XML 35 R20.htm IDEA: XBRL DOCUMENT v3.21.2
INCOME TAXES
 12 Months Ended
Jul. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The sources of earnings before income taxes are as follows:
 For the Fiscal Year Ended July 31,
 202120202019
United States$725,262 $258,483 $200,859 
Foreign119,319 14,413 (16,193)
Total$844,581 $272,896 $184,666 

The components of the provision for income taxes are as follows:
 For the Fiscal Year Ended July 31,
Income Taxes:202120202019
U.S. Federal$148,706 $49,494 $48,757 
U.S. state and local26,344 9,891 5,921 
Foreign17,571 1,842 6,611 
Total current expense192,621 61,227 61,289 
U.S. Federal162 6,472 10,862 
U.S. state and local(365)(197)(36)
Foreign(8,707)(15,990)(19,914)
Total deferred expense (benefit)(8,910)(9,715)(9,088)
Total income tax expense$183,711 $51,512 $52,201 

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law. The CARES Act includes several changes impacting businesses, including, but not limited to, enhanced business interest deductibility, net operating loss ("NOL") carryback provisions, payroll tax deferral provisions and employee retention tax credits. The Company determined that the impacts of the CARES Act are not material to the Consolidated Financial Statements.
On March 11, 2021, the American Rescue Plan Act (the "Act") was signed into law. The Act includes several changes impacting business, including, but not limited to, insurance premium subsidies, extension of employee retention tax credits and amendments to deductible compensation. The Company determined that the impacts of the Act are not material to the Consolidated Financial Statements.

The differences between income tax expense at the federal statutory rate and the actual income tax expense are as follows:

 For the Fiscal Year Ended July 31,
 202120202019
Provision at federal statutory rate$177,362 $57,308 $38,779 
Differences between U.S. federal statutory and foreign tax rates(16,857)(50,898)1,478 
Foreign currency remeasurement (gains) losses1,595 30,246 (12,942)
U.S. state and local income taxes, net of federal benefit20,407 7,616 4,642 
Nondeductible compensation6,418 2,249 2,401 
Nondeductible acquisition costs— — 3,031 
Nondeductible foreign currency forward contract loss on acquisition— — 14,863 
Federal income tax credits and incentives(3,530)(1,738)(3,373)
Change in uncertain tax positions1,209 1,101 1,279 
Other(2,893)5,628 2,043 
Total income tax expense$183,711 $51,512 $52,201 

A summary of the deferred income tax balances is as follows:
 July 31,
 20212020
Deferred income tax asset (liability):
Inventory basis$3,158 $1,000 
Employee benefits10,485 7,353 
Self-insurance reserves6,949 4,923 
Accrued product warranties53,258 53,586 
Accrued incentives4,403 4,316 
Sales returns and allowances934 1,027 
Accrued expenses7,496 6,733 
Property, plant and equipment(36,662)(28,438)
Operating leases10,615 9,110 
Deferred compensation19,260 15,876 
Intangibles(173,360)(147,423)
Net operating loss and other carryforwards38,669 32,877 
Unrealized loss609 4,892 
Unrecognized tax benefits3,946 3,046 
Other(4,949)4,558 
Valuation allowance(17,193)(18,500)
Deferred income tax (liability), net$(72,382)$(45,064)

Deferred tax assets are reduced by a valuation allowance if, based upon available evidence, it is more likely than not that some, or all, of the deferred tax assets will not be realized. The valuation allowances recorded at July 31, 2021 and July 31, 2020 relate to certain foreign net operating loss carry forwards and other assets in foreign jurisdictions.

With the exception of foreign subsidiary investment basis differences not attributable to unrepatriated foreign earnings, we consider all of our undistributed earnings of our foreign subsidiaries, as of July 31, 2021, to not be indefinitely reinvested outside of the United States. As of July 31, 2021, the related income tax cost of the repatriation of foreign earnings is not material.
As of July 31, 2021, the Company has $2,972 of U.S. state tax credit carry forwards that expire from fiscal 2030-2031 which the Company expects to realize prior to expiration. At July 31, 2021, the Company had $75,407 of gross NOL carry forwards in certain foreign jurisdictions that will expire from fiscal 2023 to indefinite carryforward, of which $70,037 has been reserved with a valuation allowance and the remaining amount the Company expects to realize. In addition, the Company has $4,961 of gross U.S. state tax NOL carryforwards that expire from fiscal 2022-2041 that the Company does not expect to realize and therefore has been fully reserved with a valuation allowance.

The benefits of tax positions reflected on income tax returns but whose outcome remains uncertain are only recognized for financial accounting purposes if they meet minimum recognition thresholds. The total amount of unrecognized tax benefits that, if recognized, would have impacted the Company’s effective tax rate were $13,631 for fiscal 2021, $11,606 for fiscal 2020 and $11,332 for fiscal 2019.

Changes in the unrecognized tax benefit during fiscal years 2021, 2020 and 2019 were as follows:
 
202120202019
Beginning balance$14,238 $13,848 $13,004 
Tax positions related to prior years:
Additions72 73 — 
Reductions(277)(129)(263)
Tax positions related to current year:
Additions4,346 1,966 2,062 
Settlements(3,363)— (773)
Lapses in statute of limitations(2,701)(1,520)(918)
Tax positions acquired4,710 — 736 
Ending balance$17,025 $14,238 $13,848 

It is the Company’s policy to recognize interest and penalties accrued relative to unrecognized tax benefits in income tax expense. The total amount of liabilities accrued for interest and penalties related to unrecognized tax benefits as of July 31, 2021 and July 31, 2020 were $2,967 and $2,516, respectively. The total amount of interest and penalties expense recognized in the Consolidated Statements of Income and Comprehensive Income for the fiscal years ended July 31, 2021, July 31, 2020 and July 31, 2019 were $238, $544 and $454, respectively.

The total unrecognized tax benefits above, along with the related accrued interest and penalties, are reported within the liability section of the Consolidated Balance Sheets. A portion of the unrecognized tax benefits is classified as short-term and is included in the “Income and other taxes” line of the Consolidated Balance Sheets, while the remainder is classified as a long-term liability.

The components of total unrecognized tax benefits are summarized as follows:
 July 31,
 20212020
Unrecognized tax benefits$17,025 $14,238 
Reduction to unrecognized tax benefits which offset tax credit and loss carryforwards(725)(809)
Accrued interest and penalties2,967 2,516 
Total unrecognized tax benefits$19,267 $15,945 
Short-term, included in “Income and other taxes”$3,423 $3,180 
Long-term15,844 12,765 
Total unrecognized tax benefits$19,267 $15,945 

The Company anticipates a decrease of approximately $4,600 in unrecognized tax benefits and $1,600 in interest during fiscal 2022 from expected settlements or payments of uncertain tax positions and lapses of the applicable statutes of limitations. Actual results may differ from these estimates.
The Company files income tax returns in the U.S. federal jurisdiction and in many U.S. state and foreign jurisdictions. The Company is currently under exam by certain U.S. state tax authorities for the fiscal years ended July 31, 2015 through July 31, 2017. The Company believes it has adequately reserved for its exposure to additional payments for uncertain tax positions in its liability for unrecognized tax benefits.
 
The major tax jurisdictions we file in, with the years still subject to income tax examinations, are listed below:
 
Major Tax JurisdictionTax Years Subject to Exam
United States – FederalFiscal 2018 – Fiscal 2020
United States – StateFiscal 2018 – Fiscal 2020
GermanyFiscal 2016 – Fiscal 2019
FranceFiscal 2017 – Fiscal 2019
ItalyFiscal 2016 – Fiscal 2020
United KingdomFiscal 2020