Income Taxes

9 Months Ended

Feb. 29, 2024

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 9 — INCOME TAXES

The effective income tax rate of 26.4% for the three months ended February 29, 2024 compares to the effective income tax rate of 35.9% for the three months ended February 28, 2023. The effective income tax rates for the three-month periods ended February 29, 2024 and February 28, 2023 reflect variances from the 21% statutory rate due primarily to the unfavorable impact of state and local income taxes, non-deductible business expenses, and the net tax on foreign subsidiary income resulting from the global intangible low-taxed income provisions, partially offset by tax benefits related to equity compensation. Further, the effective income tax rate for the three-month period ended February 29, 2024, reflects incremental tax expense related to increases to our net deferred income tax liability for unremitted earnings, unfavorable changes in valuation allowances for certain foreign tax attribute carryforwards, and an adjustment for the tax related to the prior year sale of the furniture warranty business. Additionally, the effective tax rate for the three-month period ended February 28, 2023, reflects the unfavorable impact of a noncash impairment charge for goodwill that was nondeductible for tax purposes.

The effective income tax rate of 25.5% for the nine months ended February 29, 2024 compares to the effective income tax rate of 25.9% for the nine months ended February 28, 2023. The effective income tax rates for the nine-month periods ended February 29, 2024 and February 28, 2023 reflect variances from the 21% statutory rate due primarily to the unfavorable impact of state and local income taxes, non-deductible business expenses, and the net tax on foreign subsidiary income resulting from the global intangible low-taxed income provisions, partially offset by tax benefits related to equity compensation. Additionally, the effective tax rate for the nine-month period ended February 29, 2024 reflects incremental tax expense related to increases to our net deferred income tax liability for unremitted earnings, unfavorable changes in valuation allowances for certain foreign attribute tax carryforwards, and an adjustment for the tax related to the prior year sale of the furniture warranty business. Additionally, the effective tax rate for the nine-month period ended February 28, 2023 reflects the unfavorable impact of a noncash impairment charge for goodwill that was nondeductible for tax purposes.

Our deferred tax liability for unremitted foreign earnings was $7.3 million as of February 29, 2024, which represents our estimate of the net tax cost associated with the remittance of $298.0 million of foreign earnings that are not considered to be permanently reinvested. We have not provided for foreign withholding or income taxes on the remaining foreign subsidiaries’ undistributed earnings because such earnings have been retained and reinvested by the subsidiaries as of February 29, 2024. Accordingly, no provision has been made for foreign withholding or income taxes, which may become payable if the remaining undistributed earnings of foreign subsidiaries were remitted to us as dividends.