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v3.23.2

Income Taxes | 12 Months Ended
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May 31, 2023
Income Taxes | 6. Income Taxes Income before income taxes by source consists of the following amounts:
|  | Year ended May 31 |
|  | 2023 |  |  | 2022 |  |  | 2021 |
U.S. |  | $ | (85,681 | ) |  | $ | 38,554 |  |  | $ | 55,753 |
Foreign |  |  | 63,639 |  |  |  | 21,653 |  |  |  | 19,515 |
|  | $ | (22,042 | ) |  | $ | 60,207 |  |  | $ | 75,268 |
The provision for income taxes consists of the following:
|  | Year ended May 31 |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Current |  |  |  |  |  |  |  |  |
Domestic |  |  |  |  |  |  |  |  |
Federal |  | $ | 8,674 |  |  | $ | 8,579 |  |  | $ | 6,981 |
Change in tax-related uncertainties |  |  | 278 |  |  |  | 3 |  |  |  | (75 | )
State |  |  | 1,616 |  |  |  | 2,406 |  |  |  | 2,147 |
Foreign |  |  | 9,490 |  |  |  | 5,140 |  |  |  | 4,875 |
Total Current |  |  | 20,058 |  |  |  | 16,128 |  |  |  | 13,928 |
Deferred |  |  |  |  |  |  |  |  |
Domestic |  |  |  |  |  |  |  |  |
Federal |  |  | (17,406 | ) |  |  | (3,721 | ) |  |  | 479 |
State |  |  | (1,865 | ) |  |  | (356 | ) |  |  | 44 |
Foreign |  |  | 41 |  |  |  | (151 | ) |  |  | (65 | )
Total Deferred |  |  | (19,230 | ) |  |  | (4,228 | ) |  |  | 458 |
Provision for Income Taxes |  | $ | 828 |  |  | $ | 11,900 |  |  | $ | 14,386 |
The reconciliation of income taxes computed at the U.S. federal statutory tax rate to income tax expense is as follows:
|  | Year ended May 31 |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Tax at U.S. statutory rate |  | $ | (4,629 | ) |  | $ | 12,643 |  |  | $ | 15,806 |
Permanent differences |  |  | 325 |  |  |  | 179 |  |  |  | 292 |
Global intangible low-taxed income (GILTI) |  |  | 6,482 |  |  |  | 1,501 |  |  |  | 2,064 |
Foreign derived intangible income deduction (FDII) |  |  | (643 | ) |  |  | (1,308 | ) |  |  | (1,210 | )
Foreign rate differential |  |  | (3,742 | ) |  |  | 215 |  |  |  | 669 |
Subpart F income |  |  | 152 |  |  |  | 397 |  |  |  | 628 |
Tax-effect from stock-based compensation |  |  | 1,946 |  |  |  | (462 | ) |  |  | (2,651 | )
Provision for state income taxes, net of federal benefit |  |  | 18 |  |  |  | 1,517 |  |  |  | 1,601 |
Non-deductible acquisition expenses |  |  | 7,187 |  |  |  | — |  |  |  | — |
Tax credits |  |  | (6,709 | ) |  |  | (2,527 | ) |  |  | (3,298 | )
Impact of tax rate changes |  |  | — |  |  |  | 583 |  |  |  | (75 | )
Change in tax-related uncertainties |  |  | 278 |  |  |  | 3 |  |  |  | 55 |
Changes in valuation allowances |  |  | 355 |  |  |  | 85 |  |  |  | — |
Research expenditures deduction |  |  | (365 | ) |  |  | (112 | ) |  |  | — |
Other |  |  | 173 |  |  |  | (814 | ) |  |  | 505 |
Income Tax Expense |  | $ | 828 |  |  | $ | 11,900 |  |  | $ | 14,386 |
Foreign tax credits, primarily offsetting taxes associated with Subpart F and GILTI income, were $5,324, $1,747, and $2,753 in fiscal years 2023, 2022, and 2021, respectively. The Company’s research and development credits were $1,385, $780, and $545 in fiscal years 2023, 2022, and 2021, respectively. Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred income tax liabilities and assets are as follows:
|  | Year ended May 31 |
|  | 2023 |  |  | 2022 |
Deferred income tax liabilities |  |  |  |  |  |
Indefinite and long-lived assets |  | $ | (369,500 | ) |  | $ | (22,709 | )
Right of use asset |  |  | (1,834 | ) |  |  | (344 | )
Prepaid expenses |  |  | (1,480 | ) |  |  | (884 | )
|  |  | (372,814 | ) |  |  | (23,937 | )
Deferred income tax assets |  |  |  |  |  |
Interest expense not currently deductible |  |  | 5,782 |  |  |  | — |
Research and experimentation capitalization |  |  | 5,868 |  |  |  | — |
Stock options |  |  | 2,192 |  |  |  | 2,085 |
Inventories and accounts receivable |  |  | 3,219 |  |  |  | 2,044 |
Tax loss carryforwards |  |  | 3,909 |  |  |  | 561 |
Lease liability |  |  | 1,899 |  |  |  | 382 |
Accrued expenses and other |  |  | 1,981 |  |  |  | 2,422 |
|  |  | 24,850 |  |  |  | 7,494 |
Valuation allowance |  |  | (2,110 | ) |  |  | (568 | )
Net deferred income tax liabilities |  | $ | (350,074 | ) |  | $ | (17,011 | )
Net deferred income tax assets (jurisdictional) |  | $ | 3,353 |  |  | $ | 575 |
Net deferred income tax liabilities (jurisdictional) |  |  | (353,427 | ) |  |  | (17,586 | )
Net deferred income tax liabilities |  | $ | (350,074 | ) |  | $ | (17,011 | )
The Company has the following net operating loss carryforwards:
|  | As of May 31, 2023 |  |  | Expiry
U.S. |  | $ | 218 |  |  | 2037
Foreign |  |  | 13,362 |  |  | 2024 to Indefinite
|  | $ | 13,580 |  |  |
Valuation allowances against certain deferred tax assets are established based on management’s determination of a more likely than not standard that the tax benefits will not be realized. We are subject to income taxes in the U.S. (federal and state) and in numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these reserves in light of changing facts and circumstances, such as the outcome of tax audits. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate. The Company’s policy is to recognize both accrued interest expense and penalties related to unrecognized tax benefits in income tax expense. The amount of interest and penalties included in the unrecognized tax benefits reserve was $145 at May 31, 2023, $69 at May 31, 2022, and $65 at May 31, 2021. Of the total unrecognized tax benefits at May 31, 2023 and 2022, $1,087 and $808, respectively, comprise unrecognized tax positions that would, if recognized, affect our effective tax rate. The reconciliation of our unrecognized tax benefits is as follows:
|  | Year ended May 31 |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Beginning balance |  | $ | 741 |  |  | $ | 764 |  |  | $ | 762 |
Increase/(decrease) related to prior periods |  |  | 2 |  |  |  | (75 | ) |  |  | (182 | )
Increase related to current period |  |  | 479 |  |  |  | 147 |  |  |  | 184 |
Lapses of applicable statute of limitations |  |  | (276 | ) |  |  | (95 | ) |  |  | — |
Ending balance |  | $ | 946 |  |  | $ | 741 |  |  | $ | 764 |
The Company is no longer subject to examination by the Internal Revenue Service for fiscal year 2019 and preceding years. As of May 31, 2023, the Company has approximately $153 million of undistributed earnings in its foreign subsidiaries. Approximately $41 million of these earnings are no longer considered permanently reinvested. The incremental tax cost to repatriate these earnings to the US is immaterial. The Company has not provided deferred taxes on approximately $112 million of undistributed earnings from non-U.S. subsidiaries as of May 31, 2023 which are indefinitely reinvested in operations. Based on historical experience, as well as management’s future plans, earnings from these subsidiaries will continue to be re-invested indefinitely for future expansion and working capital needs. On an annual basis, we evaluate the current business environment and whether any new events or other external changes might require future evaluation of the decision to indefinitely re-invest these foreign earnings. It is not practical to determine the income tax liability that would be payable if such earnings were not reinvested indefinitely.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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