Income Taxes

12 Months Ended

May 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Note M – Income Taxes

Earnings before income taxes for the prior three fiscal years included the following components:

(In millions)	2024		2023		2022
U.S. based operations	$	166.3	$	102.7	$	208.0
Non – U.S. based operations		49.9		26.0		46.3
Earnings before income taxes		216.2		128.7		254.3
Less: Net earnings attributable to noncontrolling interests (1)		15.4		12.6		19.9
Earnings before income taxes attributable to controlling interest	$	200.8	$	116.1	$	234.4

(1)Net earnings attributable to noncontrolling interests are not taxable to the Company.

Significant components of income tax expense (benefit) for the prior three fiscal years were as follows:

(In millions)	2024			2023			2022
Current
Federal	$	25.3		$	26.9		$	30.2
State and local		6.3			4.2			5.1
Foreign		13.4			7.6			5.1
Subtotal		45.0			38.7			40.4
Deferred
Federal		4.7			(8.6	)		12.2
State and local		(0.8	)		(0.6	)		1.1
Foreign		(2.8	)		(0.5	)		0.3
Subtotal		1.1			(9.7	)		13.6
Total	$	46.1		$	29.0		$	54.0

A reconciliation of the federal statutory corporate income tax rate to total tax provision for the prior three fiscal years follows:

	2024			2023			2022
Federal statutory corporate income tax rate		21.0	%		21.0	%		21.0	%
State and local income taxes, net of federal tax benefit		2.2			2.2			2.1
Non-U.S. income taxes at other than federal statutory rate		0.6			1.7			(1.6	)
Nondeductible executive compensation		0.6			1.7			1.1
Other		(1.4	)		(1.6	)		0.5
Effective tax rate attributable to controlling interest		23.0	%		25.0	%		23.1	%

The above effective tax rate attributable to controlling interest excludes any impact from the inclusion of net earnings attributable to noncontrolling interests in the Company’s consolidated and combined statements of earnings. The effective tax rates upon inclusion of net earnings attributable to noncontrolling interests were 21.3%, 22.5% and 21.2% for fiscal 2024, fiscal 2023 and fiscal 2022, respectively. Net earnings attributable to noncontrolling interests are a result of the Company’s consolidated joint ventures. The net earnings attributable to the noncontrolling interests in the U.S. operations of the Company’s consolidated joint ventures do not generate tax expense to the Company since the investors are taxed directly based on the earnings attributable to the investors. The tax expense of TWB’s wholly-owned foreign subsidiaries is reported in the consolidated and combined income tax expense.

Under applicable accounting guidance, a tax benefit may be recognized from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Any tax benefits recognized in the Company’s financial statements from such a position were measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.

A tabular reconciliation of unrecognized tax benefits follows:

(In millions)	2024			2023		2022
Balance at beginning of the year	$	1.2		$	1.2	$	0.1
Decreases - tax positions taken in prior years		(1.0	)		-		-
Increases - current tax positions		-			-		1.2
Settlements		-			-		-
Lapse of statutes of limitations		-			-		(0.1	)
Balance at the end of the year	$	0.2		$	1.2	$	1.2

During the fiscal year ended May 31, 2024, $1.0 million was reclassified as a tax payable due to the final ruling in a pre-acquisition tax matter at Tempel. The amount of unrecognized tax benefits for the years ended May 31, 2023 and 2022, that, if recognized would affect the effective tax rate, was not material. During the fiscal year ended May 31, 2024, 2023, and 2022, the Company recognized an immaterial amount of tax-related interest on unrecognized tax benefits. Management estimates the reasonably possible changes to unrecognized tax benefits during the next twelve months to be immaterial and is currently unaware of any issues under review that would result in significant additional payments, accruals, or other material deviations to this estimate.

The following is a summary of the tax years open to examination by major tax jurisdiction:

•U.S. Federal – 2021 and forward

•U.S. State and Local – 2020 and forward

•Austria – 2024 and forward

•Canada – 2019 and forward

•China – 2021 and forward

•India – 2020 and forward

•Mexico – 2019 and forward

The components of the Company’s deferred tax assets and liabilities as of May 31 were as follows:

(In millions)	2024			2023
Deferred tax assets
Accounts receivable	$	1.8		$	1.3
Inventories		2.8			3.4
Accrued expenses		9.2			14.1
Net operating loss carry forwards		2.8			3.2
Stock-based compensation		1.9			3.4
Operating lease - liability		4.4			2.3
Derivative contracts		0.2			1.5
Other		1.5			0.1
Deferred tax assets before valuation allowance		24.6			29.3
Less: Valuation allowance		-			-
Total deferred tax assets		24.6			29.3
Deferred tax liabilities
Property, plant and equipment		(28.7	)		(33.0	)
Investment in affiliated companies, principally due to undistributed earnings		(10.5	)		(12.1	)
Operating lease - ROU assets		(4.2	)		(2.1	)
Other		(0.6	)		(1.9	)
Total deferred tax liability		(44.0	)		(49.1	)
Net deferred tax asset (liability)	$	(19.4	)	$	(19.8	)

At May 31, 2024, the Company had tax benefits for non-U.S. net operating loss carryforwards of $2.8 million that begin expiring in fiscal 2029.

Based on the Company’s history of profitability, the scheduled reversal of deferred tax liabilities, and taxable income projections, the Company has determined that it is more likely than not that the remaining deferred tax assets are otherwise realizable.