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Note 15 - Income Taxes | 12 Months Ended
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Dec. 31, 2019
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
15. | Income Taxes
The Company’s provision for income taxes consists of the following:
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 41,686 |  |  | $ | 32,072 |  |  | $ | 15,753 |
State |  |  | 4,211 |  |  |  | 9,639 |  |  |  | 1,775 |
Foreign |  |  | 2,660 |  |  |  | 4,546 |  |  |  | 4,585 |
|  |  | 48,557 |  |  |  | 46,257 |  |  |  | 22,113 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 19,393 |  |  |  | 22,225 |  |  |  | 18,213 |
State |  |  | 1,390 |  |  |  | 1,910 |  |  |  | 4,139 |
Foreign |  |  | (1,263 | ) |  |  | 479 |  |  |  | (2,777 | )
|  |  | 19,520 |  |  |  | 24,614 |  |  |  | 19,575 |
Change in valuation allowance |  |  | (778 | ) |  |  | (1,015 | ) |  |  | 2,454 |
Provision for income taxes |  | $ | 67,299 |  |  | $ | 69,856 |  |  | $ | 44,142 |
The Company files U.S federal, U.S. state and foreign jurisdiction tax returns which are subject to examination up to the expiration of the statute of limitations. The Company believes the tax positions taken on its returns would be sustained upon an exam, or where a position is uncertain, adequate reserves have been recorded. As of December 31, 2019, the Company is no longer subject to income tax examinations for United States federal income taxes for tax years prior to 2016. Due to the carryforward of net operating losses and research & development credits, the Company’s Wisconsin state income tax returns for tax years 2009 through 2018 remain open. In addition, the Company is subject to audit by various foreign taxing jurisdictions for the tax years 2013 through 2018. The Company is regularly under examination in the various jurisdictions in which we operate. The Company is actively managing the examinations and working to address any open matters. While the Company does not believe any material taxes or penalties are due, there is a possibility that the ultimate tax outcome of an examination may result in differences from what was recorded. Such differences may affect the provision for income taxes in the period in which the determination is made, and could impact the Company’s financial results. Significant components of deferred tax assets and liabilities are as follows:
|  | December 31, |
|  | 2019 |  |  | 2018 |
Deferred tax assets: |  |  |  |  |  |  |  |
Accrued expenses |  | $ | 21,053 |  |  | $ | 16,745 |
Deferred revenue |  |  | 14,697 |  |  |  | 12,418 |
Inventories |  |  | 9,879 |  |  |  | 8,500 |
Pension obligations |  |  | - |  |  |  | 1,062 |
Stock-based compensation |  |  | 7,490 |  |  |  | 5,960 |
Operating loss and credit carryforwards |  |  | 28,356 |  |  |  | 25,585 |
Bad debt |  |  | 1,094 |  |  |  | 1,363 |
Other |  |  | 4,275 |  |  |  | 2,516 |
Valuation allowance |  |  | (5,024 | ) |  |  | (5,802 | )
Total deferred tax assets |  |  | 81,820 |  |  |  | 68,347 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Goodwill and intangible assets |  |  | 142,159 |  |  |  | 108,899 |
Depreciation |  |  | 27,864 |  |  |  | 25,429 |
Debt refinancing costs |  |  | 4,119 |  |  |  | 4,206 |
Prepaid expenses |  |  | 1,073 |  |  |  | 950 |
Total deferred tax liabilities |  |  | 175,215 |  |  |  | 139,484 |
Net deferred tax liabilities |  | $ | (93,395 | ) |  | $ | (71,137 | )
As of December 31, 2019 and 2018, deferred tax assets of $2,933 and $163, and deferred tax liabilities of $96,328 and $71,300, respectively, were reflected on the consolidated balance sheets. The Company maintains a valuation allowance against the deferred tax assets of an entity when it is uncertain the entity will generate sufficient taxable income to utilize the asset. During 2019, the valuation allowance decreased by $778 primarily due to an increase in income allowing for a utilization of tax credits, partially offset by current losses in certain foreign subsidiaries. At December 31, 2019, the Company had various state research & development and state manufacturing tax credit carryforwards of approximately $8,291 and $12,747, respectively, which expire between 2020 and 2034. The Company believes it will generate sufficient taxable income in these jurisdictions to fully utilize the credits prior to their expiration. Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, were as follows:
|  | December 31, |
|  | 2019 |  |  | 2018 |
Unrecognized tax benefit, beginning of period |  | $ | 5,635 |  |  | $ | 7,122 |
Increase in unrecognized tax benefit for positions taken in prior period |  |  | 633 |  |  |  | - |
Increase in unrecognized tax benefit for positions taken in current period |  |  | 495 |  |  |  | 580 |
Statute of limitation expirations |  |  | (43 | ) |  |  | (1,818 | )
Settlements |  |  | - |  |  |  | (249 | )
Unrecognized tax benefit, end of period |  | $ | 6,720 |  |  | $ | 5,635 |
The unrecognized tax benefit as of December 31, 2019 and 2018, if recognized, would favorably impact the effective tax rate. As of December 31, 2019 and 2018, total accrued interest of approximately $71 and $37, respectively, and accrued penalties of approximately $195 and $136, respectively, associated with net unrecognized tax benefits are included in the consolidated balance sheets. Interest and penalties are recorded as a component of income tax expense. The Company does not expect a significant increase or decrease to the total amounts of unrecognized tax benefits related to continuing operations during the fiscal year ending December 31, 2020. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act includes a mandatory one-time tax on accumulated earnings of foreign subsidiaries, and as a result, all previously unremitted earnings for which no U.S. deferred tax liability had been accrued have now been subject to U.S. tax. Notwithstanding the U.S. taxation of these amounts, the Company intends to continue to invest these earnings, as well as the capital in these subsidiaries, indefinitely outside of the U.S. and do not expect to incur any significant additional taxes related to such amounts. A reconciliation of the statutory tax rates and the effective tax rates for the years ended December 31, 2019, 2018 and 2017 are as follows:
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
U.S. statutory rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 35.0 | %
State taxes |  |  | 4.3 |  |  |  | 4.7 |  |  |  | 4.1 |
State tax rate differential |  |  | (1.0 | ) |  |  | - |  |  |  | - |
Research and development credits |  |  | (0.8 | ) |  |  | (1.3 | ) |  |  | (1.4 | )
State credits |  |  | (1.0 | ) |  |  | (1.0 | ) |  |  | (0.2 | )
Share-based compensation (1) |  |  | (0.6 | ) |  |  | (0.5 | ) |  |  | (1.4 | )
Tax Act impact (2) |  |  | - |  |  |  | (0.2 | ) |  |  | (13.9 | )
Other |  |  | (0.8 | ) |  |  | (0.2 | ) |  |  | (0.9 | )
Effective tax rate |  |  | 21.1 | % |  |  | 22.5 | % |  |  | 21.3 | %
| (1) | With the adoption of ASU 2016-09 in 2017, excess tax benefits from equity awards are reflected within the provision for income taxes rather than within the consolidated balance sheet.
| (2) | As a result of the Tax Act, we recognized a one-time, non-cash benefit of $28.4 million in the fourth quarter of 2017 primarily from the impact of the revaluation of our net deferred tax liabilities. This non-cash benefit resulted primarily from the Federal rate reduction from 35% to 21%.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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