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Note 8 - Income Taxes

12 Months Ended

Dec. 31, 2020

Note 8 – Income Taxes

The components of Income before income taxes are:

	2020		2019		2018
United States	$	28,493	$	41,234	$	45,271
Foreign countries		2,753		3,932		5,045
Total	$	31,246	$	45,166	$	50,316

The components of income tax expense are:

	2020			2019			2018
Current expense:
Federal	$	4,058		$	8,204		$	7,779
Foreign		353			1,140			1,179
State and local		1,103			1,205			1,042
	$	5,514		$	10,549		$	10,000
Deferred expense (benefit):
Federal	$	728		$	(720	)	$	405
Foreign		(349	)		(379	)		(125	)
State and local		165			(99	)		57
		544			(1,198	)		337
Income tax expense	$	6,058		$	9,351		$	10,337

The reconciliation between income tax expense and the amount computed by applying the statutory federal income tax rate to income before income taxes is:

	2020			2019			2018
Income taxes at statutory rate	$	6,562		$	9,485		$	10,566
State and local income taxes, net of federal tax benefit		711			803			832
Tax credits		(808	)		(898	)		(506	)
Uncertain tax positions		42			164			172
Valuation allowance		-			71			37
Federal tax reform – deferred rate change		-			-			(581	)
Deemed mandatory repatriation		-			-			(48	)
Other		(449	)		(274	)		(135	)
Income tax expense	$	6,058		$	9,351		$	10,337

The Company made income tax payments of $6.2 million, $9.1 million, and $14.7 million in 2020, 2019, and 2018, respectively.

Deferred income tax assets and liabilities consist of:

	2020			2019
Deferred tax assets:
Inventories	$	646		$	1,391
Accrued liabilities		1,484			2,095
Postretirement health benefits obligation		6,815			5,884
Pension		1,688			240
Lease liabilities		390			361
Other		1,434			1,360
Total deferred tax assets		12,457			11,331
Valuation allowance		(567	)		(567	)
Net deferred tax assets		11,890			10,764
Deferred tax liabilities:
Depreciation and amortization		(9,536	)		(9,446	)
Leases – right of use assets		(388	)		(361	)
Foreign withholding tax		(100	)		(100	)
Total deferred tax liabilities		(10,024	)		(9,907	)
Net deferred tax assets	$	1,866		$	857

The Company had state tax credit carryforwards of $0.7 million as of December 31, 2020 and 2019 which will expire incrementally between 2021 and 2035.

The Company had valuation allowances of $0.6 million as of December 31, 2020 and 2019 against certain of its deferred tax assets. ASC 740, “Income Taxes,” 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 $0.9 million and $1.1 million at December 31, 2020 and 2019, respectively. The total amount of unrecognized tax benefits that, if ultimately recognized, would reduce the Company’s annual effective tax rate were $0.7 million and $0.9 million at December 31, 2020 and 2019, respectively.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2020			2019			2018
Balance at beginning of year	$	1,130		$	951		$	797
Additions based on tax positions related to the current year		177			372			268
Reductions due to lapse of applicable statute of limitations		(139	)		(193	)		(114	)
Settlements		(290	)		-			-
Balance at end of year	$	878		$	1,130		$	951

The Company is subject to income taxes in the U.S. federal and various state, local and foreign jurisdictions. Income tax regulations 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 no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for the years before 2016.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense for all periods presented. The Company accrued approximately $0.2 million, $0.3 million and $0.2 million for the payment of interest and penalties at December 31, 2020, 2019 and 2018, respectively.

- 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.

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