before income taxes were as follows:

	December 31,
(in thousands)	2022		2021		2020
Income before income taxes:
Domestic	$	86,680	$	74,070	$	50,977
Foreign	47,630		35,428		28,780
	$	134,310	$	109,498	$	79,757

The components of income tax expense (benefit) were as follows:

	December 31,
(in thousands)	2022		2021		2020
Current:
Domestic	$	19,197	$	16,846	$	10,823
Foreign	11,848		8,646		8,759
State	3,674		4,943		3,226
	34,719		30,435		22,808
Deferred:
Domestic	(2,246)		(679)		1,238
Foreign	(51)		(274)		(1199)
State	(40)		(229)		(894)
	(2,337)		(1,182)		(855)
Total income taxes	$	32,382	$	29,253	$	21,953

A reconciliation of the income tax at the Company’s U.S. statutory federal income tax rate to the provision for income tax follows:  

	December 31,
(in thousands)	2022			2021			2020
Income tax expense at statutory rates	$	28,205		$	22,995		$	16,749
Increase (reduction) from:
Jurisdictional rate differences	1,989			1,599			1,034
Executive compensation limitation	481			1,314			170
Stock based compensation	122			(322)			(366)
U.S. state taxes	2,632			3,724			2,556
Foreign tax expense	267			—			704
R&D credit	(1,645)			(670)			(415)
GILTI	500			—			50
Previously unrecognized tax (benefit)/expense	51			8			2,219
Other, net	(220)			605			(748)
Provision for income taxes	$	32,382		$	29,253		$	21,953
Effective tax rate	24		%	27		%	28		%

Deferred Income Tax Assets and Liabilities

The components of the Company’s deferred income tax assets and liabilities were as follows. Certain prior year deferred tax component amounts have been reclassified to conform to the current year presentation.

	December 31,
(in thousands)	2022		2021
Deferred income tax assets:
Inventory basis difference	$	3,459	$	1,136
Accounts receivable reserve	334		270
Rental equipment and Property, plant and equipment	347		201
Stock based compensation	826		754
Pension liability	2,900		3,351
Employee benefit accrual	2,451		3,070
Product liability and warranty reserves	2,177		2,464
Foreign net operating loss	3,078		3,764
Lease liability	4,738		4,221
Capitalized R&D costs	4,230		—
Other	1,635		1,415
Total deferred income tax assets	$	26,175	$	20,646
Less: Valuation allowance	(3,637)		(4,129)
Net deferred income tax assets	$	22,538	$	16,517
Deferred income tax liabilities:
Inventory basis differences	$	(264)	$	(283)
Rental equipment and Property, plant and equipment	(14,373)		(13,253)
Lease asset	(4,637)		(4,149)
Intangible assets	(19,301)		(18,041)
Expenses not currently deductible for book purposes	(1,244)		(1,139)
Total deferred income tax liabilities	$	(39,819)	$	(36,865)
Net deferred income taxes	$	(17,281)	$	(20,348)

As of December 31, 2022, the Company had foreign deferred tax assets consisting of foreign net operating losses and other tax benefits available to reduce future taxable income in a foreign jurisdiction. These foreign jurisdictions’ net operating loss carry-forwards are approximately $10.1 million with an unlimited carry-forward period. The Company also has U.S. state net operating loss carry-forwards in the amount of $0.2 million which will expire between 2036 and 2042.

The Company's valuation allowances as of December 31, 2022 and 2021 related primarily to foreign net operating losses and foreign tax credits.

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows. The Company does not expect the unrecognized tax benefits to change significantly over the next 12 months.

 

Unrecognized Tax Benefits
	December 31,
(in thousands)	2022		2021
Balance as of beginning of year	$	270	$	262
Increases for tax positions related to the current year	156		82
Decreases due to lapse of statute of limitations	(105)		(74)
Balance as of end of year	$	321	$	270

The Company has adopted the policy to include interest and penalty expense related to income taxes as interest and other expense, respectively. As of December 31, 2022, no interest or penalties have accrued. With few exceptions, the Company’s open tax years for its federal and state income tax returns are for the tax years ended 2017 through 2022, and for tax years ended 2016 through 2022 for its foreign income tax returns.

The Company currently intends to permanently reinvest its earnings in certain foreign subsidiaries. No U.S. corporate income taxes or foreign withholding taxes should be imposed on future distributions of the earnings not permanently reinvested. If the amounts asserted as permanent reinvestment were distributed, the Company would be subject to approximately $4.8 million in withholding taxes.