INCOME TAXES

12 Months Ended

Dec. 31, 2022

INCOME TAXES

INCOME TAXES

NOTE 4—INCOME TAXES:

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

	2022		2021		2020
Domestic	$	84,286	$	77,434	$	69,211
Foreign		13,855		8,295		7,051
	$	98,141	$	85,729	$	76,262

The provision for income taxes is comprised of the following:

	2022		2021		2020
Current:
Federal	$	13,070	$	16,886	$	14,831
Foreign		4,110		1,983		1,029
State		2,605		2,822		1,763
		19,785		21,691		17,623
Deferred:
Federal		2,364		(2,069)		(1,006)
Foreign		81		39		1,316
State		19		760		(645)
		2,464		(1,270)		(335)
	$	22,249	$	20,421	$	17,288

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

	December 31,
	2022		2021
Deferred tax assets:
Accrued customer promotions	$	1,269	$	2,107
Deferred compensation		17,533		22,311
Postretirement benefits		2,466		3,324
Other accrued expenses		7,744		5,158
Foreign subsidiary tax loss carry forward		4,650		4,497
Outside basis difference in foreign subsidiary		359		365
Capitalized research and development costs		2,049		—
Deductible state tax depreciation		893		736
Tax credit carry forward		2,047		2,517
		39,010		41,015
Valuation allowances		(5,703)		(5,555)
Total deferred tax assets	$	33,307	$	35,460
Deferred tax liabilities:
Depreciation	$	27,153	$	23,342
Deductible goodwill and trademarks		37,608		38,255
Accrued export company commissions		4,580		4,615
Employee benefit plans		395		525
Inventory reserves		934		2,532
Prepaid insurance		1,016		965
Unrealized capital gains		(160)		3,874
Deferred foreign exchange gain		119		132
Deferred gain on sale of real estate		5,213		5,309
Total deferred tax liabilities	$	76,858	$	79,549
Net deferred tax liability	$	43,551	$	44,089

At December 31, 2022, the Company has benefits related to state tax credit carry-forwards expiring by year as follows: $50 in 2028, $130 in 2029, $212 in 2030, $225 in 2031, $238 in 2032, $211 in 2033, $235 in 2034, $274 in 2035, $235 in 2036 and $237 in 2037. 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 $1,053 and $924 at December 31, 2022 and 2021, respectively.

At December 31, 2022, the amounts of the Company’s Spanish subsidiary loss carry-forwards expiring by year are as follows: $270 in 2026, $57 in 2027, $171 in 2028, $98 in 2029, $296 in 2030, $394 in 2031, $297 in 2032, $120 in 2033, $415 in 2034, $524 in 2035, $761 in 2036, $388 in 2037, $186 in 2038, $151 in 2039 and $369 in 2040. 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:

	2022		2021		2020
U.S. statutory rate	21.0	%	21.0	%	21.0	%
State income taxes, net	2.3		2.4		2.1
Foreign income tax rates	1.0		0.2		1.0
Income tax credits and adjustments	(0.8)		(0.6)		(1.4)
Adjustment of deferred tax balances	(0.7)		0.6		(0.2)
Reserve for uncertain tax benefits	0.3		—		(0.8)
Other, net	(0.4)		0.2		1.0
Effective income tax rate	22.7	%	23.8	%	22.7	%

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, 2022 and 2021, the Company had unrecognized tax benefits of $3,392 and $3,133, respectively. Included in this balance is $1,734 and $1,547, respectively, of unrecognized tax benefits that, if recognized, would favorably affect the annual effective income tax rate. As of December 31, 2022 and 2021, $355 and $282, 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:

	2022		2021		2020
Unrecognized tax benefits at January 1	$	3,133	$	3,011	$	3,678
Increases in tax positions for the current year		393		700		377
Reductions in tax positions for lapse of statute of limitations		(134)		(578)		(501)
Reductions in tax positions for settlements and payments		—		—		(308)
Increases (decreases) in prior period unrecognized tax benefits due to change in judgment		—		—		(235)
Unrecognized tax benefits at December 31	$	3,392	$	3,133	$	3,011

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 2019 through 2021. With few exceptions, the Company is no longer subject to examinations by tax authorities for the years 2018 and prior.