Income Taxes

12 Months Ended

Aug. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Note 7 – Income Taxes

For financial reporting purposes, earnings before income taxes include the following components:

	For the years ended August 31,
($ in thousands)	2024		2023		2022
United States	$	40,497	$	40,066	$	34,465
Foreign		38,553		60,309		53,403
Earnings before income taxes	$	79,050	$	100,375	$	87,868

Significant components of the income tax provision are as follows:

	For the years ended August 31,
($ in thousands)	2024			2023			2022
Current:
Federal	$	9,743		$	8,119		$	5,678
State		2,331			1,690			1,310
Foreign		4,614			18,187			17,474
Total current		16,688			27,996			24,462
Deferred:
Federal		(2,310	)		(684	)		244
State		(370	)		(76	)		34
Foreign		(1,215	)		760			(2,341	)
Total deferred		(3,895	)	—				(2,063	)
Total income tax provision	$	12,793		$	27,996		$	22,399

Total income tax provision resulted in effective tax rates differing from that of the statutory United States federal income tax rates. The reasons for these differences are:

	For the years ended August 31,
	2024						2023						2022
($ in thousands)	Amount			%			Amount			%			Amount			%
U.S. statutory rate	$	16,601			21.0		$	21,079			21.0		$	18,452			21.0
State and local taxes, net of federal tax benefit		1,471			1.9			1,259			1.3			1,069			1.2
Foreign tax rate differences		1,658			2.1			6,017			6.0			3,318			3.8
NOLs		(1,349	)		(1.7	)	—			—			—			—
U.S. tax reform	—			—				(103	)		(0.1	)		313			0.4
Deferred tax asset valuation allowance	—			—				(610	)		(0.6	)	—			—
Federal credits		(1,256	)		(1.6	)		(445	)		(0.4	)		(444	)		(0.6	)
Uncertain tax benefits		(221	)		(0.3	)		(84	)		(0.1	)		(369	)		(0.4	)
Capital gains	—			—				529			0.5		—			—
International credits		(4,386	)		(5.5	)	—			—			—			—
Other		275			0.3			354			0.3			60			0.1
Effective rate	$	12,793			16.2		$	27,996			27.9		$	22,399			25.5

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:

	August 31,
($ in thousands)	2024			2023
Deferred tax assets:
Accrued expenses		9,879		$	11,467
Warranty		3,432			3,433
Defined benefit pension plan		1,188			1,253
Inventory		2,825			2,749
Share-based compensation		1,920			1,722
Vacation		1,202			935
Net operating loss and capital loss carry forwards		1,264			189
Deferred revenue		1,329			1,379
Allowance for doubtful accounts		1,343			1,338
Lease liabilities		3,712			3,656
Capitalized research and development expenditures		3,867			2,009
Net investment hedges		41		—
Other		1,392			1,490
Gross deferred tax assets		33,394			31,620
Valuation allowance		(534	)		(491	)
Net deferred tax assets	$	32,860		$	31,129
Deferred tax liabilities:
Intangible assets	$	(4,802	)	$	(5,085	)
Property, plant, and equipment		(11,398	)		(12,718	)
Lease assets		(2,907	)		(2,844	)
Net investment hedges	—				(286	)
Total deferred tax liabilities	$	(19,107	)	$	(20,933	)
Net deferred tax assets	$	13,753		$	10,196

In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. During the year ended August 31, 2024, the Company recorded tax benefits totaling $5.9 million in Brazil, which are not expected to repeat in future periods. The impact of other discrete items in fiscal 2024, 2023, and 2022 was not significant. As of August 31, 2024 and 2023, the Company had a valuation allowance of $0.5 million related to deferred tax assets in a jurisdiction where the Company does not expect to realize the deferred benefit.

The Company does not intend to, and has not historically, repatriated earnings of its foreign subsidiaries. Thus, the Company has not provided a deferred income tax liability on these undistributed earnings that are indefinitely reinvested. The Company would recognize a deferred income tax liability if the Company were to determine that such earnings were no longer indefinitely reinvested. There are other taxes that may be incurred if the Company would repatriate earnings of its foreign subsidiaries. It is not practicable to estimate the amount of income taxes that would be incurred if the Company would repatriate earnings of its foreign subsidiaries.

The Company recognizes tax benefits only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. Unrecognized tax benefits are tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards.

The amount of unrecognized tax benefits at August 31, 2024 and 2023 did not have a material impact on the Company's consolidated financial statements. While it is expected that the amount of unrecognized tax benefits will change in the next twelve months as a result of the expiration of statutes of limitations, the Company does not expect this change to have a significant impact on its results of operations or financial position.

The Company files income tax returns in the United States and various state and foreign jurisdictions. The Company is no longer subject to income tax examination by US federal and most state tax authorities for tax years prior to fiscal 2020. Other major jurisdictions where we conduct business generally have statutes of limitations ranging from three to six years.