v3.26.1
Income Taxes
 12 Months Ended
May 31, 2026
Income Tax Disclosure [Abstract]  
Income Taxes

Note M – Income Taxes

 

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

 

 

 

2026

 

 

2025

 

 

2024

 

U.S. based operations

 

$

200,396

 

 

$

132,160

 

 

$

107,643

 

Non – U.S. based operations

 

 

952

 

 

 

(3,351

)

 

 

(33,636

)

Earnings before income taxes

 

 

201,348

 

 

 

128,809

 

 

 

74,007

 

Plus: net loss attributable to noncontrolling interests (1)

 

 

1,050

 

 

 

1,083

 

 

 

263

 

Earnings before income taxes attributable to controlling interest

 

$

202,398

 

 

$

129,892

 

 

$

74,270

 

 

 
(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:

 

 

 

2026

 

 

2025

 

 

2024

 

Current

 

 

 

 

 

 

 

 

 

Federal

 

$

34,187

 

 

$

44,669

 

 

$

32,743

 

State and local

 

 

3,391

 

 

 

5,714

 

 

 

1,576

 

Foreign

 

 

296

 

 

 

1,894

 

 

 

1,666

 

Subtotal

 

 

37,874

 

 

 

52,277

 

 

 

35,985

 

Deferred

 

 

 

 

 

 

 

 

 

Federal

 

 

7,840

 

 

 

(14,775

)

 

 

(3,751

)

State and local

 

 

609

 

 

 

(2,256

)

 

 

3,801

 

Foreign

 

 

(10

)

 

 

(1,407

)

 

 

2,992

 

Subtotal

 

 

8,439

 

 

 

(18,438

)

 

 

3,042

 

Total

 

$

46,313

 

 

$

33,839

 

 

$

39,027

 

 

A reconciliation of the federal statutory corporate income tax rate to total tax provision upon adoption of ASU 2023-09 for the three prior fiscal years were as follows:

 

2026

 

 

2025

 

 

2024

 

Federal statutory corporate income tax rate

$

42,504

 

 

21.0

%

 

$

27,277

 

 

21.0

%

 

$

15,597

 

 

21.0

%

State and local income taxes, net of federal tax benefit (1)

 

4,000

 

 

2.0

 

 

 

3,458

 

 

2.7

 

 

 

5,377

 

 

7.2

 

Foreign tax effects

 

86

 

 

-

 

 

 

1,044

 

 

0.8

 

 

 

347

 

 

0.5

 

Nontaxable or Nondeductible Items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Executive compensation

 

1,399

 

 

0.7

 

 

 

2,021

 

 

1.6

 

 

 

3,622

 

 

4.9

 

     Excess benefit related to share-based payment awards

 

(750

)

 

(0.4

)

 

 

(745

)

 

(0.6

)

 

 

(1,643

)

 

(2.2

)

     Spin-off transaction costs

 

-

 

 

-

 

 

 

-

 

 

-

 

 

 

5,588

 

 

7.5

 

     Tax impact of SES impairment and deconsolidation

 

-

 

 

-

 

 

 

-

 

 

-

 

 

 

8,213

 

 

11.1

 

Changes in valuation allowance

 

1,151

 

 

0.6

 

 

 

2,686

 

 

2.1

 

 

 

2,346

 

 

3.2

 

Change in Uncertain Tax Benefits

 

(1,827

)

 

(0.9

)

 

 

(1,547

)

 

(1.2

)

 

 

257

 

 

0.3

 

Other

 

(250

)

 

(0.1

)

 

 

(355

)

 

(0.3

)

 

 

(677

)

 

(0.9

)

Effective tax rate attributable to controlling interest

$

46,313

 

 

22.9

%

 

$

33,839

 

 

26.1

%

 

$

39,027

 

 

52.6

%

 

 
(1)
For the year ended May 31, 2026, state taxes in California, Illinois, and New York make up greater than 50% of the tax effect in this category. For the year ended May 31, 2025, state taxes in California and Illinois make up greater than 50% of the tax effect in this category. For the year ended May 31, 2024, state taxes in California, Wisconsin, New York, and Illinois make up greater than 50% of the tax effect in this category.

 

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 23.0% for fiscal 2026. 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.

 

Consolidated income taxes paid (net of refunds) consisted of the following for the years ended May 31:

 

 

 

2026

 

 

2025

 

 

2024

 

Federal

 

$

43,052

 

 

$

32,500

 

 

$

65,000

 

State and local

 

 

5,179

 

 

 

4,826

 

 

 

6,793

 

Foreign

 

 

 

 

 

 

 

 

 

          Portugal

 

*

 

 

 

2,261

 

 

*

 

          Other foreign jurisdictions

 

 

383

 

 

 

(5

)

 

 

9,653

 

Total

 

$

48,614

 

 

$

39,582

 

 

$

81,446

 

 

* The amount of income taxes paid during the year does not meet the 5% disaggregation threshold.

 

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.

 

There were no unrecognized tax benefits as of May 31, 2026, compared to $1,826 as of May 31, 2025, and $3,467 as of May 31, 2024, respectively. 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, 2026, 2025 and 2024, we had accrued liabilities of $0, $564, and $881, respectively, for interest and penalties related to unrecognized tax benefits.

 

A tabular reconciliation of unrecognized tax benefits follows:

 

Balance at May 31, 2025

 

$

1,826

 

Decreases - tax positions taken in prior years

 

 

(94

)

Settlements

 

 

(61

)

Lapse of statutes of limitations

 

 

(1,671

)

Balance at May 31, 2026

 

$

-

 

 

During fiscal 2025, 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 operating segment. We have recognized an income tax receivable of $16,741 related to the anticipated refund and interest. 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 - 2022 and forward
•
Portugal - 2022 and forward
•
Norway - 2021 and forward

 

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

 

 

 

 

 

2026

 

 

2025

 

Deferred tax assets

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

$

1,016

 

 

$

731

 

Note receivable

 

 

 

 

3,985

 

 

 

4,026

 

Inventories

 

 

 

 

4,315

 

 

 

3,821

 

Accrued expenses

 

 

 

 

15,052

 

 

 

14,926

 

NOL carry forwards

 

 

 

 

5,054

 

 

 

5,562

 

Stock-based compensation

 

 

 

 

3,364

 

 

 

3,694

 

Derivative contracts

 

 

 

 

85

 

 

 

1,818

 

Operating lease - ROU liability

 

 

 

 

9,000

 

 

 

3,663

 

Capital loss

 

 

 

 

1,151

 

 

 

-

 

Interest expense carry forwards

 

 

 

 

2,943

 

 

 

137

 

Other

 

 

 

 

4,066

 

 

 

5,091

 

Total deferred tax assets

 

 

 

 

50,031

 

 

 

43,469

 

Valuation allowance for deferred tax assets

 

 

 

 

(10,118

)

 

 

(10,477

)

Net deferred tax assets

 

 

 

 

39,913

 

 

 

32,992

 

Deferred tax liabilities

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

 

 

(30,935

)

 

 

(27,057

)

Intangibles

 

 

 

 

(73,870

)

 

 

(67,076

)

Investment in affiliated companies, principally due
   to undistributed earnings

 

 

 

 

(19,686

)

 

 

(17,069

)

Operating lease - ROU asset

 

 

 

 

(8,760

)

 

 

(3,544

)

Other

 

 

 

 

(2,475

)

 

 

(1,146

)

Total deferred tax liability

 

 

 

 

(135,726

)

 

 

(115,892

)

Net deferred tax liability

 

 

 

$

(95,813

)

 

$

(82,900

)

 

At May 31, 2026, we had tax benefits for federal NOL carry forwards of $1,636, with no expiration date, and tax benefits for state net NOL carry forwards of $3,418 that expire from fiscal 2027 to fiscal 2046.

 

The valuation allowance for deferred tax assets of $10,118 on May 31, 2026, is associated primarily with a note receivable, 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.

 

The OECD introduced a global minimum tax of 15% on multi-national entities with global revenues in excess of EUR 750 million. We continue to evaluate the impact of these rules and do not believe they will have a material impact to the financial statements.