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Note 17 - Income Taxes | 12 Months Ended
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Dec. 31, 2020
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | 1 7. Income Taxes Income Tax Expense The components of the Company’s income (loss) before income taxes and its provision for (benefit from) income taxes consist of the following:
|  | Years ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Income (loss) before income taxes |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  | $ | (25,722 | ) |  | $ | 38,299 |  |  | $ | 26,227 |
Foreign |  |  | (2,902 | ) |  |  | (2,178 | ) |  |  | (3,020 | )
|  | $ | (28,624 | ) |  | $ | 36,121 |  |  | $ | 23,207 |
|  | Years ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Provision for (benefit from) income taxes: |  |  |  |  |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 357 |  |  | $ | 6,245 |  |  | $ | 4,783 |
State |  |  | (1,970 | ) |  |  | 1,884 |  |  |  | 1,644 |
Foreign |  |  | 49 |  |  |  | 202 |  |  |  | 405 |
Total current |  |  | (1,564 | ) |  |  | 8,331 |  |  |  | 6,832 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (1,980 | ) |  |  | 1,086 |  |  |  | (992 | )
State |  |  | (1,070 | ) |  |  | 324 |  |  |  | (152 | )
Foreign |  |  | (28 | ) |  |  | (813 | ) |  |  | (1,203 | )
Total deferred |  |  | (3,078 | ) |  |  | 597 |  |  |  | (2,347 | )
Total provision |  | $ | (4,642 | ) |  | $ | 8,928 |  |  | $ | 4,485 |
Deferred Tax Assets and Liabilities Significant components of the Company’s deferred tax assets and liabilities consist of the following:
|  | December 31, |
|  | 2020 |  |  | 2019 |
Deferred tax assets: |  |  |  |  |  |  |  |
Lease liability |  | $ | 5,147 |  |  | $ | 5,206 |
Inventory reserve |  |  | 2,004 |  |  |  | 1,187 |
Net operating loss carry forwards |  |  | 4,775 |  |  |  | 1,812 |
Stock-based compensation expense |  |  | 1,742 |  |  |  | 1,901 |
Tax credits |  |  | 2,485 |  |  |  | - |
Foreign currency exchange |  |  | 229 |  |  |  | 346 |
Accrued expenses and other |  |  | 156 |  |  |  | 1,076 |
Gross deferred tax assets |  |  | 16,538 |  |  |  | 11,528 |
Less: valuation allowance |  |  | (857 | ) |  |  | - |
Deferred tax assets |  | $ | 15,681 |  |  | $ | 11,528 |
|  | December 31, |
|  | 2020 |  |  | 2019 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Acquisition-related intangibles |  | $ | (13,972 | ) |  | $ | (2,023 | )
Depreciation |  |  | (8,493 | ) |  |  | (8,665 | )
Right of use asset |  |  | (5,111 | ) |  |  | (5,171 | )
Deferred tax liabilities |  | $ | (27,576 | ) |  | $ | (15,859 | )
Net deferred tax liabilities |  | $ | (11,895 | ) |  | $ | (4,331 | )
The Company recognized a total net deferred tax liability of $11.9 million, of which $11.2 million is due to the intangible assets and inventory step up offset by net operating loss (“NOL”) carryforwards and research and development tax credits associated with the Arthrosurface acquisition discussed in Note 3. As of December 31, 2020, the Company had a federal NOL carryforward of $8.6 million and state NOL carryforwards of $3.0 million. The federal NOL carryforward will begin to expire in 2025 and the state NOL carryforwards will begin to expire in 2028 through 2040 if unutilized. Federal NOLs generated in tax years after 2017 do not expire but are limited to 80% of taxable income. The Company also had NOL carryforwards in Italy of $8.5 million that do not expire. As of December 31, 2020, the Company had federal and state research and development tax credit carryforwards of $1.9 million and $0.07 million, respectively, that will begin expiring in 2023. The Company evaluated the likelihood that it would realize the deferred income taxes to offset future taxable income and concluded that it is more likely than not that the majority of its deferred tax assets will be realized through consideration of both the positive and negative evidence. At December 31, 2020, the Company recorded a valuation allowance in the amount of $0.9 million related to the Italy NOL carryforwards due to the uncertainty regarding their realization. Tax Rate The reconciliation between the U.S. federal statutory rate and the Company’s effective rate is summarized as follows:
|  | Years ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Statutory federal income tax rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
State tax expense, net of federal benefit |  |  | 1.5 | % |  |  | 5.5 | % |  |  | 5.5 | %
Stock compensation and Section 162(m) limitation |  |  | (2.2 | %) |  |  | 0.9 | % |  |  | (0.5 | %)
Goodwill impairment |  |  | (16.8 | %) |  |  | 0.0 | % |  |  | 0.0 | %
Change in fair value of contingent consideration |  |  | 6.7 | % |  |  | 0.0 | % |  |  | 0.0 | %
Change in state apportionment |  |  | 4.9 | % |  |  | 0.0 | % |  |  | 0.0 | %
Federal, state and foreign tax credits |  |  | 2.2 | % |  |  | (1.5 | %) |  |  | (3.6 | %)
Valuation allowance |  |  | (3.0 | %) |  |  | 0.0 | % |  |  | 0.0 | %
Other permanent items |  |  | 1.9 | % |  |  | (1.2 | %) |  |  | (3.1 | %)
Effective income tax rate |  |  | 16.2 | % |  |  | 24.7 | % |  |  | 19.3 | %
Accounting for Uncertainty in Income Taxes The Company had no unrecognized tax benefits for the years ended December 31, 2020 and 2019, respectively. The Company does not anticipate experiencing any significant increases or decreases in its unrecognized tax benefits within the twelve months following December 31, 2020. In the normal course of business, Anika and its subsidiaries may be periodically examined by various taxing authorities. The Company files income tax returns in the United States on a federal basis, in certain U.S. states, and in certain foreign jurisdictions. The associated tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate. With few exceptions, the Company is no longer subject to income tax examinations for years prior to 2017. Upon the settlement of certain stock-based awards (i.e., exercise, vesting, forfeiture, or cancellation), the actual tax deduction is compared with cumulative financial reporting compensation cost, and any excess tax deduction related to these awards is considered a windfall tax benefit. With the adoption of ASU 2016-09 in 2017, the Company records windfall tax benefits to income tax expense. The Company follows the with-and-without approach for the direct effects of windfall/shortfall items and to determine the timing of the recognition of any related benefits. The Company recorded a windfall tax benefit in income tax expense of $0.2 million in 2020 compared to an immaterial amount in 2019 and $1.5 million in 2018.

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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=84230637&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=116825942&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=84230637&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=116825942&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=84230637&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 + Details
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