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Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

8. INCOME TAXES

Income tax expense consisted of the following:

		December 31,
		2016				2015				2014
		(in thousands)
Federal Income Tax:
Current		$	5,788			$	6,155			$	5,674
Deferred			(311	)			31				(9	)

State Income Tax:
Current			652				601				550
Deferred			(23	)			2				4

Foreign Income Tax:
Current			791				797				625
Deferred			78				17				150
Income Tax Expense		$	6,975			$	7,603			$	6,994

Pre-tax income included foreign income of $3,944,000, $4,117,000 and $3,474,000 in 2016, 2015 and 2014, respectively. During 2014, the Company paid a dividend out of its U.K. subsidiary, resulting in incremental U.S. taxes of $296,000. As of December 31, 2016, the Company has $7,306,000 of unremitted earnings at its foreign subsidiaries. The Company has not provided deferred taxes on these amounts, as the Company considers these balances to be indefinitely invested in the operations of the foreign subsidiary. The incremental U.S. tax that would be paid if these earnings were remitted is $1,198,000.

Total income tax expense differed from statutory income tax expense, computed by applying the U.S. federal income tax rate of 35% to earnings before income tax, as follows:

		December 31,
		2016				2015				2014
		(in thousands)
Computed Statutory Income Tax Expense		$	7,475			$	8,193			$	7,159
State Income Tax, Net of Federal Tax Benefit			386				360				318
Foreign Tax Rate Differential			(592	)			(607	)			(469	)
Manufacturing Deduction			(385	)			(423	)			(381	)
Impact of Foreign Dividend			—				—				296
Increase/(Reduction) in Tax Uncertainties			(70	)			3				3
Valuation Allowance for Foreign Loss Carryover			70				—				—
Other - Net			91				77				68
Income Tax Expense		$	6,975			$	7,603			$	6,994

A deferred income tax (expense) benefit results from temporary timing differences in the recognition of income and expense for income tax and financial reporting purposes. The components of and changes in the net deferred tax assets (liabilities) which give rise to this deferred income tax (expense) benefit for the years ended December 31, 2016 and 2015 are as follows:

		December 31,
		2016				2015
		(in thousands)
Deferred Tax Assets:
Compensation Assets		$	151			$	133
Inventory Valuation			482				490
Accounts Receivable Valuation			344				325
Deferred Litigation Costs			37				44
Foreign Net Operating Losses			70				87
Valuation Allowance for Loss Carryover			(70	)			—
Other			265				207
Compensation Liabilities			796				522
Total Deferred Assets		$	2,075			$	1,808

Deferred Tax Liabilities:
Prepaid Expenses			(655	)			(527	)
Depreciation and Amortization			(1,546	)			(1,535	)
Total Deferred Liabilities		$	(2,201	)		$	(2,062	)

Total Deferred Tax Liability		$	(126	)		($	254	)

Management believes it is more likely than not that the Company will have sufficient taxable income when these timing differences reverse and that the deferred tax assets will be realized with the exception of a carryover of foreign operating losses. Due to the uncertainty of future income in the foreign subsidiary, the Company has recognized a valuation allowance related to the foreign operating losses carrying forward.

The Company is currently subject to audit by the Internal Revenue Service for the calendar years ended 2013 through 2015. The Company and its Subsidiaries’ state income tax returns are subject to audit for the calendar years ended 2012 through 2015.

As of December 31, 2015, the Company had provided a liability of $110,000 for unrecognized tax benefits related to various federal and state income tax matters, which was included in Other Long Term Liabilities. Of this amount, the amount that would impact the Company’s effective tax rate, if recognized, was $70,000. The entire liability balance in the account at December 31, 2015 was written off during 2016 as a result of expired statutes. The liability for unrecognized tax benefits at December 31, 2016 is zero. The difference between the total amount of unrecognized tax benefits and the amount that would impact the effective tax rate consists of items that are offset by the federal tax benefits of state income tax items of zero and $40,000 for 2016 and 2015, respectively.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the year:

		December 31,
		2016				2015

Beginning Unrecognized Tax Benefits –		$	110			$	105
Current Year – Increases			—				—
Current Year – Decreases			—				—
Current Year – Interest/Penalties			4				5
Expired Statutes			(114	)			—
Ending Unrecognized Tax Benefits –		$	—			$	110