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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
Note N – Income Taxes
The components of income before income taxes were as follows:
Years Ended December 31,
(in thousands)202320222021
Domestic$131,343 $188,265 $171,297 
Foreign89,271 94,055 70,771 
$220,614 $282,320 $242,068 
The components of provision for income taxes were as follows:
Years Ended December 31,
(in thousands)202320222021
Current:
Federal$18,491 $36,983 $32,983 
State and local3,594 6,057 3,711 
Foreign18,449 18,462 11,635 
40,534 61,502 48,329 
Deferred:
Federal5,229 2,705 (1,402)
State and local682 466 1,888 
Foreign194 430 794 
6,105 3,601 1,280 
$46,639 $65,103 $49,609 
A reconciliation between income taxes computed at the federal statutory rate and the effective tax rate is as follows:
Years Ended December 31,
(in thousands)202320222021
Income taxes at federal statutory rate21.0 %21.0 %21.0 %
Effects of foreign operations0.4 (0.2)(0.8)
Stock-based compensation(1.8)(0.5)(2.4)
State and local income taxes - net of federal income tax benefit1.9 2.0 2.1 
Nondeductible items0.3 0.5 1.2 
Valuation allowance(0.1)0.1 (0.5)
Other(0.6)0.2 (0.1)
Effective tax rate21.1 %23.1 %20.5 %
The primary changes between the Company’s effective tax rate for the year ended December 31, 2023 and 2022 are due to a higher tax benefit related to equity-based awards and a decrease in pre-tax income in jurisdictions with higher tax rates. The primary changes between the Company’s effective tax rate for the year ended December 31, 2022, and 2021 are due to a lower tax benefit related to equity-based awards and an increase in pre-tax income in jurisdictions with higher tax rates.
The components of deferred tax assets and liabilities were as follows:
As of December 31,
(in thousands)20232022
Deferred tax assets
Receivable allowances$7,087 $7,049 
Inventory7,780 8,367 
Accrued expenses343 315 
Deferred compensation3,468 6,461 
Net operating loss carryforwards5,393 5,685 
Lease liability33,232 26,038 
Other2,332 1,042 
Gross deferred tax assets before valuation allowance59,635 54,957 
Less: valuation allowance3,715 3,948 
Gross deferred tax assets after valuation allowance55,920 51,009 
Deferred tax liabilities
Depreciation and amortization(22,648)(16,704)
Unremitted earnings of foreign subsidiaries(2,917)(2,599)
Right-of-use asset(29,290)(21,621)
Amortization of goodwill(7,613)(7,599)
Indefinite-lived intangibles(1,449)(4,654)
Gross deferred tax liabilities(63,917)(53,177)
Net deferred tax liabilities$(7,997)$(2,168)
The Company applies the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax‑planning strategies in making this assessment.
The Company’s decrease in valuation allowance of $233 is due to a decrease of net operating loss deferred tax assets in various foreign subsidiaries, which resulted in an aggregate valuation allowance of $3,715 for the year ended December 31, 2023.
A reconciliation of the beginning and ending amount of unrecognized tax benefits were as follows:
Years Ended December 31,
(in thousands)202320222021
Beginning Balance$1,145 $1,145 $2,295 
Additions for tax positions of prior years— — — 
Reductions for tax positions of prior years(907)— (1,150)
Ending Balance$238 $1,145 $1,145 
For the years ended December 31, 2023, 2022, and 2021 the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is approximately $238, $1,145, and $1,145, in the aggregate, respectively. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. Accrued interest and penalties on unrecognized tax benefits and interest and penalty expense was immaterial to the consolidated financial statements for all periods presented. It is reasonably possible that the unrecognized tax benefits will decrease in the next twelve months.
The Company’s consolidated financial statements provide for any related tax liability on amounts that may be repatriated from foreign operations, aside from undistributed earnings of certain of the Company’s foreign subsidiaries that are intended to be indefinitely reinvested in operations outside the U.S. The deferred tax liability of $2,917 at December 31, 2023 reflects the withholding tax on amounts that may be repatriated from foreign operations.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law, which contains certain revisions to the Internal Revenue Code, including a 15% corporate minimum income tax for tax years beginning after December 31, 2022. While the 15% corporate minimum income tax has no effect on the Company’s results of operations in the near term, we will continue to evaluate its impact as further information becomes available. The Inflation reduction Act also assesses a 1% excise tax on repurchases of corporate stock which will continue to impact the Company’s stock repurchases.
The Organization for Economic Cooperation and Development (“OECD”) has proposed to enact a global minimum tax rate of at least 15% for large multinational companies beginning in 2024 (“Pillar Two”). Under Pillar Two, a top-up tax will be required for any jurisdiction whose effective tax rate falls below the 15% global minimum rate. Additionally, the OECD issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax. Under the safe harbor, companies would be excluded from Pillar Two requirements provided certain criteria are met. Based on preliminary analysis, the enactment of Pillar Two legislation is not expected to have a material effect on the Company’s financial position. The Company will continue to monitor and reflect the impact of such legislative changes in future periods, as appropriate.