Entity information:
Note
6
– Income Taxes
 
The components of income before income taxes are:
 
   
2017
    
2016
    
2015
  
United States
   $
33,277
     $
33,101
     $
35,391
  
Foreign countries
    
6,101
      
3,381
      
1,875
  
Total
   $
39,378
     $
36,482
     $
37,266
  
 
 
The components of income tax expense are:
 
   
2017
    
2016
    
2015
  
Current expense:
                        
Federal
   $
16,489
     $
6,960
     $
11,465
  
Foreign
    
1,243
      
547
      
292
  
State and local
    
1,231
      
581
      
963
  
     
18,963
      
8,088
      
12,720
  
Deferred expense (benefit):
                        
Federal
    
(5,968
 )    
3,429
      
(443
 )
Foreign
    
51
      
(184
 )    
(112
 )
State and local
    
(223
 )    
266
      
(8
 )
     
(6,140
 )    
3,511
      
(563
 )
Income tax expense
   $
12,823
     $
11,599
     $
12,157
  
 
 
The reconciliation between income tax expense and the amount compute
d by applying the statutory federal income tax rate of
35%
to income before income taxes is:
 
   
2017
    
2016
    
2015
  
Income taxes at statutory rate
   $
13,782
     $
12,769
     $
13,043
  
State and local income taxes, net of federal tax benefit
    
555
      
576
      
680
  
Research and
development tax credits
    
(295
 )    
(371
 )    
(380
 )
Domestic production activities deduction
    
(1,191
 )    
(822
 )    
(964
 )
Lower foreign taxes differential
    
(842
 )    
(820
 )    
(476
 )
Uncertain tax positions
    
346
      
(93
 )    
26
  
Valuation allowance
    
100
      
-
      
(59
 )
Federal tax reform
– deferred rate change
    
(1,624
 )    
-
      
-
  
Deemed mandatory repatriation
    
1,370
      
-
      
-
  
Foreign withholding tax
    
600
      
-
      
-
  
Other
    
22
      
360
      
287
  
Income tax expense
   $
12,823
     $
11,599
     $
12,157
  
 
 
The
Company made income tax payments of
$13.5
million,
$7.8
million, and
$13.5
million in
2017,
2016,
and
2015,
respectively.
 
Deferred income tax assets and liabilities consist of:
 
   
2017
    
2016
    
2015
  
Deferred tax assets:
                        
Inventories
   $
1,131
     $
721
     $
1,664
  
Accrued liabilities
    
1,872
      
3,139
      
2,450
  
Postretirement health benefits obligation
    
3,844
      
7,449
      
7,547
  
Pension
    
-
      
-
      
3,443
  
Other
    
583
      
879
      
292
  
Total deferred tax assets
    
7,430
      
12,188
      
15,396
  
Valuation allowance
    
(459
 )    
(277
 )    
(277
 )
Net deferred tax assets
    
6,971
      
11,911
      
15,119
  
Deferred tax liabilities:
                        
Depreciation and amortization
    
(8,715
 )    
(16,119
 )    
(18,059
 )
Pension
    
(997
 )    
(3,017
 )    
-
  
Foreign
withholding tax
    
(600
 )    
-
      
-
  
Total deferred tax liabilities
    
(10,312
 )    
(19,136
 )    
(18,059
 )
Net def
erred tax liabilities
   $
(3,341
 )   $
(7,225
 )   $
(2,940
 )
 
 
The Company has state tax credit carryforwards of
$644,000
and
$518,000
as of
December
 
31,
2017
and
2016,
respectively, that will expire incrementally between
2018
and
2022.
 
The Compa
ny has a valuation allowance of
$459,000
as of
December 31, 2017
and
$277,000
as of
December 
31,
2016
against certain of its deferred tax assets. ASC
740
requires that a valuation allowance be recorded against deferred tax assets when it is more likely than
not
that some or all of a Company’s deferred tax assets will
not
be realized based on available positive and negative evidence.
 
Total unrecognized tax benefits were
$797,000
and
$492,000
at
December 31, 2017
and
2016,
respectively. The total amount of
unrecognized tax benefits that, if ultimately recognized, would reduce the Company’s annual effective tax rate were
$674,000
and
$397,000
at
December 31, 2017
and
2016,
respectively.
 
A reconciliation of the beginning and ending amount of unrecognized tax
benefits is as follows:
 
   
2017
    
2016
    
2015
  
Balance at beginning of year
   $
492
     $
567
     $
576
  
Additions based on tax positions related to the current year
    
239
      
101
      
113
  
Additions based on tax positions related to prior years
    
165
      
-
      
-
  
Reductions due to l
apse of applicable statute of limitations
    
(99
 )    
(108
 )    
(101
 )
Settlements
    
-
      
(68
 )    
(21
 )
Balance at end of year
   $
797
     $
492
     $
567
  
 
The Company is subject to income taxes in the U.S. federal and various state, local and foreign jurisdictions. Income tax reg
ulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is
no
longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for the years before
2013.
The Company has
$56,000
of unrecognized tax benefits recorded for periods for which the relevant statutes of limitations expire in the next
12
months.
 
The Company recognizes interest and pen
alties related to unrecognized tax benefits in income tax expense for all periods presented. The Company accrued approximately
$168,000,
$98,000
and
$116,000
for the payment of interest and penalties at
December 
31,
2017,
2016
and
2015,
respectively.
 
On
December 22, 2017,
the United States enacted tax reform legislation commonly known as the Tax Cuts and Jobs Act (the “Tax Act”), resulting in significant modifications to existing law. The Company follows the guidance in SEC Staff Accounting Bulletin
118
(“SAB
118”
), which provides additional clarification regarding the application of ASC
740
in situations where the Company does
not
have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act for the reporting period in which the Tax Act was enacted. SAB
118
provides for a measurement period beginning in the reporting period that includes the Tax Act’s enactment date and ending when the Company has obtained, prepared, and analyzed the information needed in order to complete the accounting requirements but in
no
circumstances should the measurement period extend beyond
one
year from the enactment date.
 
The Company recorded
$0.
4
million provisional net tax expense in the
fourth
quarter of
2017
to reflect the effects of the Tax Act.  This net expense included a provisional noncurrent income tax payable in the amount of
$1.4
million related to the
one
-time deemed repatriation transition tax on previously unrepatriated foreign earnings and a
one
-time provisional benefit of
$1.6
million, which consisted primarily of the re-measurement of U.S. deferred tax assets and liabilities reflecting the change in the U.S. federal rate from
35%
to
21%.
The Company has also recorded a
$0.6
million foreign withholding tax. The provisional estimates are based on the Company's initial analysis of the Tax Act. Given the significant complexity of the Tax Act, anticipated guidance from the U. S. Treasury about implementing the Tax Act, and the potential for additional guidance from the Securities and Exchange Commission or the Financial Accounting Standards Board related to the Tax Act, these estimates
may
be adjusted during
2018.