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Income Taxes

12 Months Ended

Oct. 31, 2023

Income Taxes

Income Taxes

9. Income Taxes

​

The income tax provision consists of the following for the years ended October 31, (in thousands):

​

​	​	​	​	​	​	​	​	​	​	​
​		2023			2022			2021
​	​	​	​		​	​	​	​	​	​
Current:	​	​	​	​	​	​	​	​	​	​
Federal	​	$	(387)	​	$	2,012	​	$	(3,449)	​
State	​		280	​		147	​		323	​
Foreign	​		1,143	​		1,209	​		16,703	​
Total current	​		1,036	​		3,368	​		13,577	​
​	​	​	​	​	​	​	​	​	​	​
Deferred:	​	​	​	​	​	​	​	​	​	​
Federal	​		(468)	​		(162)	​		790	​
State	​		(337)	​		746	​		(343)	​
Foreign	​		2,656	​		(701)	​		(3,934)	​
Total deferred	​		1,851	​		(117)	​		(3,487)	​
Change in valuation allowance	​	​	3,055	​	​	—	​	​	657	​
Total income tax provision	​	$	5,942	​	$	3,251	​	$	10,747	​

​

The following table presents domestic and foreign components of loss before income taxes for the years ended October 31, (in thousands):

​

​	​	​	​	​	​	​	​	​	​
​	​	2023		​	2022		​	2021
Domestic	​	$	(8,741)	​	$	(1,411)	​	$	(4,959)
Foreign	​	​	6,716	​	​	(1,940)	​	​	3,784
Income (loss) before taxes	​	$	(2,025)	​	$	(3,351)	​	$	(1,175)

​

The above loss before taxes includes the net loss from unconsolidated entites of $0.9 million and $0.6 million for the years ended October 31, 2023 and 2022, which is recorded in foreign operations, respectively. Additionally, for fiscal 2022, we received income tax refunds of $6.7 million.

​

At October 31, 2023 and 2022, gross deferred tax assets totaled approximately $25.8 million and $23.5 million, while gross deferred tax liabilities totaled approximately $18.7 million and $16.2 million, respectively. Deferred income taxes

reflect the net of temporary differences between the carrying amount of assets and liabilities for financial reporting and income tax purposes.

​

Significant components of our deferred tax assets (liabilities) as of October 31, are as follows (in thousands):

​

​	​	​	​	​	​	​	​
​		2023			2022
​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
Intangible assets	​	$	941	​	$	2,828	​
Stock-based compensation	​		316	​		715	​
State taxes	​		7	​		6	​
Allowance for accounts receivable	​	​	1,276	​	​	936	​
Inventories	​	​	591	​	​	442	​
Accrued liabilities	​	​	2,238	​	​	1,143	​
Operating lease liabilities	​	​	14,444	​	​	14,861	​
Net operating loss	​	​	4,109	​	​	549	​
Capital loss carryover	​	​	806	​	​	804	​
Credits and incentives	​		1,099	​		1,194	​
Total deferred income tax assets	​	​	25,827	​	​	23,478	​
​	​	​	​	​	​	​	​
Property, plant, and equipment	​		(6,340)	​		(2,002)	​
Operating lease - right of use assets	​	​	(12,111)	​	​	(13,723)	​
Other	​		(227)	​		(490)	​
Total deferred income tax liabilities	​	​	(18,678)	​	​	(16,215)	​
Valuation allowance	​	​	(4,885)	​	​	(1,830)	​
Net deferred income tax assets	​	$	2,264	​	$	5,433	​

​

The Company’s net deferred income tax assets as presented in the consolidated balance sheets consists of the following items as of October 31, (in thousands):

​

​	​	​	​	​	​	​
​		Year Ended October 31,
​	​	2023		​	2022
Deferred income tax assets	​	$	3,010	​	$	5,433
Deferred income tax liabilities	​	​	(746)	​	​	—
Net deferred income tax assets	​	$	2,264	​	$	5,433

​

As of October 31, 2023, the Company had a federal net operating loss carryforward of $6.6 million. As of October 31, 2023 and 2022, the Company has gross state net operating loss carryforwards of approximately $13.4 million and $9.1 million, respectively, with carryforward periods primarily ranging from 20 years to indefinite.

​

The Company’s domestic operations has incurred a cumulative operating loss for the last three years. During the fourth quarter of the year ended October 31, 2023, based on this evaluation, and after considering future reversals of existing taxable temporary differences, the Company determined the realization of a majority of the net deferred tax assets no longer met the more likely than not criteria and a valuation allowance was recorded against the majority of the net deferred tax assets. As of October 31, 2023 and 2022, there is a valuation allowance of $4.9 million and $1.8 million, respectively, against the deferred tax assets that are more likely not to be realized. During the year ended October 31, 2023 and 2022, the Company increased the valuation allowance against deferred income tax assets by $3.1 million and $0.6 million, respectively.

​

A reconciliation of the significant differences between the federal statutory income tax rate and the effective income tax rate on pretax income (loss) for the years ended October 31, is as follows:

​

​	​	​	​	​	​	​	​
​		2023		2022		2021
​	​	​	​	​	​	​	​
Federal statutory tax rate		21.0	%	21.0	%	21.0	%
State taxes, net of federal effects		0.9	​	(1.3)	​	11.6	​
Rate differential on NOL carryback	​	—	​	—	​	125.8	​
Foreign tax rate differential		(29.8)	​	5.2	​	16.1	​
Uncertain tax positions		—	​	5.1	​	(1,059.9)	​
Stock based compensation		(26.3)	​	(6.1)	​	(16.7)	​
Provision to return	​	(12.3)	​	(59.9)	​	39.2	​
US tax on foreign income, net	​	(15.8)	​	—	​	—	​
State rate change		0.9	​	(2.5)	​	9.2	​
Valuation allowance	​	(150.7)	​	(24.2)	​	(44.1)	​
Limits on executive compensation	​	(21.6)	​	—	​	—	​
Other permanent differences	​	(19.1)	​	(33.8)	​	—	​
Other		(40.6)	​	(0.5)	​	(15.5)	​
​		(293.4)	%	(97.0)	%	(913.3)	%

​

As of October 31, 2023, and 2022, we had $11.1 million for unrecognized tax benefits related primarily to the probable outcomes of the 2013 Mexico Assessment. See Note 7 for further information.

​

A reconciliation of the beginning and ending amount of gross unrecognized taxes (exclusive of interest and penalties) was as follows (in thousands):

​

​	​	​	​	​	​	​
​		Year Ended October 31,
​	​	2023		​	2022
Beginning balance	​	$	11,131	​	$	11,303
Reductions based on tax positions related to prior periods	​	​	—	​	​	(172)
Gross increase - Tax positions in prior periods	​		—	​		—
Gross increase - Tax positions in current period	​		—	​		—
Ending balance	​	$	11,131	​	$	11,131

​

Although it is reasonably possible that certain unrecognized tax benefits may increase or decrease within the next twelve months due to tax examination changes, settlement activities, expirations of statutes of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities, the Company does not anticipate any significant changes to unrecognized tax benefits over the next 12 months. The Company accounts for income taxes regarding uncertain tax positions and recognized interest and penalties related to uncertain tax positions in income tax benefit/(expense) in the consolidated statements of operations. Total accrued interest and penalties recorded on the consolidated balance sheet were zero because the company prepaid the disputed amount. See Note 7 for additional details.

​

We are subject to U.S. federal income tax as well as income of multiple state tax and foreign tax jurisdictions. We are no longer subject to U.S. income tax examinations for the fiscal years prior to October 31, 2020, and are no longer subject to state income tax examinations for fiscal years prior to October 31, 2019.

The Company determined that certain foreign earnings to be indefinitely reinvested outside the United States. Our intent is to permanently reinvest these funds outside of the United States and our current plans do not demonstrate a need to repatriate the cash to fund our U.S. operations. However, if these funds were repatriated, we would be required to accrue and pay applicable United States taxes (if any) and withholding taxes payable to foreign tax authorities.

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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.

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