Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

13.Income Taxes

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

(in thousands)	2023		2022		2021
Domestic	$	7,444	$	11,971	$	771
Foreign		14,081		11,718		3,903
	$	21,525	$	23,689	$	4,674

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 $0.7 million has been recorded for the deferred taxes on such undistributed foreign earnings as of December 31, 2023. 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:

(in thousands)	2023			2022			2021
Current:
Federal	$	3,939		$	5,009		$	354
State		1,100			836			278
Foreign		2,107			1,755			1,972
		7,147			7,600			2,604
Deferred:
Federal		(495	)		(3,001	)		426
State		(208	)		(231	)		45
Foreign		580			1,058			(384	)
		(123	)		(2,174	)		87
	$	7,024		$	5,426		$	2,691

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

(in thousands)	2023			2022			2021
Tax expense at statutory rate	$	4,488		$	4,975		$	981
Increase (decrease) in tax resulting from:
State income tax, net of federal benefit		541			340			334
Other permanent differences		290			383			(147	)
Impact of rate differences and adjustments		(1,046	)		565			876
United States tax credits and incentives		(532	)		(626	)		300
Foreign tax credits and incentives		(812	)		(895	)		(265	)
Change in valuation allowance		1,782			(526	)		(489	)
Foreign withholding taxes on repatriation of foreign earnings		(592	)		139			244
Earnout expense (income)		85			(48	)		233
Equity compensation		460			339			169
Excess compensation		360			11			—
Provision-to-return adjustments		528			(189	)		127
Investment in joint venture		(155	)		375			237
Net effect GILTI and FDII		1,400			565			—
Other		227			18			91
	$	7,024		$	5,426		$	2,691

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:

(in thousands)	2023			2022
Gross deferred tax assets:
Accrued expenses	$	729		$	692
Reserves on assets		2,769			2,228
Share-based compensation awards		372			452
Minimum pension		920			1,247
Net operating loss carry-forwards		3,785			3,142
Tax credit carry-forwards		2,302			2,349
Investment in joint venture		926			815
Leases		3,699			2,564
Research and development costs		3,857			3,224
Other		—			69
Total gross deferred tax assets		19,359			16,782
Valuation allowances		(6,545	)		(4,950	)
	$	12,814		$	11,832
Gross deferred tax liabilities:
Depreciation		(1,809	)		(727	)
Goodwill and intangibles		(14,299	)		(13,310	)
Prepaid expenses and inventory		(95	)		(783	)
Withholding tax on unremitted foreign earnings		(662	)		(1,254	)
Leases		(3,571	)		(2,564	)
Revenue recognition		(694	)		(1,031	)
Other		(218	)		—
		(21,348	)		(19,669	)
Net deferred tax liabilities	$	(8,534	)	$	(7,837	)

As of December 31, 2023, state and local net operating loss carry forwards total $41.0 million, which expire from 2024 to 2043. 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 $11.2 million. As of December 31, 2023 and 2022, the Company has recorded a valuation reserve, including but not limited to net operating losses, in the amount of $6.5 million and $5.0 million, respectively. The changes in the valuation allowance resulted in additional income tax expense (benefit) of $1.5 million, $(0.5) million, and $(0.5) million in 2023, 2022, and 2021, 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, 2023. 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:

(in thousands)	2023		2022
Balance as of January 1,	$	144	$	141
Additions for tax positions taken in prior years		7		3
Balance as of December 31,	$	151	$	144

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, 2023 and 2022. The favorable settlement of all uncertain tax positions would impact the Company’s effective income tax rate. Tax years going back to 2018 remain open for examination by all significant federal, state and foreign authorities.