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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Note G - Income Taxes The company recorded net tax provisions of $13.2 million, $5.7 million, and $5.0 million for the years ending December 31, 2017, 2016, and 2015, respectively. Cash taxes paid net of refunds were $3.4 million in 2017, $6.9 million in 2016 and $12.3 million in 2015. As described in Note A, effective January 1, 2017, the Company adopted the new guidance from ASU 2016-09 and has recorded excess tax benefits or tax deficiencies from stock-based compensation in the Statements of Consolidated Income within the provision for income taxes rather than in the Consolidated Balance Sheets within paid-in capital. The Company had $.2 million in excess tax benefits during the year ended December 31, 2017. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code that affected 2017, including, but not limited to, requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that is payable over eight years. The Tax Act also establishes new tax laws that will affect 2018, including but not limited to, (1) reduction of the U.S. federal statutory rate from 35% to 21%; (2) the creation of the base erosion anti-abuse tax (BEAT), a new minimum tax; (3) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries; (4) a new provision, Global Intangible Low-Taxed Income (GILTI), which ends deferral of taxation on a significant portion of foreign earnings; (5) a new limitation on deductible interest expense; (6) the repeal of the domestic production activity deduction; (7) limitations on the deductibility of certain executive compensation; and (8) limitations on the use of FTCs to reduce the U.S. income tax liability. The SEC staff issued Standard Accounting Bulletin (“SAB”) 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate to be included in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. Our accounting for the following elements of the Tax Act is incomplete. However, the Company was able to make reasonable estimates of certain effects and, therefore, recorded provisional adjustments as follows:
| 1. | The Tax Act reduces the corporate tax rate from 35% to 21%, effective January 1, 2018. For certain of its deferred tax assets and deferred tax liabilities, the Company has recorded a provisional decrease of $6.1 million and $2.9 million, respectively, with a corresponding net adjustment to deferred income tax expense of $3.2 million for the year ended December 31, 2017. While the Company was able to make a reasonable estimate of the impact of the reduction in the corporate rate, it may be affected by other analyses related to the Tax Act, including but not limited to, its calculation of deemed repatriation of deferred foreign income and the state tax effect of adjustments made to federal temporary differences.
| 2. | The Deemed Repatriation Transition Tax (Transition Tax) is a tax on previously untaxed accumulated and current earnings and profits (E&P) of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. The Company was able to make a reasonable estimate of the Transition Tax and recorded a provisional Transition Tax expense of $3.8 million, of which $2.6 million affects the tax rate. However, the Company is continuing to gather additional information to more precisely compute the amount of the Transition Tax.
Our accounting for the following elements of the Tax Act is incomplete, and no provisional amounts have been recorded with regard to the following:
| 1. | The Company has not made sufficient progress on the effects of the 2018 limitations on the deductibility of certain executive compensation on its related deferred tax balances. The Company continues to apply ASC 740 based on the provisions of the tax laws that were in effect immediately prior to the Tax Act being enacted.
| 2. | The Tax Act subjects a US shareholder to tax on global intangible low taxed income (GILTI) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income states that an entity can make an accounting policy election to either recognize deferred taxes on temporary basis differences expected to reverse as GILTI in the future years or provide for the tax expense related to GILTI in the year the tax is incurred. Given the complexity of the GILTI provisions, the Company is still evaluating the effects of the GILTI provisions and has not yet determined its accounting policy. At December 31, 2017, because the Company is still evaluating the GILTI provisions and its analysis of the future taxable income that is subject to GILTI, the Company is unable to make a reasonable estimate and has not reflected any adjustments related to GILTI in its financial statements.
| 3. | Since the Company has not yet completed all the computations necessary or completed an inventory of our 2017 expenditures that qualify for immediate expensing, the Company has not recorded a provisional benefit.
Income before income taxes was derived from the following sources:
|  | 2017 |  |  | 2016 |  |  | 2015 |
United States |  | $ | 4,774 |  |  | $ | 3,501 |  |  | $ | 4,421 |
Foreign |  |  | 21,032 |  |  |  | 17,452 |  |  |  | 7,285 |
|  | $ | 25,806 |  |  | $ | 20,953 |  |  | $ | 11,706 |
The components of income taxes for the year ended December 31 are as follows:
|  | 2017 |  |  | 2016 |  |  | 2015 |
Current |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 4,592 |  |  | $ | (1,698 | ) |  | $ | 2,679 |
Foreign |  |  | 5,998 |  |  |  | 5,115 |  |  |  | 2,951 |
State and local |  |  | 126 |  |  |  | 32 |  |  |  | 345 |
|  |  | 10,716 |  |  |  | 3,449 |  |  |  | 5,975 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 2,316 |  |  |  | 2,986 |  |  |  | (611 | )
Foreign |  |  | 12 |  |  |  | (914 | ) |  |  | (309 | )
State and local |  |  | 108 |  |  |  | 177 |  |  |  | (24 | )
|  |  | 2,436 |  |  |  | 2,249 |  |  |  | (944 | )
Income taxes |  | $ | 13,152 |  |  | $ | 5,698 |  |  | $ | 5,031 |
The differences between the provision for income taxes at the U.S. federal statutory rate and the tax shown in the Statements of Consolidated Income for the year ended December 31 are summarized as follows:
|  | 2017 |  |  | 2016 |  |  | 2015 |
U. S. federal statutory tax rate |  | 35% |  |  | 35% |  |  | 35% |
Federal tax at statutory rate |  | $ | 9,033 |  |  | $ | 7,334 |  |  | $ | 4,097 |
State and local taxes, net of federal benefit |  |  | 82 |  |  |  | 20 |  |  |  | 89 |
U.S. federal permanent items |  |  | (60 | ) |  |  | 400 |  |  |  | 251 |
Domestic production activities deduction |  |  | (116 | ) |  | 0 |  |  |  | (321 | )
Foreign earnings and related tax credits |  | 0 |  |  |  | 716 |  |  |  | 700 |
Tax act - transition tax |  |  | 2,592 |  |  | 0 |  |  | 0 |
Non-U.S. tax rate variances |  |  | (1,491 | ) |  |  | (1,484 | ) |  |  | (685 | )
Unrecognized tax benefits |  | 0 |  |  |  | (195 | ) |  |  | (768 | )
Valuation allowance |  |  | 88 |  |  |  | (414 | ) |  |  | 1,754 |
Tax credits |  |  | (255 | ) |  |  | (252 | ) |  |  | (212 | )
Tax Act - remeasurement of deferreds |  |  | 3,161 |  |  | 0 |  |  | 0 |
Other, net |  |  | 118 |  |  |  | (427 | ) |  |  | 126 |
|  | $ | 13,152 |  |  | $ | 5,698 |  |  | $ | 5,031 |
Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the tax basis of assets and liabilities and their carrying value for financial statement purposes. The tax effects of temporary differences that give rise to the Company’s deferred tax assets and liabilities at December 31 are as follows:
|  | 2017 |  |  | 2016 |
Deferred tax assets: |  |  |  |  |  |  |  |
Accrued compensation and benefits |  | $ | 1,093 |  |  | $ | 1,250 |
Inventory valuation reserves |  |  | 2,332 |  |  |  | 3,422 |
Allowance for doubtful accounts |  |  | 360 |  |  |  | 471 |
Benefit plan reserves |  |  | 7,981 |  |  |  | 11,130 |
Net operating loss carryforwards |  |  | 3,402 |  |  |  | 3,358 |
Other accrued expenses |  |  | 2,489 |  |  |  | 2,445 |
Unrealized foreign exchange |  |  | 1,462 |  |  |  | 2,812 |
Gross deferred tax assets |  |  | 19,119 |  |  |  | 24,888 |
Valuation allowance |  |  | (3,965 | ) |  |  | (3,805 | )
Net deferred tax assets |  |  | 15,154 |  |  |  | 21,083 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation and other basis differences |  |  | (6,313 | ) |  |  | (8,341 | )
Intangibles |  |  | (2,706 | ) |  |  | (2,887 | )
Undistributed foreign earnings |  |  | (426 | ) |  |  | (1,642 | )
Other |  |  | (25 | ) |  |  | (83 | )
Deferred tax liabilities |  |  | (9,470 | ) |  |  | (12,953 | )
Net deferred tax assets |  | $ | 5,684 |  |  | $ | 8,130 |
|  | 2017 |  |  | 2016 |
Change in net deferred tax assets: |  |  |  |  |  |  |  |
Deferred income tax expense |  |  |  |  |  |  |  |
Ordinary movement |  | $ | (473 | ) |  | $ | (2,249 | )
Tax act - transition tax |  |  | 1,198 |  |  |  | 0 |
Tax impact deferred rate |  |  | (3,161 | ) |  |  | 0 |
Items of other comprehensive income (loss) |  |  | 48 |  |  |  | (48 | )
Currency translation |  |  | (58 | ) |  |  | 191 |
Total change in net deferred tax assets |  | $ | (2,446 | ) |  | $ | (2,106 | )
Deferred taxes are recorded at a rate at which such items are expected to reverse based on currently enacted tax rates for temporary differences between the financial reporting and income tax basis of assets and liabilities and operating loss and tax credit carryforwards. At December 31, 2017, the Company had $11.3 million of foreign net operating loss carryforwards of which $10.0 million have an indefinite carryforward and $1.0 million will expire between the years 2024 and 2027. The Company assesses the available positive and negative evidence to determine if it is more likely than not sufficient future taxable income will be generated to utilize the existing deferred tax assets by jurisdiction. Based on this evaluation, the Company has established a valuation allowance of $4.0 million at December 31, 2017 in order to measure only the portion of the deferred tax asset that is more likely than not to be realized. The net increase in the valuation allowance during the year was $.2 million, all of which impacts the income tax provision. The Company previously considered the majority of the earnings in our non-U.S. subsidiaries to be permanently reinvested and accordingly did not record any associated deferred income taxes on such earnings. Since the Tax Act includes a mandatory one-time tax on certain accumulated earnings of foreign subsidiaries, these previously unremitted earnings for which no U.S. deferred tax liability had been accrued have now been subject to U.S. tax. Notwithstanding the U.S. taxation of these amounts, the Company intends to continue to invest most or all of these earnings, as well as our capital in these subsidiaries, indefinitely outside of the U.S. and do not expect to incur any significant, additional taxes related to such amounts. The Company is subject to taxation in the U.S. and various state and foreign jurisdictions. As of December 31, 2017, with few exceptions, the Company is no longer subject to U.S. federal examinations by tax authorities for years before 2014 and state, local or foreign examinations by tax authorities for years before 2011. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties, for the year ended December 31:
|  | 2017 |  |  | 2016 |  |  | 2015 |
Balance at January 1 |  | $ | 0 |  |  | $ | 178 |  |  | $ | 794 |
Additions for tax positions of prior years |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Reductions for tax positions of prior years |  |  | 0 |  |  |  | 0 |  |  |  | (616 | )
Expiration of statutes of limitations |  |  | 0 |  |  |  | (178 | ) |  |  | 0 |
Balance at December 31 |  | $ | 0 |  |  | $ | 0 |  |  | $ | 178 |
The Company records accrued interest as well as penalties related to unrecognized tax benefits as part of the provision for income taxes. The Company recognized less than $.1 million, net of the amount reversed due to expiring statutes, during each of the years ended December 31, 2017, 2016 and 2015. During the year ended December 31, 2017, the Company had no activity with regard to unrecognized tax. The Company had approximately $0, $0, and less than $.1 million accrued for the payment of interest for the years ended December 31, 2017, 2016 and 2015, respectively. The Company had approximately $0 accrued for the payment of penalties for each of the years ended December 31, 2017, 2016 and 2015, respectively. If recognized, approximately $0, $0 and $.2 million of unrecognized tax benefits would affect the tax rate for the year ended December 31, 2017, 2016 and 2015, respectively. The Company does not anticipate a change in the unrecognized tax benefits within the next twelve months.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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