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INCOME TAXES

12 Months Ended

Dec. 31, 2021

INCOME TAXES

INCOME TAXES

14. INCOME TAXES

The provision for income taxes included the following components for the years ended December 31, 2021 and 2020:

​	​	​	​	​	​	​
​		2021			2020
​	​	(Dollars in thousands)
Current:		​			​
Federal	​	$	3,656	​	$	(1,954)
State	​		1,235	​		(154)
Foreign	​		989	​		784
Total	​		5,880	​		(1,324)
Deferred	​		910	​		2,755
Total provision	​	$	6,790	​	$	1,431

​

The differences between the U.S. federal statutory income tax rate and the Company’s effective tax rate were as follows for the years ended December 31, 2021 and 2020:

​	​	​	​	​	​
​		2021		2020
U.S. federal statutory income tax rate		21.0	%	21.0	%
State income taxes, net of federal tax benefit		3.3		1.8	​
Non-taxable municipal bond interest		(0.3)		1.3	​
Net Operating Loss Carryback Under the CARES Act	​	—	​	10.4	​
Foreign income tax rate differences		1.6		(24.3)	​
Reversal of deferred tax assets on foreign net operating losses	​	—	​	(28.4)	​
Share-based compensation		0.5		(1.0)	​
Other		(1.3)		(1.1)	​
Effective tax rate		24.8	%	(20.3)	%

​

The foreign component of pretax net earnings was earnings of $3.5 million and losses of $5.5 million for 2021 and 2020, respectively.

The Company's foreign subsidiaries, Florsheim Australia and Florsheim Europe, had net operating losses in 2020, and the Company determined it was more likely than not that current year tax benefits would not be realized, and recorded no current year tax provision for these entities, causing the majority of 2020’s negative foreign income tax rate differences noted above.

The Company also determined it was more likely than not that $2.0 million of deferred tax assets related to foreign tax carryforwards will not be realized, and reversed them in 2020.

The components of deferred taxes at December 31, 2021, and 2020 were as follows:

​	​	​	​	​	​	​
​		2021			2020
​	​	(Dollars in thousands)
Deferred income tax assets:		​			​
Accounts receivable reserves	​	$	269	​	$	269
Pension liability	​		7,350	​		8,842
Accrued liabilities	​		1,578	​		1,720
Operating lease liabilities	​	​	2,848	​	​	2,716
Foreign currency losses on intercompany loans	​		57	​		58
​	​		12,102	​		13,605
Deferred income tax liabilities:	​		​	​		​
Inventory and related reserves	​		(3,011)	​		(3,149)
Cash value of life insurance	​		(545)	​		(485)
Property, plant and equipment	​		(1,199)	​		(1,285)
Intangible assets	​		(8,539)	​		(7,913)
Operating lease right-of-use assets	​	​	(356)	​	​	(2,087)
Prepaid expenses and other assets	​		(2,415)	​		(365)
​	​		(16,065)	​		(15,284)
Net deferred income tax liabilities	​	$	(3,963)	​	$	(1,679)

​

The net deferred tax liabilities are classified in the Consolidated Balance Sheets as follows:

​	​	​	​	​	​	​
​		2021			2020
​	​	(Dollars in thousands)
Non-current deferred income tax benefits	​	$	1,063	​	$	1,235
Non-current deferred income tax liabilities	​		(5,026)	​		(2,914)
Net deferred income tax liabilities	​	$	(3,963)	​	$	(1,679)

​

Uncertain Tax Positions

The Company accounts for its uncertain tax positions in accordance with ASC 740, Income Taxes (“ASC 740”). ASC 740 provides that the tax effects from an uncertain tax position can be recognized in the Company’s consolidated financial statements only if the position is more likely than not of being sustained on audit, based on the technical merits of the position.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

​	​	​	​	​	​	​
​		2021			2020
​	​	(Dollars in thousands)
Unrecognized tax benefits balance at January 1,	​	$	833	​	$	636
Increases related to current year tax positions	​		8	​		257
Decreases due to settlements of tax positions	​		(250)	​		—
Decreases due to lapsing of statute of limitations	​		(436)	​		(60)
Unrecognized tax benefits balance at December 31,	​	$	155	​	$	833

​

The unrecognized tax benefits at December 31, 2021 and 2020, include $26,000 and $155,000, respectively, of interest related to such positions. The unrecognized tax benefits, if ultimately recognized, would reduce the Company’s annual effective tax rate. The liabilities for potential interest are included in the Consolidated Balance Sheets at December 31, 2021 and 2020.

The Company files a U.S. federal income tax return, various U.S. state income tax returns and several foreign returns. In general, the 2018 through 2020 tax years remain subject to examination by those taxing authorities.

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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)
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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