INCOME TAXES

12 Months Ended

Dec. 31, 2021

INCOME TAXES

INCOME TAXES

NOTE 4—INCOME TAXES:

The domestic and foreign components of pretax income are as follows:

	2021		2020		2019
Domestic	$	77,434	$	69,211	$	74,978
Foreign		8,295		7,051		10,426
	$	85,729	$	76,262	$	85,404

The provision for income taxes is comprised of the following:

	2021		2020		2019
Current:
Federal	$	16,886	$	14,831	$	15,133
Foreign		1,983		1,029		—
State		2,822		1,763		2,942
		21,691		17,623		18,075
Deferred:
Federal		(2,069)		(1,006)		(543)
Foreign		39		1,316		2,422
State		760		(645)		611
		(1,270)		(335)		2,490
	$	20,421	$	17,288	$	20,565

Significant components of the Company’s net deferred tax liability at year end were as follows:

	December 31,
	2021		2020
Deferred tax assets:
Accrued customer promotions	$	2,107	$	1,506
Deferred compensation		22,311		18,501
Postretirement benefits		3,324		3,355
Other accrued expenses		5,158		3,078
Foreign subsidiary tax loss carry forward		4,497		4,508
Outside basis difference in foreign subsidiary		365		365
Deductible state tax depreciation		736		471
Tax credit carry forward		2,517		3,288
		41,015		35,072
Valuation allowances		(5,555)		(5,593)
Total deferred tax assets	$	35,460	$	29,479
Deferred tax liabilities:
Depreciation	$	23,342	$	22,192
Deductible goodwill and trademarks		38,255		37,348
Accrued export company commissions		4,615		4,508
Employee benefit plans		525		1,767
Inventory reserves		2,532		1,994
Prepaid insurance		965		569
Unrealized capital gains		3,874		2,515
Deferred foreign exchange gain		132		179
Deferred gain on sale of real estate		5,309		5,269
Total deferred tax liabilities	$	79,549	$	76,341
Net deferred tax liability	$	44,089	$	46,862

At December 31, 2021, the Company has benefits related to state tax credit carry-forwards expiring by year as follows: $175 in 2023, $200 in 2024, $35 in 2025, $40 in 2026, $50 in 2028, $131 in 2029, $213 in 2030, $225 in 2031, $238 in 2032, $211 in 2033, $235 in 2034, $274 in 2035 and $235 in 2036. The Company expects that not all the credits will be utilized before their expiration and has provided a valuation allowance for the estimated amounts that will expire. Such valuation allowances were $924 and $837 at December 31, 2021 and 2020, respectively.

At December 31, 2021, the amounts of the Company’s Spanish subsidiary loss carry-forwards expiring by year are as follows: $286 in 2026, $61 in 2027, $182 in 2028, $103 in 2029, $314 in 2030, $418 in 2031, $315 in 2032, $127 in 2033, $440 in 2034, $556 in 2035, $805 in 2036, $412 in 2037, $197 in 2038 and $160 in 2039. A full valuation allowance has

been provided for all of these Spanish loss carry-forwards as the Company expects that the losses will not be utilized before their expiration.

The effective income tax rate differs from the statutory rate as follows:

	2021		2020		2019
U.S. statutory rate	21.0	%	21.0	%	21.0	%
State income taxes, net	2.4		2.1		2.2
Exempt municipal bond interest	—		—		(0.1)
Foreign income tax rates	0.2		1.0		(0.1)
Income tax credits and adjustments	(0.6)		(1.4)		0.5
Adjustment of deferred tax balances	0.6		(0.2)		—
Reserve for uncertain tax benefits	—		(0.8)		0.4
Other, net	0.2		1.0		0.2
Effective income tax rate	23.8	%	22.7	%	24.1	%

As a result of the 2017 Tax Cuts and Jobs Act, the Company does not assert permanent reinvestment of its foreign subsidiaries earnings.

At December 31, 2021 and 2020, the Company had unrecognized tax benefits of $3,133 and $3,011, respectively. Included in this balance is $1,547 and $1,468, respectively, of unrecognized tax benefits that, if recognized, would favorably affect the annual effective income tax rate. As of December 31, 2021 and 2020, $282 and $340, respectively, of interest and penalties were included in the liability for uncertain tax positions.

A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits is as follows:

	2021		2020		2019
Unrecognized tax benefits at January 1	$	3,011	$	3,678	$	3,339
Increases in tax positions for the current year		700		377		1,164
Reductions in tax positions for lapse of statute of limitations		(578)		(501)		(576)
Reductions in tax positions for settlements and payments		—		(308)		(249)
Increases (decreases) in prior period unrecognized tax benefits due to change in judgment		—		(235)		—
Unrecognized tax benefits at December 31	$	3,133	$	3,011	$	3,678

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes on the Consolidated Statements of Earnings and Retained Earnings.

The Company is subject to taxation in the U.S. and various state and foreign jurisdictions, primarily Canada and Mexico. The Company generally remains subject to examination by U.S. federal, state and foreign tax authorities for the years 2018 through 2020. With few exceptions, the Company is no longer subject to examinations by tax authorities for the years 2017 and prior.