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

Income Taxes

v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company is subject to U.S. federal income tax as well as income tax in multiple state, local and foreign jurisdictions. With few exceptions, the statute of limitations for these jurisdictions is no longer open for audit or examinations for the years before 2021 for federal and state income taxes in the U.S and various foreign jurisdictions.

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

For the years ended December 31,
  2025 2024 2023
Domestic
 $ 62,037  $ 18,928  $ 14,284 
Foreign 7,002  4,881  4,776 
Income from continuing operations before income taxes
 $ 69,039  $ 23,809  $ 19,060 
The components of the provision for income taxes from continuing operations were as follows (in thousands):
For the years ended December 31,
  2025 2024 2023
Current:
Federal $ 10,422  $ 9,010  $ 6,792 
State 2,191  1,495  1,066 
Foreign 1,655  1,573  1,138 
       Total current
 14,268  12,078  8,996 
Deferred:      
Federal 1,944  (6,569) (3,951)
State (1,234) (923) (557)
Foreign 568  (179) 7 
       Total deferred
 1,278  (7,671) (4,501)
Provision for income taxes $ 15,546  $ 4,407  $ 4,495 

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,
  2025 2024 2023
$
%
$
%
$
%
US federal statutory tax rate
 $ 14,498  21.0  % $ 5,000  21.0  % $ 4,003  21.0  %
Increases (decreases) in tax resulting from:  
State and local income taxes, net of federal income tax effect (a)
756  1.1  % 451  1.9  % 402  2.1  %
Foreign tax effects
  Germany
 798  1.2  % —  —  % —  —  %
  Other foreign jurisdictions
 (41) —  % 373  1.6  % 144  0.8  %
Effect of cross-border tax laws
Foreign-derived intangible income
 (3,753) (5.4) % (1,892) (8.0) % (615) (3.2) %
Tax credits
 (52) (0.1) % (80) (0.3) % (32) (0.2) %
Changes in valuation allowances
 502  0.7  % 4  —  % (1) —  %
Nontaxable or nondeductible items
Excess stock tax benefit
 (1,421) (2.1) % (772) (3.2) % —  —  %
Section 162(m) executive compensation
3,809  5.5  % 1,444  6.1  % 554  2.9  %
Transaction costs
 1,053  1.5  % 489  2.0  % 477  2.5  %
Corporate-owned life insurance
 —  —  % (283) (1.2) % (409) (2.1) %
Other
 (132) (0.2) % 116  0.5  % 43  0.2  %
Other adjustments
Other adjustments
 (471) (0.7) % (443) (1.9) % (71) (0.4) %
Effective tax rate
 $ 15,546  22.5  % $ 4,407  18.5  % $ 4,495  23.6  %
(a) State Taxes in CA, FL, KS, and VA made up the majority (greater than 50%) of the tax effect in this category. State income tax expense includes the effects of changes in valuation allowances related to state net operating losses, the impact of state conformity to federal income tax provisions, and the benefit of state income tax credits.

During the year ended December 31, 2025, the Company recorded unrecognized tax benefits of approximately $3.1 million in connection with a recent acquisition. Because the identified tax exposures, including interest and penalties, are fully indemnified, recognition is not expected to materially affect the Company’s effective tax rate.
The tax effect of temporary differences representing deferred tax assets and liabilities was as follows (in thousands):

As of December 31,
  2025 2024
Deferred compensation and accrued paid leave $ 2,544  $ 1,948 
Accrued expense 2,481  1,367 
Inventory reserve 22,822  23,020 
Operating lease liabilities 13,321  14,199 
Stock-based compensation 2,201  2,084 
Capitalized inventory 514  498 
US operating and capital loss carryforward 8,187  12,843 
Disallowed interest expense 6,982  9,450 
Tax credit carryforward 1,822  1,421 
Foreign country operating loss carryforward 1,417  1,364 
Interest capitalized —  2,030 
Transaction costs 302  235 
62,593  70,459 
Valuation allowance (a)
(5,091) (19,368)
    Total gross deferred tax assets 57,502  51,091 
Interest rate swaps (170) (1,021)
Depreciation (7,285) (4,000)
Goodwill and intangible assets (50,571) (26,786)
Operating lease right-of-use assets (11,870) (10,962)
Other —  (193)
    Total gross deferred tax liabilities (69,896) (42,962)
Net deferred tax (liabilities) assets (b)
$ (12,394) $ 8,129 
(a) A valuation allowance was provided against US capital losses in connection with a recent stock sale, certain state net operating losses, tax credits, and foreign tax loss deferred tax assets arising from carryforwards of unused tax benefits.
(b) Deferred tax assets are included within other assets in the Company's consolidated balance sheets as of December 31, 2024.

As of December 31, 2025, the Company had various tax losses and tax credits that may be applied against future taxable income. The majority of such tax attributes will expire in 2026 through 2046; 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 the Company does not have material operations in jurisdictions with tax rates lower than the Pillar Two minimum, the Company does not expect these rules will significantly increase global tax costs. The Company will continue to monitor US and global legislative action related to Pillar Two for future potential impacts.