INCOME TAXES

12 Months Ended

Dec. 31, 2023

INCOME TAXES

INCOME TAXES

NOTE 4—INCOME TAXES:

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

	2023		2022		2021
Domestic	$	105,018	$	84,286	$	77,434
Foreign		14,876		13,855		8,295
	$	119,894	$	98,141	$	85,729

The provision for income taxes is comprised of the following:

	2023		2022		2021
Current:
Federal	$	21,710	$	13,070	$	16,886
Foreign		3,775		4,110		1,983
State		3,738		2,605		2,822
		29,223		19,785		21,691
Deferred:
Federal		(1,209)		2,364		(2,069)
Foreign		658		81		39
State		(664)		19		760
		(1,215)		2,464		(1,270)
	$	28,008	$	22,249	$	20,421

Deferred taxes reflect temporary differences between the tax basis and financial statement carrying value of assets and liabilities. The significant temporary differences that comprised the deferred tax assets and liabilities are as follows:

	December 31,
	2023		2022
Deferred tax assets:
Accrued customer promotions	$	1,223	$	1,269
Deferred compensation		21,617		17,533
Postretirement benefits		2,572		2,466
Other accrued expenses		4,214		7,744
Foreign subsidiary tax loss carry forward		5,012		4,650
Outside basis difference in foreign subsidiary		361		359
Capitalized research and development costs		6,594		2,049
Deductible state tax depreciation		1,386		893
Tax credit carry forward		2,368		2,047
		45,347		39,010
Valuation allowances		(6,361)		(5,703)
Total deferred tax assets	$	38,986	$	33,307
Deferred tax liabilities:
Depreciation	$	27,604	$	27,153
Deductible goodwill and trademarks		38,512		37,608
Accrued export company commissions		4,735		4,580
Employee benefit plans		4,000		395
Inventory reserves		(688)		934
Prepaid insurance		721		1,016
Unrealized capital gains		2,633		(160)
Deferred foreign exchange gain		—		119
Deferred gain on sale of real estate		5,240		5,213
Total deferred tax liabilities	$	82,757	$	76,858
Net deferred tax liability	$	43,771	$	43,551

The valuation allowances as of December 31, 2023 and 2022 were primarily related to foreign jurisdictions’ net operating loss carryforwards and state credits that we do not expect to realize.

At December 31, 2023, the amounts of the Company’s foreign subsidiary valuation allowances for net operating loss carryforwards were $5,012 and $4,650 at December 31, 2023 and 2022, respectively.

At December 31, 2023, the Company has benefits related to state tax credit carryforwards valuation allowances were $1,349 and $1,053 at December 31, 2023 and 2022, respectively.

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

	2023		2022		2021
U.S. statutory rate	21.0	%	21.0	%	21.0	%
State income taxes, net	3.7		2.3		2.4
Foreign income tax rates	0.3		1.0		0.2
Income tax credits and adjustments	(0.6)		(0.8)		(0.6)
Adjustment of deferred tax balances	(0.2)		(0.7)		0.6
Reserve for uncertain tax benefits	(0.2)		0.3		—
Other, net	(0.6)		(0.4)		0.2
Effective income tax rate	23.4	%	22.7	%	23.8	%

As a result of the 2017 Tax Cuts and Jobs Act, the Company asserts it is permanently reinvested in its foreign subsidiaries earnings outside of United States.

At December 31, 2023 and 2022, the Company had unrecognized tax benefits of $2,313 and $3,392, respectively. Included in this balance is $1,736 and $1,734, respectively, of unrecognized tax benefits that, if recognized, would favorably affect the annual effective income tax rate. 2023 includes a change for temporary items that also results in offsetting adjustment to deferred tax. As of December 31, 2023 and 2022, $463 and $355, 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:

	2023		2022		2021
Unrecognized tax benefits at January 1	$	3,392	$	3,133	$	3,011
Increases in tax positions for the current year		510		393		700
Reductions in tax positions for lapse of statute of limitations		(1,589)		(134)		(578)
Unrecognized tax benefits at December 31	$	2,313	$	3,392	$	3,133

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 2020 through 2022. With few exceptions, the Company is no longer subject to examinations by tax authorities for the years 2019 and prior.