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

Income Taxes

v3.25.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
We are subject to U.S. federal income tax as well as income tax in multiple state and local jurisdictions. With few exceptions, the statute of limitations for these jurisdictions is no longer open for audit or examinations for the years before 2020 for federal and state income taxes in the U.S.

We file consolidated federal income tax returns that include all of our U.S. subsidiaries. The components of income from continuing operations before income taxes were as follows (in thousands):

For the years ended December 31,
  2024 2023 2022
Domestic
 $ 41,599  $ 52,137  $ 36,694 
Foreign 4,881  4,776  (983)
Income from continuing operations before income taxes
 $ 46,480  $ 56,913  $ 35,711 

The components of the provision for income taxes from continuing operations were as follows (in thousands):
For the years ended December 31,
  2024 2023 2022
Current:
Federal $ 11,670  $ 11,556  $ 9,483 
State 2,132  2,205  1,485 
Foreign 1,573  1,138  35 
       Total current
 15,375  14,899  11,003 
Deferred:      
Federal (4,725) (1,148) (1,890)
State (489) 3  (61)
Foreign (179) 7  — 
       Total deferred
 (5,393) (1,138) (1,951)
Provision for income taxes $ 9,982  $ 13,761  $ 9,052 
The Company's effective tax rate differs from the federal statutory rate. A reconciliation of the provision for income taxes from continuing operations to the amount computed by applying the statutory federal income tax rate is as follows (in thousands):

For the years ended December 31,
  2024 2023 2022
Tax at statutory federal income tax rate $ 9,761  $ 11,952  $ 7,499 
Increases (decreases) in tax resulting from:      
State taxes, net of federal tax benefit 1,738  2,019  1,459 
Permanent differences, net (634) (193) 287 
Tax credits (454) (461) (418)
Prior year true-up adjustment (931) 269  (45)
Valuation allowance 378  77  324 
Other provision adjustments 124  98  (54)
Provision for income taxes $ 9,982  $ 13,761  $ 9,052 
Effective tax rate
 21.5  % 24.2  % 25.3  %

The tax effect of temporary differences representing deferred tax assets and liabilities was as follows (in thousands):

As of December 31,
  2024 2023
Deferred compensation and accrued paid leave $ 2,767  $ 3,003 
Accrued expense 2,094  1,429 
Inventory reserve 23,463  13,980 
Operating lease liabilities 14,362  6,249 
Stock-based compensation 2,084  1,697 
Capitalized inventory 1,741  1,335 
US operating and capital loss carryforward 12,777  7,637 
Disallowed interest expense 9,450  1,663 
Tax credit carryforward 1,421  1,492 
Foreign country operating loss carryforward 1,364  806 
Interest capitalized 2,030  — 
Transaction costs 357  — 
73,910  39,291 
Valuation allowance (a)
(19,301) (9,906)
    Total gross deferred tax assets 54,609  29,385 
Interest rate swaps (1,021) (708)
Depreciation (3,959) (2,925)
Goodwill and intangible assets (38,279) (26,666)
Operating lease right-of-use assets (10,962) (5,939)
Other (270) (132)
    Total gross deferred tax liabilities (54,491) (36,370)
Net deferred tax assets (liabilities) (b)
$ 118  $ (6,985)
(a) A valuation allowance was provided against US capital loss in connection with the stock sale of Prime Turbines, certain state net operating loss, tax credit, and foreign tax loss deferred tax assets arising from carryforwards of unused tax benefits.
(b) Deferred tax assets are included within other assets in our consolidated balance sheets.

As of December 31, 2024, we had various tax losses and tax credits that may be applied against future taxable income. The majority of such tax attributes will expire in 2025 through 2044; however, some may be carried forward indefinitely.
The Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of 15% intended to be effective on January 1, 2024. While the US has not yet adopted the Pillar Two rules, many countries took steps to incorporate Pillar Two model rule concepts into their domestic laws in 2023. Considering that we do not have material operations in jurisdictions with tax rates lower than the Pillar Two minimum, we do not expect these rules will significantly increase our global tax costs. We will continue to monitor US and global legislative action related to Pillar Two for future potential impacts.