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Income Taxes | 12 Months Ended
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Jul. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income before income taxes consists of the following:
|  | Years Ended July 31,
|  | 2024 |  | 2023 |  | 2022
United States |  | $ | 111,647 |  |  | $ | 92,053 |  |  | $ | 92,985 |
Other Nations |  | 136,194 |  |  | 133,643 |  |  | 98,995 |
Total |  | $ | 247,841 |  |  | $ | 225,696 |  |  | $ | 191,980 |
Income before income taxes in the United States increased to $111,647 in fiscal 2024 from $92,053 in fiscal 2023 primarily due to organic sales growth and improved gross profit margin. The increase in income before income taxes in Other Nations to $133,643 in fiscal 2023 from $98,995 in fiscal 2022 was primarily due to intercompany royalty payments to the United States that occurred in fiscal 2023 which reduced Other Nations income before income taxes by $32,857. Income tax expense consists of the following:
|  | Years Ended July 31,
|  | 2024 |  | 2023 |  | 2022
Current income tax expense: |  |  |  |  |  |
United States |  | $ | 22,637 |  |  | $ | 26,324 |  |  | $ | 8,639 |
Other Nations |  | 32,121 |  |  | 31,093 |  |  | 31,851 |
States (U.S.) |  | 5,267 |  |  | 5,894 |  |  | 3,156 |
|  | $ | 60,025 |  |  | $ | 63,311 |  |  | $ | 43,646 |
Deferred income tax (benefit) expense: |  |  |  |  |  |
United States |  | $ | (7,999) |  |  | $ | (10,577) |  |  | $ | 970 |
Other Nations |  | (133) |  |  | 251 |  |  | (2,377) |
States (U.S.) |  | (1,267) |  |  | (2,146) |  |  | (238) |
|  | $ | (9,399) |  |  | $ | (12,472) |  |  | $ | (1,645) |
Total income tax expense |  | $ | 50,626 |  |  | $ | 50,839 |  |  | $ | 42,001 |
The tax effects of temporary differences are as follows as of July 31, 2024 and 2023:
|  | July 31, 2024
|  | Assets |  | Liabilities |  | Total
Inventories |  | $ | 7,462 |  |  | $ | (59) |  |  | $ | 7,403 |
Employee compensation and benefits |  | 9,248 |  |  | — |  |  | 9,248 |
Accounts receivable |  | 1,828 |  |  | — |  |  | 1,828 |
Fixed assets |  | 3,507 |  |  | (8,148) |  |  | (4,641) |
Intangible assets |  | 639 |  |  | (48,248) |  |  | (47,609) |
Capitalized R&D expenditures |  | 20,252 |  |  | — |  |  | 20,252 |
Deferred and equity-based compensation |  | 9,071 |  |  | — |  |  | 9,071 |
Postretirement benefits |  | 2,463 |  |  | (52) |  |  | 2,411 |
Tax credit and net operating loss carry-forwards |  | 43,929 |  |  | — |  |  | 43,929 |
Valuation allowances |  | (47,224) |  |  | — |  |  | (47,224) |
Other, net |  | 20,346 |  |  | (5,462) |  |  | 14,884 |
Total |  | $ | 71,521 |  |  | $ | (61,969) |  |  | $ | 9,552 |
|  | July 31, 2023
|  | Assets |  | Liabilities |  | Total
Inventories |  | $ | 8,526 |  |  | $ | (64) |  |  | $ | 8,462 |
Employee compensation and benefits |  | 8,556 |  |  | — |  |  | 8,556 |
Accounts receivable |  | 2,202 |  |  | — |  |  | 2,202 |
Fixed assets |  | 3,118 |  |  | (9,238) |  |  | (6,120) |
Intangible assets |  | 760 |  |  | (49,267) |  |  | (48,507) |
Capitalized R&D expenditures |  | 9,986 |  |  | — |  |  | 9,986 |
Deferred and equity-based compensation |  | 9,937 |  |  | — |  |  | 9,937 |
Postretirement benefits |  | 2,683 |  |  | (100) |  |  | 2,583 |
Tax credit and net operating loss carry-forwards |  | 51,387 |  |  | — |  |  | 51,387 |
Valuation allowances |  | (52,750) |  |  | — |  |  | (52,750) |
Other, net |  | 19,826 |  |  | (4,798) |  |  | 15,028 |
Total |  | $ | 64,231 |  |  | $ | (63,467) |  |  | $ | 764 |
Tax credit carry-forwards as of July 31, 2024 consist of the following: •Foreign net operating loss carry-forwards of $89,282, of which $69,753 have no expiration date and the remainder of which expire from fiscal 2025 to fiscal 2040. •State net operating loss carry-forwards of $24,527, of which $2,103 have no expiration date and the remainder of which expire in fiscal 2032. •Foreign tax credit carry-forwards of $16,054, which expire from fiscal 2025 to fiscal 2034. •State credit carry-forwards of $13,635, which expire from fiscal 2025 to fiscal 2039. Rate Reconciliation A reconciliation of the income tax rate computed by applying the statutory U.S. federal income tax rate to income before income taxes to the total income tax expense is as follows:
|  | Years Ended July 31,
|  | 2024 |  | 2023 |  | 2022
Tax at statutory rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
International rate differential (1) |  | 0.7 | % |  | 1.7 | % |  | 4.2 | %
Adjustments to tax accruals and reserves |  | 0.2 | % |  | 0.2 | % |  | (0.1) | %
Research and development tax credits |  | (1.6) | % |  | (1.3) | % |  | (1.6) | %
Valuation allowance against foreign tax credits and foreign net operating loss carry-forwards |  | 0.2 | % |  | 1.2 | % |  | (1.2) | %
Deferred tax and other adjustments, net |  | (0.1) | % |  | (0.3) | % |  | (0.4) | %
Income tax rate |  | 20.4 | % |  | 22.5 | % |  | 21.9 | %
(1)Represents the foreign income tax rate differential when compared to the U.S. statutory income tax rate for the years ended July 31, 2024, 2023, and 2022. Uncertain Tax Positions The Company follows the guidance in ASC 740, "Income Taxes" regarding uncertain tax positions. The guidance requires application of a more-likely-than-not threshold to the recognition and de-recognition of income tax positions. A reconciliation of unrecognized tax benefits (excluding interest and penalties) is as follows:
Balance as of July 31, 2021 | $ | 21,912 |
Additions based on tax positions related to the current year | 3,233 |
Additions for tax positions of prior years | 435 |
Reductions for tax positions of prior years | (122) |
Lapse of statute of limitations | (3,226) |
Settlements with tax authorities | (1,129) |
Cumulative translation adjustments and other | (539) |
Balance as of July 31, 2022 | $ | 20,564 |
Additions based on tax positions related to the current year | 2,902 |
Additions for tax positions of prior years | 792 |
Reductions for tax positions of prior years | (19) |
Lapse of statute of limitations | (2,682) |
Settlements with tax authorities | (782) |
Cumulative translation adjustments and other | 124 |
Balance as of July 31, 2023 | $ | 20,899 |
Additions based on tax positions related to the current year | 3,130 |
Additions for tax positions of prior years | 1,594 |
Reductions for tax positions of prior years | (43) |
Lapse of statute of limitations | (2,666) |
Settlements with tax authorities | (257) |
Cumulative translation adjustments and other | (67) |
Balance as of July 31, 2024 | $ | 22,590 |
Of the $22,590 of unrecognized tax benefits, if recognized, $19,350 would affect the Company's income tax rate. The Company has classified $19,527 and $17,587, excluding interest and penalties, of the reserve for uncertain tax positions in "Other liabilities" on the Consolidated Balance Sheets as of July 31, 2024 and 2023, respectively. The Company has classified $3,063 and $3,312, excluding interest and penalties, as a reduction of long-term deferred income tax assets on the accompanying Consolidated Balance Sheets as of July 31, 2024 and 2023, respectively. Interest expense is recognized on the amount of potentially underpaid taxes associated with the Company's tax positions, beginning in the first period in which interest starts accruing under the respective tax law and continuing until the tax positions are settled. The Company recognized interest expense of $893, $700, and $701 on the reserve for uncertain tax positions during the years ended July 31, 2024, 2023, and 2022, respectively. The Company also recognized benefits related to penalties of $38, $281, and $82 during the years ended July 31, 2024, 2023, and 2022, respectively. These amounts are net of reversals due to reductions for tax positions of prior years, statute of limitations, and settlements. At July 31, 2024 and 2023, the Company had $4,448 and $3,581, respectively, accrued for interest on unrecognized tax benefits. Penalties are accrued if the tax position does not meet the minimum statutory threshold to avoid the payment of a penalty. At July 31, 2024 and 2023, the Company had $1,631 and $1,674, respectively, accrued for penalties on unrecognized tax benefits. Interest expense and penalties are recorded as a component of "Income tax expense" in the Consolidated Statements of Income. The Company estimates that it is reasonably possible that the unrecognized tax benefits may be reduced by up to $4,151 in the next 12 months as a result of the resolution of worldwide tax matters, tax audit settlements, amended tax filings, and/or the expiration of statute of limitations, all of which, if recognized, would result in an income tax benefit in the Consolidated Statements of Income. During the year ended July 31, 2024, the Company recognized $3,708 of tax benefits (including interest and penalties) associated with the lapse of statutes of limitations. The Company and its subsidiaries file income tax returns in the U.S., various states, and foreign jurisdictions. The following table summarizes the open tax years for the Company's major jurisdictions:
Jurisdiction |  | Open Tax Years
United States — Federal |  | F’21 — F’24

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