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Note 16 - Income Taxes | 12 Months Ended
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Dec. 31, 2018
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | Note 1 6 – Income Taxes The Company is subject to income tax in multiple jurisdictions and the use of estimates is required to determine the provision for income taxes. For the years ended December 31, 2018, 2017 and 2016, the Company recorded an income tax provision of $15.1 million, $22.7 million and $21.5 million, respectively. The effective income tax rate for the years ended December 31, 2018, 2017 and 2016 was 16.4 percent, 30.4 percent and 33.4 percent, respectively. The effective tax rate decreased by 14.0% for the year ended December 31, 2018 when compared to 2017 primarily due to the impact of the Tax Cuts and Jobs Act (the “ Act”), which was enacted on December 22, 2017. The Act reduced the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. The reduction to the U.S. tax rate results in revaluing deferred tax liabilities. At December 31, 2017, the Company had not completed its accounting for the tax effects of the enactment of the Act. However, the Company made a reasonable estimate on the effects of the transition tax and recognized a provisional amount of $2.4 million which was included as a component of income tax expense from continuing operations. The Company was also required to revalue its deferred tax liabilities to reflect the new U.S. federal corporate income tax rate from the Act which resulted in the recognition of an estimated tax benefit of $4.2 million in 2017. At December 31, 2018, the Company completed its accounting for the tax effects of the enactment of the Act. As a result, the Company recorded a tax benefit of $0.7 million for the final accounting for the transition tax and a tax benefit of $0.5 million resulting from the completion of the accounting related to the revaluation of its net deferred tax liabilities utilizing the new U.S. federal corporate income tax rate. The impact of the tax effects for the enactment of the Act was a tax benefit of $3.0 million. The foreign tax effects of the transition tax was based on our total post- 1986 earnings and profits that we previously deferred from U.S. income taxes. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax or any additional outside basis difference inherent in these entities as these amounts continue to be indefinitely reinvested in foreign operations. The provision for income taxes is based on income before income taxes reported for financial statement purposes. The components of income before income taxes are as follows:
|  | Year Ended December 31, |
(in thousands) |  | 2018 |  |  | 2017 |  |  | 2016 |
Domestic |  | $ | 81,893 |  |  | $ | 69,929 |  |  | $ | 59,232 |
Foreign |  |  | 9,762 |  |  |  | 4,506 |  |  |  | 4,989 |
Total |  | $ | 91,655 |  |  | $ | 74,435 |  |  | $ | 64,221 |
Significant components of the provision for income taxes for the following periods are as follows:
|  | Year Ended December 31, |
(in thousands) |  | 2018 |  |  | 2017 |  |  | 2016 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (782 | ) |  | $ | 17,808 |  |  | $ | 15,119 |
State |  |  | 2,078 |  |  |  | 1,367 |  |  |  | 1,091 |
Foreign |  |  | 1,810 |  |  |  | 2,215 |  |  |  | 2,439 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 11,325 |  |  |  | 865 |  |  |  | 2,758 |
State |  |  | 538 |  |  |  | 193 |  |  |  | 75 |
Foreign |  |  | (430 | ) |  |  | (1,918 | ) |  |  | (1,960 | )
Valuation Allowance |  |  | 528 |  |  |  | 2,127 |  |  |  | 1,992 |
Total |  | $ | 15,067 |  |  | $ | 22,657 |  |  | $ | 21,514 |
A reconciliation of the federal statutory income tax rate to the effective tax rate is as follows:
|  | Year Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Federal tax statutory rate |  |  | 21.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
State tax (net of federal benefit) |  |  | 2.0 |  |  |  | 1.7 |  |  |  | 0.6 |
Share based compensation |  |  | (2.8 | ) |  |  | (0.8 | ) |  |  | - |
Valuation allowance against deferred tax assets |  |  | 0.7 |  |  |  | 2.9 |  |  |  | 3.1 |
Research and development credit |  |  | (2.5 | ) |  |  | (2.2 | ) |  |  | (2.2 | )
Foreign rate differential |  |  | (0.1 | ) |  |  | (1.9 | ) |  |  | (2.8 | )
Tax reserves |  |  | (0.1 | ) |  |  | 0.9 |  |  |  | 1.4 |
Domestic manufacturing deduction |  |  | - |  |  |  | (2.5 | ) |  |  | (1.8 | )
Other |  |  | (0.5 | ) |  |  | (0.2 | ) |  |  | 0.1 |
Transition tax |  |  | (0.8 | ) |  |  | 3.2 |  |  |  | - |
Revaluation of deferred tax liability |  |  | (0.5 | ) |  |  | (5.7 | ) |  |  | 0.0 |
Total |  |  | 16.4 | % |  |  | 30.4 | % |  |  | 33.4 | %
Significant components of deferred tax assets and liabilities are as follows:
|  | December 31, |
(in thousands) |  | 2018 |  |  | 2017 |
Deferred tax assets: |  |  |  |  |  |  |  |
Accrued expenses |  | $ | 931 |  |  | $ | 756 |
Stock options, restricted stock and other |  |  | 2,908 |  |  |  | 2,309 |
Intangible assets |  |  | 748 |  |  |  | 429 |
Inventories |  |  | 154 |  |  |  | 220 |
Other assets |  |  | 666 |  |  |  | 625 |
Net operating loss |  |  | 6,605 |  |  |  | 6,374 |
Less valuation allowance |  |  | (6,900 | ) |  |  | (6,633 | )
Total deferred tax assets |  |  | 5,112 |  |  |  | 4,080 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation |  |  | (21,788 | ) |  |  | (9,528 | )
Goodwill |  |  | (3,486 | ) |  |  | (1,518 | )
Total deferred tax liabilities |  |  | (25,274 | ) |  |  | (11,046 | )
Net deferred tax liability |  | $ | (20,162 | ) |  | $ | (6,966 | )
The Company has recorded no U.S. deferred taxes related to the undistributed earnings of its non-U.S. subsidiaries as of December 31, 2018. Such amounts are intended to be reinvested outside of the United States indefinitely. It is not practicable to estimate the amount of additional tax that might be payable on the foreign earnings. As of December 31, 2018, the Company had accumulated undistributed earnings in non-U.S. subsidiaries of $6.8 million. As of December 31, 2018, the Company had estimated net operating loss carry forwards of $22.5 million for tax purposes. The net operating losses relate to operations in Japan and Germany. Japan losses can be carried forward for up to ten years but are limited to 50 percent of taxable income. Germany net operating losses may be carried forward without any time limitations but are limited to €1 million, plus 50 percent of taxable income exceeding €1 million. The remaining Japan net operating losses begin to expire at various dates between 2019 and 2026. The Company’s Japan operations are taxed both by local authorities and in the U.S. The Company establishes valuation allowances for deferred tax assets when, after consideration of all positive and negative evidence, it is considered more-likely-than- not that a portion of the deferred tax assets will not be realized. The Company's valuation allowances of $6.9 million and $6.6 million at December 31, 2018 and 2017, respectively, reduce the carrying value of deferred tax assets associated with certain net operating loss carry forwards and other assets with insufficient positive evidence for recognition. The increase in the valuation allowance is primarily attributable to fluctuations in foreign currency and the net operating losses incurred in Germany in 2018. The Company files a U.S. federal income tax return and income tax returns in various states and foreign jurisdictions. With a few exceptions, the Company is no longer subject to U.S. federal, state, or foreign income tax examinations by tax authorities for years before 2015. The Company has liabilities related to unrecognized tax benefits totaling $4.1 million and $4.2 million at December 31, 2018 and 2017, respectively, that if recognized would result in a reduction of the Company’s effective tax rate. The liabilities are classified as other long-term liabilities in the accompanying consolidated balance sheets. The Company does not anticipate that total unrecognized tax benefits will materially change in the next twelve months. The Company recognizes interest and penalties related to income tax matters in income tax expense and reports the liability in current or long-term income taxes payable as appropriate. Interest and penalties were immaterial for each of the years ended December 31, 2018, 2017 and 2016. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|  | December 31, |
|  | 2018 |  |  | 2017 |
Balance at beginning of period |  | $ | 4,233 |  |  | $ | 3,796 |
Additions for tax positions of current year |  |  | 593 |  |  |  | 831 |
Additions for tax positions of prior years |  |  | 309 |  |  |  | 48 |
Decrease related to expiration of statutes of limitations |  |  | (1,039 | ) |  |  | (442 | )
Balance at period end |  | $ | 4,096 |  |  | $ | 4,233 |

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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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