v3.25.2
Income Taxes
 12 Months Ended
May 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes

Note M – Income Taxes

 

Earnings before income taxes for the prior three fiscal years included the following components:

 

 

 

2025

 

 

2024

 

 

2023

 

U.S. based operations

 

$

132,160

 

 

$

107,643

 

 

$

149,670

 

Non – U.S. based operations

 

 

(3,351

)

 

 

(33,636

)

 

 

10,616

 

Earnings before income taxes

 

 

128,809

 

 

 

74,007

 

 

 

160,286

 

Plus: net loss attributable to noncontrolling interests (1)

 

 

1,083

 

 

 

263

 

 

 

-

 

Earnings before income taxes attributable to controlling interest

 

$

129,892

 

 

$

74,270

 

 

$

160,286

 

 

 
(1)
Net earnings attributable to noncontrolling interests are not taxable to us.

 

Significant components of income tax expense (benefit) for the three prior fiscal years were as follows:

 

 

 

2025

 

 

2024

 

 

2023

 

Current

 

 

 

 

 

 

 

 

 

Federal

 

$

44,669

 

 

$

32,743

 

 

$

34,734

 

State and local

 

 

5,714

 

 

 

1,576

 

 

 

2,891

 

Foreign

 

 

1,894

 

 

 

1,666

 

 

 

3,988

 

Subtotal

 

 

52,277

 

 

 

35,985

 

 

 

41,613

 

Deferred

 

 

 

 

 

 

 

 

 

Federal

 

 

(14,775

)

 

 

(3,751

)

 

 

(4,427

)

State and local

 

 

(2,256

)

 

 

3,801

 

 

 

(1,943

)

Foreign

 

 

(1,407

)

 

 

2,992

 

 

 

(708

)

Subtotal

 

 

(18,438

)

 

 

3,042

 

 

 

(7,078

)

Total

 

$

33,839

 

 

$

39,027

 

 

$

34,535

 

 

 

A reconciliation of the federal statutory corporate income tax rate to total tax provision for the three prior fiscal years follows:

 

 

 

2025

 

 

2024

 

 

2023

 

Federal statutory corporate income tax rate

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

State and local income taxes, net of federal tax benefit

 

 

1.8

 

 

 

3.5

 

 

 

0.6

 

Non-U.S. income taxes at other than federal statutory rate

 

 

0.8

 

 

 

0.5

 

 

 

0.7

 

Excess benefit related to share-based payment awards

 

 

(0.7

)

 

 

(2.7

)

 

 

(0.1

)

Non-deductible executive compensation

 

 

1.6

 

 

 

4.9

 

 

 

2.1

 

Research and development tax credit

 

 

-

 

 

 

(0.2

)

 

 

(0.8

)

Non-deductible spin-off transaction costs

 

 

-

 

 

 

7.5

 

 

 

-

 

Non-deductible note receivable impairment

 

 

0.8

 

 

 

3.2

 

 

 

-

 

Federal NOL deferred tax asset valuation allowance

 

 

1.3

 

 

 

-

 

 

 

 

FIN 48

 

 

(1.2

)

 

 

0.3

 

 

 

0.1

 

Tax impact of Sustainable Energy Solutions impairment and deconsolidation

 

 

-

 

 

 

11.1

 

 

 

-

 

Deferred state tax adjustment due to the Separation

 

 

-

 

 

 

4.2

 

 

 

-

 

Other

 

 

0.7

 

 

 

(0.7

)

 

 

(2.0

)

Effective tax rate attributable to controlling interest

 

 

26.1

%

 

 

52.6

%

 

 

21.5

%

 

The above effective tax rate attributable to controlling interest excludes any impact from the inclusion of net earnings attributable to noncontrolling interests in our consolidated statements of earnings. The effective tax rate upon inclusion of net earnings attributable to noncontrolling interests was 26.3% for fiscal 2025. Net earnings attributable to noncontrolling interests are primarily a result of our acquisition of Halo in fiscal 2024. The earnings attributable to the noncontrolling interests in Halo do not generate tax expense to us since the investors in Halo’s operations are taxed directly based on the earnings attributable to them.

 

Under applicable accounting guidance, a tax benefit may be recognized from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Any tax benefits recognized in our financial statements from such a position were measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.

 

The total amount of unrecognized tax benefits was $1,826 as of May 31, 2025, and $3,467 as of May 31, 2024 and 2023, respectively. As of May 31, 2025, the total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate attributable to controlling interest was $1,442. Unrecognized tax benefits are the differences between a tax position taken, or expected to be taken, in a tax return, and the benefit recognized for accounting purposes. Accrued amounts of interest and penalties related to unrecognized tax benefits are recognized as part of income tax expense within our consolidated statements of earnings. As of May 31, 2025, 2024 and 2023, we had accrued liabilities of $564, $881 and $556, respectively, for interest and penalties related to unrecognized tax benefits.

 

A tabular reconciliation of unrecognized tax benefits follows:

 

Balance at May 31, 2024

 

$

3,467

 

Increases - tax positions taken in prior years

 

 

-

 

Decreases - tax positions taken in prior years

 

 

(1,088

)

Increases - current tax positions

 

 

-

 

Settlements

 

 

-

 

Lapse of statutes of limitations

 

 

(553

)

Balance at May 31, 2025

 

$

1,826

 

 

Approximately $1,670 of the liability for unrecognized tax benefits is expected to be settled in the next twelve months due to the expiration of statutes of limitations in various tax jurisdictions and as a result of expected settlements with various tax jurisdictions. While it is expected that the amount of unrecognized tax benefits will change in the next twelve months, any such change is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.

 

During the year, we filed an amended U.S. federal income tax return for fiscal year 2021 to carry back capital losses primarily generated as a result of the deconsolidation of our former Sustainable Energy Solutions segment. We have recognized an income tax receivable of approximately $15,374 related to the anticipated refund. Due to the size of the claim, the refund is subject to review by the Internal Revenue Service Joint Committee on Taxation.

 

The following is a summary of the tax years open to examination by major tax jurisdiction:

•
U.S. Federal - 2021 and forward
•
U.S. State and Local - 2021 and forward
•
Portugal - 2021 and forward
•
Norway - 2020 and forward

 

The components of our deferred tax assets and liabilities as of May 31 were as follows:

 

 

 

2025

 

 

2024

 

Deferred tax assets

 

 

 

 

 

 

Accounts receivable

 

$

731

 

 

$

850

 

Note receivable

 

 

4,026

 

 

 

2,346

 

Inventories

 

 

3,821

 

 

 

3,616

 

Accrued expenses

 

 

14,926

 

 

 

13,238

 

NOL carry forwards

 

 

5,562

 

 

 

5,497

 

Stock-based compensation

 

 

3,694

 

 

 

3,508

 

Derivative contracts

 

 

1,818

 

 

 

303

 

Operating lease - ROU liability

 

 

3,663

 

 

 

4,595

 

Capital loss

 

 

-

 

 

 

10,110

 

Other

 

 

5,228

 

 

 

3,866

 

Total deferred tax assets

 

 

43,469

 

 

 

47,929

 

Valuation allowance for deferred tax assets

 

 

(10,477

)

 

 

(7,083

)

Net deferred tax assets

 

 

32,992

 

 

 

40,846

 

Deferred tax liabilities

 

 

 

 

 

 

Property, plant and equipment

 

 

(27,057

)

 

 

(28,770

)

Intangibles

 

 

(67,076

)

 

 

(72,898

)

Investment in affiliated companies, principally due
   to undistributed earnings

 

 

(17,069

)

 

 

(17,434

)

Operating lease - ROU asset

 

 

(3,544

)

 

 

(4,613

)

Other

 

 

(1,146

)

 

 

(1,281

)

Total deferred tax liability

 

 

(115,892

)

 

 

(124,996

)

Net deferred tax liability

 

$

(82,900

)

 

$

(84,150

)

 

At May 31, 2025, we had tax benefits for federal NOL carry forwards of $1,636, with no expiration date, tax benefits for state net NOL carry forwards of $3,926 that expire from fiscal 2026 to fiscal 2044.

 

The valuation allowance for deferred tax assets of $10,477 on May 31, 2025, is associated primarily with a write-down of a prior Sustainable Energy Solutions investment, the federal NOL carry forward, and various state NOL carry forwards.

 

Based on our history of profitability, the scheduled reversal of deferred tax liabilities, and taxable income projections, we have determined that it is more likely than not that the remaining deferred tax assets are otherwise realizable.

 

On July 4, 2025, the U.S. government enacted The One Big Beautiful Bill Act of 2025 which includes, among other provisions, changes to the U.S. corporate income tax system including the allowance of immediate expensing of qualifying research and development expenses and permanent extensions of certain provisions within the Tax Cuts and Jobs Acts. Certain provisions are effective for us beginning in fiscal 2026. We do not expect the impacts from this legislation to be significant to our financial statements.