Income Taxes

12 Months Ended

Jul. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income before income taxes consists of the following:

	Years Ended July 31,
	2024		2023		2022
United States	$	111,647	$	92,053	$	92,985
Other Nations	136,194		133,643		98,995
Total	$	247,841	$	225,696	$	191,980

Income before income taxes in the United States increased to $111,647 in fiscal 2024 from $92,053 in fiscal 2023 primarily due to organic sales growth and improved gross profit margin.

The increase in income before income taxes in Other Nations to $133,643 in fiscal 2023 from $98,995 in fiscal 2022 was primarily due to intercompany royalty payments to the United States that occurred in fiscal 2023 which reduced Other Nations income before income taxes by $32,857.

Income tax expense consists of the following:

	Years Ended July 31,
	2024		2023		2022
Current income tax expense:
United States	$	22,637	$	26,324	$	8,639
Other Nations	32,121		31,093		31,851
States (U.S.)	5,267		5,894		3,156
	$	60,025	$	63,311	$	43,646
Deferred income tax (benefit) expense:
United States	$	(7,999)	$	(10,577)	$	970
Other Nations	(133)		251		(2,377)
States (U.S.)	(1,267)		(2,146)		(238)
	$	(9,399)	$	(12,472)	$	(1,645)
Total income tax expense	$	50,626	$	50,839	$	42,001

The tax effects of temporary differences are as follows as of July 31, 2024 and 2023:

	July 31, 2024
	Assets		Liabilities		Total
Inventories	$	7,462	$	(59)	$	7,403
Employee compensation and benefits	9,248		—		9,248
Accounts receivable	1,828		—		1,828
Fixed assets	3,507		(8,148)		(4,641)
Intangible assets	639		(48,248)		(47,609)
Capitalized R&D expenditures	20,252		—		20,252
Deferred and equity-based compensation	9,071		—		9,071
Postretirement benefits	2,463		(52)		2,411
Tax credit and net operating loss carry-forwards	43,929		—		43,929
Valuation allowances	(47,224)		—		(47,224)
Other, net	20,346		(5,462)		14,884
Total	$	71,521	$	(61,969)	$	9,552

	July 31, 2023
	Assets		Liabilities		Total
Inventories	$	8,526	$	(64)	$	8,462
Employee compensation and benefits	8,556		—		8,556
Accounts receivable	2,202		—		2,202
Fixed assets	3,118		(9,238)		(6,120)
Intangible assets	760		(49,267)		(48,507)
Capitalized R&D expenditures	9,986		—		9,986
Deferred and equity-based compensation	9,937		—		9,937
Postretirement benefits	2,683		(100)		2,583
Tax credit and net operating loss carry-forwards	51,387		—		51,387
Valuation allowances	(52,750)		—		(52,750)
Other, net	19,826		(4,798)		15,028
Total	$	64,231	$	(63,467)	$	764

Tax credit carry-forwards as of July 31, 2024 consist of the following:

•Foreign net operating loss carry-forwards of $89,282, of which $69,753 have no expiration date and the remainder of which expire from fiscal 2025 to fiscal 2040.

•State net operating loss carry-forwards of $24,527, of which $2,103 have no expiration date and the remainder of which expire in fiscal 2032.

•Foreign tax credit carry-forwards of $16,054, which expire from fiscal 2025 to fiscal 2034.

•State credit carry-forwards of $13,635, which expire from fiscal 2025 to fiscal 2039.

Rate Reconciliation

A reconciliation of the income tax rate computed by applying the statutory U.S. federal income tax rate to income before income taxes to the total income tax expense is as follows:

	Years Ended July 31,
	2024		2023		2022
Tax at statutory rate	21.0	%	21.0	%	21.0	%
International rate differential (1)	0.7	%	1.7	%	4.2	%
Adjustments to tax accruals and reserves	0.2	%	0.2	%	(0.1)	%
Research and development tax credits	(1.6)	%	(1.3)	%	(1.6)	%
Valuation allowance against foreign tax credits and foreign net operating loss carry-forwards	0.2	%	1.2	%	(1.2)	%
Deferred tax and other adjustments, net	(0.1)	%	(0.3)	%	(0.4)	%
Income tax rate	20.4	%	22.5	%	21.9	%

(1)Represents the foreign income tax rate differential when compared to the U.S. statutory income tax rate for the years ended July 31, 2024, 2023, and 2022.

Uncertain Tax Positions

The Company follows the guidance in ASC 740, "Income Taxes" regarding uncertain tax positions. The guidance requires application of a more-likely-than-not threshold to the recognition and de-recognition of income tax positions. A reconciliation of unrecognized tax benefits (excluding interest and penalties) is as follows:

Balance as of July 31, 2021	$	21,912
Additions based on tax positions related to the current year	3,233
Additions for tax positions of prior years	435
Reductions for tax positions of prior years	(122)
Lapse of statute of limitations	(3,226)
Settlements with tax authorities	(1,129)
Cumulative translation adjustments and other	(539)
Balance as of July 31, 2022	$	20,564
Additions based on tax positions related to the current year	2,902
Additions for tax positions of prior years	792
Reductions for tax positions of prior years	(19)
Lapse of statute of limitations	(2,682)
Settlements with tax authorities	(782)
Cumulative translation adjustments and other	124
Balance as of July 31, 2023	$	20,899
Additions based on tax positions related to the current year	3,130
Additions for tax positions of prior years	1,594
Reductions for tax positions of prior years	(43)
Lapse of statute of limitations	(2,666)
Settlements with tax authorities	(257)
Cumulative translation adjustments and other	(67)
Balance as of July 31, 2024	$	22,590

Of the $22,590 of unrecognized tax benefits, if recognized, $19,350 would affect the Company's income tax rate. The Company has classified $19,527 and $17,587, excluding interest and penalties, of the reserve for uncertain tax positions in "Other liabilities" on the Consolidated Balance Sheets as of July 31, 2024 and 2023, respectively. The Company has classified $3,063 and $3,312, excluding interest and penalties, as a reduction of long-term deferred income tax assets on the accompanying Consolidated Balance Sheets as of July 31, 2024 and 2023, respectively.

Interest expense is recognized on the amount of potentially underpaid taxes associated with the Company's tax positions, beginning in the first period in which interest starts accruing under the respective tax law and continuing until the tax positions are settled. The Company recognized interest expense of $893, $700, and $701 on the reserve for uncertain tax positions during the years ended July 31, 2024, 2023, and 2022, respectively. The Company also recognized benefits related to penalties of $38, $281, and $82 during the years ended July 31, 2024, 2023, and 2022, respectively. These amounts are net of reversals due to reductions for tax positions of prior years, statute of limitations, and settlements. At July 31, 2024 and 2023, the Company had $4,448 and $3,581, respectively, accrued for interest on unrecognized tax benefits. Penalties are accrued if the tax position does not meet the minimum statutory threshold to avoid the payment of a penalty. At July 31, 2024 and 2023, the Company had $1,631 and $1,674, respectively, accrued for penalties on unrecognized tax benefits. Interest expense and penalties are recorded as a component of "Income tax expense" in the Consolidated Statements of Income.

The Company estimates that it is reasonably possible that the unrecognized tax benefits may be reduced by up to $4,151 in the next 12 months as a result of the resolution of worldwide tax matters, tax audit settlements, amended tax filings, and/or the expiration of statute of limitations, all of which, if recognized, would result in an income tax benefit in the Consolidated Statements of Income.

During the year ended July 31, 2024, the Company recognized $3,708 of tax benefits (including interest and penalties) associated with the lapse of statutes of limitations.

The Company and its subsidiaries file income tax returns in the U.S., various states, and foreign jurisdictions. The following table summarizes the open tax years for the Company's major jurisdictions:

Jurisdiction	Open Tax Years
United States — Federal	F’21 — F’24