INCOME TAXES

12 Months Ended

Dec. 31, 2024

INCOME TAXES

INCOME TAXES

NOTE 4—INCOME TAXES:

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

	2024		2023		2022
Domestic	$	110,569	$	105,018	$	84,286
Foreign		16,302		14,876		13,855
	$	126,871	$	119,894	$	98,141

The provision for income taxes is comprised of the following:

	2024		2023		2022
Current:
Federal	$	24,804	$	21,710	$	13,070
Foreign		2,676		3,775		4,110
State		3,531		3,738		2,605
		31,011		29,223		19,785
Deferred:
Federal		6,981		(1,209)		2,364
Foreign		1,041		658		81
State		1,030		(664)		19
		9,052		(1,215)		2,464
	$	40,063	$	28,008	$	22,249

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,
	2024		2023
Deferred tax assets:
Accrued customer promotions	$	218	$	1,223
Deferred compensation		14,886		21,617
Postretirement benefits		2,326		2,572
Other accrued expenses		993		4,214
Foreign subsidiary tax loss carry forward		4,681		5,012
Outside basis difference in foreign subsidiary		361		361
Capitalized research and development costs		9,965		6,594
Deductible state tax depreciation		1,286		1,386
Tax credit carry forward		2,565		2,368
		37,281		45,347
Valuation allowances		(6,180)		(6,361)
Total deferred tax assets	$	31,101	$	38,986
Deferred tax liabilities:
Depreciation	$	26,851	$	27,604
Deductible goodwill and trademarks		37,902		38,512
Accrued export company commissions		5,012		4,735
Employee benefit plans		2,894		4,000
Inventory reserves		1,465		(688)
Prepaid insurance		1,122		721
Unrealized capital gains		3,598		2,633
Other Prepaid		13		—
Deferred gain on sale of real estate		5,240		5,240
Total deferred tax liabilities	$	84,097	$	82,757
Net deferred tax liability	$	52,996	$	43,771

The valuation allowances as of December 31, 2024 and 2023 were primarily related to foreign jurisdictions’ net operating loss carryforwards and state credits that we do not expect to realize.

The amounts of the Company’s foreign subsidiary valuation allowances for net operating loss carryforwards were $4,681 and $5,012 at December 31, 2024 and 2023, respectively.

The Company has benefits related to state tax credit carryforwards valuation allowances were $1,499 and $1,349 at December 31, 2024 and 2023, respectively.

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

	2024		2023		2022
U.S. statutory rate	21.0	%	21.0	%	21.0	%
State income taxes, net	2.6		3.7		2.3
Foreign income tax rates	0.1		0.3		1.0
Income tax credits and adjustments	(0.4)		(0.6)		(0.8)
Adjustment of deferred tax balances related to Deferred Compensation	8.7		—		—
Other adjustment of deferred tax balances	0.1		(0.2)		(0.7)
Reserve for uncertain tax benefits	(0.1)		(0.2)		0.3
Other, net	(0.6)		(0.6)		(0.4)
Effective income tax rate	31.6	%	23.4	%	22.7	%

In 2024 the Board revoked its authorization that permitted management to take appropriate action to preserve the full income tax deductibility of certain amounts under its nonqualified deferred compensation plans after determining that it was no longer feasible in light of changes to Section 162(m) of the Internal Revenue Code made by the Tax Cuts and Jobs Act of 2017. Given this Board action and the resulting expectation that certain additional amounts of deferred compensation will not be tax deductible in future years, the Company concluded that it will be required under generally accepted accounting principles in the United States of America to write off the related deferred tax assets. The adjustment to the deferred tax assets resulted in a non-cash tax charge of $11,010 in 2024. The remaining balance of $14,886 represents deferred compensation amounts that are expected to be tax deductible in the future.

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, 2024 and 2023, the Company had unrecognized tax benefits of $2,114 and $2,313, respectively. Included in this balance is $1,671 and $1,736, respectively, of unrecognized tax benefits that, if recognized, would favorably affect the annual effective income tax rate. 2024 includes a change for temporary items that also results in offsetting adjustment to deferred tax. As of December 31, 2024 and 2023, $450 and $463, 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:

	2024		2023		2022
Unrecognized tax benefits at January 1	$	2,313	$	3,392	$	3,133
Increases in tax positions for the current year		285		510		393
Reductions in tax positions for lapse of statute of limitations		(484)		(1,589)		(134)
Unrecognized tax benefits at December 31	$	2,114	$	2,313	$	3,392

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 2021 through 2023. With few exceptions, the Company is no longer subject to examinations by tax authorities for the years 2020 and prior.