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Note 16 - Income Taxes | 12 Months Ended
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Dec. 31, 2021
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | Note 16 – 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, 2021, 2020 and 2019, the Company recorded an income tax provision of $6.8 million, $12.1 million and $17.5 million, respectively. The effective income tax rate for the years ended December 31, 2021, 2020 and 2019 was 17.0 percent, 19.2 percent and 21.6 percent, respectively. The effective tax rate decreased by 2.2% for the year ended December 31, 2021 when compared to 2020 primarily due to a one-time benefit from the revaluation of contingent consideration and a benefit from the decrease in the tax liability for uncertain tax positions resulting from the expiration of the statute of limitations. These benefits were partially offset by an increase in the valuation allowances on losses from foreign operations. The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020. The CARES Act was meant to infuse companies with various income and payroll tax cash benefits to ease the impact of the pandemic. A technical correction to the Tax Cuts and Jobs Act of 2017 was included in the CARES Act allowing qualified improvement property to claim bonus depreciation for respective assets placed in service in 2018 and 2019. The impact of the CARES Act to the Company was a $2.9 million reduction to income taxes payable and a corresponding increase to deferred tax liability for the year ended December 31, 2020. In addition, the Company elected to defer deposits of the employer portion of the Social Security tax for the quarter ended March 31, 2020 through the quarter ended December 31, 2020. The Social Security taxes deferred in 2020 were paid in 2021. 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) |  | 2021 |  |  | 2020 |  |  | 2019 |
Domestic |  | $ | 42,449 |  |  | $ | 58,551 |  |  | $ | 74,841 |
Foreign |  |  | (2,265 | ) |  |  | 4,394 |  |  |  | 6,352 |
Total |  | $ | 40,184 |  |  | $ | 62,945 |  |  | $ | 81,193 |
Significant components of the provision for income taxes for the following periods are as follows:
|  | Year Ended December 31, |
(in thousands) |  | 2021 |  |  | 2020 |  |  | 2019 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 5,552 |  |  | $ | 2,128 |  |  | $ | 6,991 |
State |  |  | 975 |  |  |  | 1,136 |  |  |  | 2,882 |
Foreign |  |  | (64 | ) |  |  | 1,241 |  |  |  | 1,544 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (377 | ) |  |  | 6,904 |  |  |  | 5,121 |
State |  |  | (814 | ) |  |  | (431 | ) |  |  | 269 |
Foreign |  |  | (1,181 | ) |  |  | 210 |  |  |  | (809 | )
Valuation Allowance |  |  | 2,721 |  |  |  | 890 |  |  |  | 1,540 |
Total |  | $ | 6,812 |  |  | $ | 12,078 |  |  | $ | 17,538 |
A reconciliation of the federal statutory income tax rate to the effective tax rate is as follows:
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Federal tax statutory rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
State tax (net of federal benefit) |  |  | 2.1 |  |  |  | 2.1 |  |  |  | 2.1 |
Share based compensation |  |  | (2.3 | ) |  |  | (1.3 | ) |  |  | (0.5 | )
Valuation allowance against deferred tax assets |  |  | 8.9 |  |  |  | 2.0 |  |  |  | 1.4 |
Contingent consideration reduction |  |  | (7.0 | ) |  |  | - |  |  |  | - |
Research and development credit |  |  | (4.0 | ) |  |  | (3.7 | ) |  |  | (2.8 | )
Foreign rate differential |  |  | (2.2 | ) |  |  | (0.8 | ) |  |  | (0.3 | )
Tax reserves |  |  | (1.0 | ) |  |  | 1.4 |  |  |  | 1.1 |
Provision to return difference |  |  | (0.7 | ) |  |  | (1.4 | ) |  |  | - |
Miscellaneous |  |  | 2.2 |  |  |  | (0.1 | ) |  |  | (0.4 | )
Total |  |  | 17.0 | % |  |  | 19.2 | % |  |  | 21.6 | %
Significant components of deferred tax assets and liabilities are as follows:
|  | December 31, |
(in thousands) |  | 2021 |  |  | 2020 |
Deferred tax assets: |  |  |  |  |  |  |  |
Accrued expenses |  | $ | 2,511 |  |  | $ | 2,155 |
Leases |  |  | 1,830 |  |  |  | 3,598 |
Warrants and stock options |  |  | 4,271 |  |  |  | 3,356 |
Intangible assets |  |  | - |  |  |  | 1,693 |
Inventories |  |  | 205 |  |  |  | 172 |
Research and development credit |  |  | 2,126 |  |  |  | 1,661 |
Other assets |  |  | 1,111 |  |  |  | 129 |
Net operating loss |  |  | 14,046 |  |  |  | 6,647 |
Less valuation allowance |  |  | (13,999 | ) |  |  | (9,138 | )
Total deferred tax assets |  |  | 12,101 |  |  |  | 10,273 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation |  |  | (31,897 | ) |  |  | (32,671 | )
Goodwill |  |  | (9,872 | ) |  |  | (7,858 | )
Intangible assets |  |  | (4,394 | ) |  |  | - |
Leases |  |  | (1,830 | ) |  |  | (3,598 | )
Total deferred tax liabilities |  |  | (47,993 | ) |  |  | (44,127 | )
Net deferred tax liability |  | $ | (35,892 | ) |  | $ | (33,854 | )
The Company has recorded no U.S. deferred taxes related to the undistributed earnings of its non-U.S. subsidiaries as of December 31, 2021. 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, 2021, the Company had accumulated undistributed earnings in non-U.S. subsidiaries of $2.7 million. As of December 31, 2021, the Company had estimated net operating loss carry forwards of $14.0 million for tax purposes. The net operating losses relate to operations in Japan, Germany and Netherlands. Japan losses can be carried forward for up to ten years. The remaining Japan net operating losses begin to expire at various dates between 2022 and 2031. The Company’s Japan operations are taxed both by local authorities and in the U.S. Germany net operating losses may be carried forward without any time limitations but are limited to €1 million, plus 60 percent of taxable income exceeding €1 million. Netherlands 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 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 $14.0 million and $9.1 million at December 31, 2021 and 2020, 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 the Netherlands net operating losses acquired in 2021 via the Hubs acquisition. 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 2017. The Company has liabilities related to unrecognized tax benefits totaling $4.4 million and $4.8 million at December 31, 2021 and 2020, 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 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, 2021, 2020 and 2019. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|  | December 31, |
|  | 2021 |  |  | 2020 |
Balance at beginning of period |  | $ | 4,830 |  |  | $ | 4,598 |
Additions for tax positions of current year |  |  | 491 |  |  |  | 324 |
Additions for tax positions of prior years |  |  | 781 |  |  |  | 475 |
Decrease related to expiration of statutes of limitations |  |  | (1,738 | ) |  |  | (567 | )
Balance at period end |  | $ | 4,364 |  |  | $ | 4,830 |

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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