Annual report [Section 13 and 15(d), not S-K Item 405]

Note 11 - Income Taxes

v3.25.4
Note 11 - Income Taxes
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

11. Income Taxes

 

The provision for income tax expense consists of the following:

 

   

Year ended December 31

  
   

2025

    

2024

    

2023

  

Current:

                        

Federal

   $ 4,635     $ 18,176     $ (2,854 )

State

     706       2,606       804  
      5,341       20,782       (2,050 )

Deferred:

                        

Federal

     8,493       (2,617 )     7,709  

State

     775       (425 )     (148 )
      9,268       (3,042 )     7,561  
    $ 14,609     $ 17,740     $ 5,511  

 

 

The Company made tax payments (net of refunds) during the year ended December 31, 2025 as follows: 

 

 

Jurisdiction

  

Payment Amount

  

Federal

   $ 6,460  

State and local

     1,258  

Total net income taxes paid

   $ 7,718  

 

 

A reconciliation of income tax expense computed at the federal statutory rate to the provision for income taxes for the years ended December 31, 2025, 2024 and 2023 is as follows, note that the reconciliation for the years ended December 31, 2024 and 2023 are prior to the adoption of ASU 2023-09:

 

   

2025

    

2025 Rate

    

2024

    

2023

  

Federal income tax expense at statutory rate

   $ 12,916       21.00 %   $ 15,517     $ 6,139  

State and local income tax, net of federal income tax effect*

     1,230       2.00 %     2,295       762  

Foreign tax effects

     -       0.00 %     -       -  

Valuation allowance

     -       0.00 %     (495 )     (67 )

Effect of cross-border tax laws

     (64 )     (0.10 %)     -       -  

Change in uncertain tax positions, net

     237       0.39 %     540       225  

Tax credits

     (167 )     (0.27 %)     (704 )     (1,694 )

Nontaxable or nondeductible items

     278       0.45 %     -       -  

Other

     179       0.28 %     587       146  
    $ 14,609       23.75 %   $ 17,740     $ 5,511  

 

*State taxes in New Hampshire, New Jersey, Illinois, Iowa and Minnesota make up the majority (greater than 50%) of the tax effect in the "State and local income tax" category. 

 

Significant components of the Company’s deferred tax liabilities and assets are as follows:

 

   

December 31,

  
   

2025

    

2024

  

Deferred tax assets:

                

Allowance for doubtful accounts

   $ 617     $ 588  

Inventory reserves

     1,817       1,749  

Warranty liability

     1,402       1,343  

Deferred compensation

     2,446       2,237  

Pension and retiree health benefit obligations

     1,071       866  

Accrued vacation

     869       844  

Research expenditures

     440       6,723  

Operating lease liabilities

     16,322       17,625  

Net operating losses

     1,002       1,194  

Other accrued liabilities

     4,961       4,550  

State credit carryforwards

     868       1,060  

Other

     391       338  

Valuation allowance

     (1,393 )     (1,510 )

Total deferred tax assets

     30,813       37,607  

Deferred tax liabilities:

                

Interest rate swaps

     (170 )     (573 )

Tax deductible goodwill and other intangibles

     (38,476 )     (37,125 )

Accelerated depreciation

     (7,852 )     (6,754 )

Operating leases - right of use assets

     (16,791 )     (17,289 )

Other

     (628 )     (440 )

Total deferred tax liabilities

     (63,917 )     (62,181 )

Net deferred tax liabilities

   $ (33,104 )   $ (24,574 )

 

Deferred income tax balances reflect the effects of temporary differences between the carrying amount of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.

 

State operating loss carry forwards for tax purposes will result in future tax benefits of approximately $598. These loss carry-forwards began to expire in 2021. The Company evaluated the need to maintain a valuation allowance against certain deferred tax assets. Based on this evaluation, which included a review of recent profitability, future projections of profitability, and future deferred tax liabilities, the Company concluded that a valuation allowance of approximately $989 is necessary at December 31, 2025 for the state net operating loss carry-forwards which are likely to expire prior to the Company's ability to use the tax benefit. The Company also carries a valuation allowance for approximately $404 related to non-state net operating loss carry-forwards which are likely to expire prior to the Company’s ability to use the tax benefit.

 

A reconciliation of the beginning and ending liability for uncertain tax positions is as follows:

 

   

2025

    

2024

    

2023

  

Balance at beginning of year

   $ 2,505     $ 1,701     $ 1,519  

Increases for tax positions taken in the current year

     290       681       277  

Increases for tax positions taken in prior years

     282       951       -  

Decreases due to settlements with taxing authorities

     (15 )     -       -  

Decreases due to lapses in the statute of limitations

     (573 )     (828 )     (95 )

Balance at the end of year

   $ 2,489     $ 2,505     $ 1,701  

 

The amount of the unrecognized tax benefits that would affect the effective tax rate, if recognized, was approximately $2,489 at December 31, 2025. The Company recognizes interest and penalties related to the unrecognized tax benefits in income tax expense. Approximately $743 and $567 of accrued interest and penalties is reported as an income tax liability at December 31, 2025 and 2024, respectively. The liability for unrecognized tax benefits is reported in Other long‑term liabilities on the Consolidated Balance Sheets at December 31, 2025 and 2024.

 

The Company files income tax returns in the United States (federal), Wisconsin (state), Maine (state), and various states. Tax years open to examination by tax authorities under the statute of limitations include 2022, 2023 and 2024 for Federal and 2021 through 2024 for most states. Tax returns for the 2025 tax year have not yet been filed.

 

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures in the year incurred and required taxpayers to amortize them over a period of five years for tax purposes. This mandatory capitalization requirement increases the Company's deferred tax assets and cash tax liabilities.