Note

– Income Taxes

The components of income before income taxes are:

	2017		2016		2015
United States	$	33,277	$	33,101	$	35,391
Foreign countries		6,101		3,381		1,875
Total	$	39,378	$	36,482	$	37,266

The components of income tax expense are:

	2017			2016			2015
Current expense:
Federal	$	16,489		$	6,960		$	11,465
Foreign		1,243			547			292
State and local		1,231			581			963
		18,963			8,088			12,720
Deferred expense (benefit):
Federal		(5,968	)		3,429			(443	)
Foreign		51			(184	)		(112	)
State and local		(223	)		266			(8	)
		(6,140	)		3,511			(563	)
Income tax expense	$	12,823		$	11,599		$	12,157

The reconciliation between income tax expense and the amount compute

d by applying the statutory federal income tax rate of

35%

to income before income taxes is:

	2017			2016			2015
Income taxes at statutory rate	$	13,782		$	12,769		$	13,043
State and local income taxes, net of federal tax benefit		555			576			680
Research and development tax credits		(295	)		(371	)		(380	)
Domestic production activities deduction		(1,191	)		(822	)		(964	)
Lower foreign taxes differential		(842	)		(820	)		(476	)
Uncertain tax positions		346			(93	)		26
Valuation allowance		100			-			(59	)
Federal tax reform – deferred rate change		(1,624	)		-			-
Deemed mandatory repatriation		1,370			-			-
Foreign withholding tax		600			-			-
Other		22			360			287
Income tax expense	$	12,823		$	11,599		$	12,157

The

Company made income tax payments of

$13.5

million,

$7.8

million, and

$13.5

million in

2017,

2016,

and

2015,

respectively.

Deferred income tax assets and liabilities consist of:

	2017			2016			2015
Deferred tax assets:
Inventories	$	1,131		$	721		$	1,664
Accrued liabilities		1,872			3,139			2,450
Postretirement health benefits obligation		3,844			7,449			7,547
Pension		-			-			3,443
Other		583			879			292
Total deferred tax assets		7,430			12,188			15,396
Valuation allowance		(459	)		(277	)		(277	)
Net deferred tax assets		6,971			11,911			15,119
Deferred tax liabilities:
Depreciation and amortization		(8,715	)		(16,119	)		(18,059	)
Pension		(997	)		(3,017	)		-
Foreign withholding tax		(600	)		-			-
Total deferred tax liabilities		(10,312	)		(19,136	)		(18,059	)
Net def erred tax liabilities	$	(3,341	)	$	(7,225	)	$	(2,940	)

The Company has state tax credit carryforwards of

$644,000

and

$518,000

as of

December

31,

2017

and

2016,

respectively, that will expire incrementally between

2018

and

2022.

The Compa

ny has a valuation allowance of

$459,000

as of

December 31, 2017

and

$277,000

as of

December

31,

2016

against certain of its deferred tax assets. ASC

740

requires that a valuation allowance be recorded against deferred tax assets when it is more likely than

not

that some or all of a Company’s deferred tax assets will

not

be realized based on available positive and negative evidence.

Total unrecognized tax benefits were

$797,000

and

$492,000

December 31, 2017

and

2016,

respectively. The total amount of

unrecognized tax benefits that, if ultimately recognized, would reduce the Company’s annual effective tax rate were

$674,000

and

$397,000

December 31, 2017

and

2016,

respectively.

A reconciliation of the beginning and ending amount of unrecognized tax

benefits is as follows:

	2017			2016			2015
Balance at beginning of year	$	492		$	567		$	576
Additions based on tax positions related to the current year		239			101			113
Additions based on tax positions related to prior years		165			-			-
Reductions due to l apse of applicable statute of limitations		(99	)		(108	)		(101	)
Settlements		-			(68	)		(21	)
Balance at end of year	$	797		$	492		$	567

The Company is subject to income taxes in the U.S. federal and various state, local and foreign jurisdictions. Income tax reg

ulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is

longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for the years before

2013.

The Company has

$56,000

of unrecognized tax benefits recorded for periods for which the relevant statutes of limitations expire in the next

months.

The Company recognizes interest and pen

alties related to unrecognized tax benefits in income tax expense for all periods presented. The Company accrued approximately

$168,000,

$98,000

and

$116,000

for the payment of interest and penalties at

December

31,

2017,

2016

and

2015,

respectively.

December 22, 2017,

the United States enacted tax reform legislation commonly known as the Tax Cuts and Jobs Act (the “Tax Act”), resulting in significant modifications to existing law. The Company follows the guidance in SEC Staff Accounting Bulletin

118

(“SAB

118”

), which provides additional clarification regarding the application of ASC

740

in situations where the Company does

not

have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act for the reporting period in which the Tax Act was enacted. SAB

118

provides for a measurement period beginning in the reporting period that includes the Tax Act’s enactment date and ending when the Company has obtained, prepared, and analyzed the information needed in order to complete the accounting requirements but in

circumstances should the measurement period extend beyond

one

year from the enactment date.

The Company recorded

$0.

million provisional net tax expense in the

fourth

quarter of

2017

to reflect the effects of the Tax Act. This net expense included a provisional noncurrent income tax payable in the amount of

$1.4

million related to the

one

-time deemed repatriation transition tax on previously unrepatriated foreign earnings and a

one

-time provisional benefit of

$1.6

million, which consisted primarily of the re-measurement of U.S. deferred tax assets and liabilities reflecting the change in the U.S. federal rate from

35%

21%.

The Company has also recorded a

$0.6

million foreign withholding tax. The provisional estimates are based on the Company's initial analysis of the Tax Act. Given the significant complexity of the Tax Act, anticipated guidance from the U. S. Treasury about implementing the Tax Act, and the potential for additional guidance from the Securities and Exchange Commission or the Financial Accounting Standards Board related to the Tax Act, these estimates

may

be adjusted during

2018.