Income Taxes

9 Months Ended

Jul. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Note 12. Income Taxes

For interim financial reporting, the Company estimates its annual effective tax rate based on the projected income for its entire fiscal year and records a provision or benefit for income taxes on a quarterly basis based on the estimated annual effective income tax rate, adjusted for any discrete tax items.

The Company recorded income tax expense of $4.4 million for the three months ended July 31, 2024, or 19.6% of pre-tax income, compared to $3.5 million of expense, or 19.0% of pre-tax income, for the three months ended July 31, 2023. Income tax expense for the three months ended July 31, 2024 and July 31, 2023 was favorably impacted by net discrete tax benefits of $0.9 and $1.1 million, respectively, primarily related to a federal provision-to-return adjustment.

The Company recorded income tax expense of $68.5 million for the nine months ended July 31, 2024, or 24.1% of pre-tax income, compared to $4.2 million of expense, or 21.2% of pretax income, for the nine months ended July 31, 2023. Income tax expense for the nine months ended July 31, 2024 was unfavorably impacted by $61.3 million of net discrete tax expense, primarily related to gain on sale of Collins. Income tax expense for the nine months ended July 31, 2023 was favorably impacted by $1.0 million of net discrete tax benefit, primarily related to a federal provision-to-return adjustment.

The Company periodically evaluates its valuation allowance requirements as facts and circumstances change and may adjust its deferred tax asset valuation allowances accordingly. It is reasonably possible that the Company will either add to or reverse a portion of its existing deferred tax asset valuation allowances in the future. Such changes in the deferred tax asset valuation allowances will be reflected in the current operations through the Company’s effective income tax rate.

The Company’s liability for unrecognized tax benefits, including interest and penalties, was $3.3 million as of July 31, 2024 and $5.6 million as of October 31, 2023. The unrecognized tax benefits are presented in Other long-term liabilities in the Company’s Condensed Unaudited Consolidated Balance Sheets as of July 31, 2024. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in its Condensed Unaudited Consolidated Statements of Income and Comprehensive Income.

The Company regularly assesses the likelihood of an adverse outcome resulting from examinations to determine the adequacy of its tax reserves. As of July 31, 2024, the Company believes that it is more likely than not that the tax positions it has taken will be sustained upon the resolution of its audits resulting in no material impact on its consolidated financial position and the results of operations and cash flows. However, the final determination with respect to any tax audits, and any related litigation, could be materially different from the Company’s estimates and/or from its historical income tax provisions and income tax liabilities and could have a material effect on operating results and/or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, and/or interest assessments related to income tax examinations.