Note 9 - Income Taxes

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

9. Income Taxes

Income (loss) before income taxes is as follows:

	Year ended December 31,
	2023		2022		2021
	(in thousands)
United States	$	37,356	$	26,274	$	34,153
Foreign		2,119		1,216		134
Total	$	39,475	$	27,490	$	34,287

Certain of our foreign subsidiaries are included in the U.S. tax return as branches but are included as foreign for purposes of the table above.

The provision (benefit) for income taxes is as follows:

	Year ended December 31,
	2023		2022			2021
			(in thousands)
Current:
Federal	$	6,203	$	5,063		$	5,024
State		1,300		938			990
Foreign		1,084		1,035			1,287
		8,587		7,036			7,301
Deferred:
Federal		616		(144	)		63
State		122		(83	)		(9	)
Foreign		45		45			25
		783		(182	)		79
Provision for income taxes	$	9,370	$	6,854		$	7,380

We have reviewed the tax positions taken, or to be taken, in our tax returns for all tax years currently open to examination by a taxing authority. As of December 31, 2023, the gross amount of unrecognized tax benefits exclusive of interest and penalties was $0.6 million, which may increase within the twelve months ending December 31, 2024. We remain subject to examination until the statute of limitations expires for each remaining respective tax jurisdiction. The statute of limitations will be open with respect to these tax positions through 2030. A reconciliation of the beginning and ending amount of our unrecognized tax benefits is as follows:

	2023			2022			2021
	(in thousands)
Unrecognized tax benefits at the beginning of year	$	612		$	768		$	820
Additions/adjustments for tax positions of current year		-			-			-
Additions/adjustments for tax positions of prior years		(25	)		(57	)		(52	)
Reductions for settlements with taxing authorities		-			-			-
Reductions for lapses of the applicable statutes of limitations		-			(99	)		-
Unrecognized tax benefits at the end of the year	$	587		$	612		$	768

Deferred taxes are attributable to the following temporary differences:

	As of December 31,
	2023			2022
	(in thousands)
Deferred tax assets:
Inventory	$	2,280		$	2,002
Net operating loss carryforwards		942			1,027
Tax credit carryforwards		1,092			996
Capital loss carryforwards		462			462
Reserves and accruals		823			1,090
Operating lease liabilities		3,721			3,295
Intangible assets		4,503			4,468
Stock options		696			446
Other		1,741			573
Total deferred tax assets		16,260			14,359
Deferred tax liabilities:
Property and equipment		(2,996	)		(1,473	)
Goodwill		(6,311	)		(5,610	)
Operating lease right-of-use assets		(3,472	)		(3,066	)
Foreign branch deferred offset		(700	)		(742	)
Other		(183	)		(164	)
Total deferred tax liabilities		(13,662	)		(11,055	)
Net deferred tax assets before valuation allowance		2,598			3,304
Valuation allowance		(1,702	)		(1,628	)
Net deferred tax liabiltity	$	896		$	1,676
Deferred tax classification
Long-term deferred tax asset	$	1,003		$	1,745
Long-term deferred tax liability		(107	)		(69	)
Net long-term deferred tax asset	$	896		$	1,676

In 2022, we decreased our valuation allowance by $0.1 million mainly attributable to Australian net operating loss carry forwards and Massachusetts credit carryforwards. In 2023, we increased our valuation allowance by $0.1 million mainly attributable to Australian net operating loss carry forwards and Massachusetts credit carryforwards.

As of December 31, 2023, we have provided a valuation allowance of $1.7 million for deferred tax assets primarily related to Australian net operating loss and capital loss carry forwards and Massachusetts tax credit carry forwards that are not expected to be realized. The valuation allowance against our deferred tax assets may require adjustment in the future based on changes in the mix of temporary differences, changes in tax laws, and operating performance.

Realization of our deferred tax assets is dependent on our generating sufficient taxable income in future periods. Although we believe it is more likely than not that future taxable income will be sufficient to allow us to recover substantially all of the value of our deferred tax assets remaining after we apply the valuation allowances, realization is not assured and future events could cause us to change our judgment. In the event that actual results differ from our estimates, or we adjust these estimates in the future periods, further adjustments to our valuation allowance may be recorded, which could materially impact our financial position and net income (loss) in the period of the adjustment.

As of December 31, 2023, we have net operating loss carryforwards in Australia of $1.2 million that do not expire, in France of $1.7 million that do not expire, in Spain of $0.5 million that do not expire, in Norway of $0.1 million that do not expire, and in China of $0.4 million that expire in four years. We have a capital loss carryforward in Australia of $1.5 million that does not expire. We also have state tax credit carryforwards of approximately $1.7 million that are available to reduce future tax liabilities, which begin to expire in 2030, or can be carried forward indefinitely.

In December 2018, we reevaluated our international operations and as a result, are no longer indefinitely reinvested with respect to undistributed earnings from our German and Australian subsidiaries. There was no material deferred tax expense recorded for foreign and state tax costs associated with the future remittance of these undistributed earnings. We remain permanently reinvested with respect to undistributed earnings from our other foreign subsidiaries. It is not practicable to estimate the amount of deferred tax liability, if any, with respect to these permanently reinvested undistributed earnings.

A reconciliation of the U.S. federal statutory rate to our effective tax rate is as follows:

	2023			2022			2021
Federal statutory rate		21.0	%		21.0	%		21.0	%
State tax, net of federal benefit		2.8	%		2.7	%		2.7	%
Effect of foreign taxes		1.7	%		4.0	%		3.7	%
Federal tax on foreign income		0.3	%		0.0	%		0.2	%
Valuation allowance		0.2	%		(0.2	%)		(0.1	%)
Foreign deferred tax liability offset		(0.1	%)		(0.2	%)		(0.1	%)
Research & development tax credits		(0.6	%)		0.0	%		(0.4	%)
Stock options		(1.8	%)		0.0	%		(3.1	%)
Uncertain tax positions		0.1	%		(0.3	%)		0.2	%
Other permanent differences		0.4	%		(1.8	%)		(2.4	%)
Other		(0.3	%)		(0.3	%)		(0.2	%)
Effective tax rate		23.7	%		24.9	%		21.5	%

We are not currently under income tax audit in any tax jurisdictions.

As of December 31, 2023, a summary of the tax years that remain subject to examination in our most significant tax jurisdictions are:

United States	2020 and forward
Foreign	2016 and forward

Supplemental disclosures of cash flow information are as follows:

	Year ended December 31,
	2023		2022		2021
	(in thousands)
Cash paid for income taxes, net	$	7,549	$	8,343	$	10,147