Annual report pursuant to Section 13 and 15(d)

Note 14 - Income Taxes

v3.24.4
Note 14 - Income Taxes
12 Months Ended
Oct. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 14. Income Taxes

 

The sources of income before income taxes for the fiscal years ended  October 31, 2024 and 2023 are as follows:

 

(in thousands)

 

Year Ended October 31, 2024

   

Year Ended October 31, 2023

 

United States

  $ 18,264     $ 35,650  

Foreign

    6,047       4,912  

Total

  $ 24,311     $ 40,562  

 

The components of the provision for income taxes for the fiscal years ended  October 31, 2024 and 2023 are as follows:

 

(in thousands)

 

Year Ended October 31, 2024

   

Year Ended October 31, 2023

 

Current tax provision:

               

Federal

  $ 1,924     $ 1,945  

State and local

    723       690  

Total current tax provision

  $ 2,647     $ 2,635  
                 

Deferred tax provision:

               

Federal

  $ 3,012     $ 4,567  

Foreign

    1,893       753  

State and local

    552       817  

Total deferred tax provision

  $ 5,457     $ 6,137  
                 

Net provision for income taxes

  $ 8,104     $ 8,772  

 

For the fiscal years ended October 31, 2024 and 2023, the income tax provision differs from the expected tax provision computed by applying the U.S. federal statutory rate to income before taxes as a result of the following:

 

(in thousands)

 

Year Ended October 31, 2024

   

Year Ended October 31, 2023

 

Income tax expense per federal statutory rate of 21% for each period

  $ 5,105     $ 8,517  

State income taxes, net of federal deduction

    1,003       1,196  

Change in deferred tax rate

    (31 )     (280 )

Warrant fair value change

    (27 )     (1,449 )

Stock compensation shortfall (benefit)

    1,023       (10 )

Foreign income inclusion

    103       -  

Increase (decrease) in valuation allowance

    (23 )     14  

Other

    951       784  

Income tax provision

  $ 8,104     $ 8,772  

 

The tax effects of the temporary differences giving rise to the Company’s net deferred tax liabilities for fiscal years ending  October 31, 2024 and 2023 are summarized as follows:

 

(in thousands)

 

Year Ended October 31, 2024

   

Year Ended October 31, 2023

 

Deferred tax assets:

               

Accrued insurance reserve

  $ 2,579     $ 1,865  

Accrued sales and use tax

    72       72  

Accrued bonuses and vacation

    1,591       1,855  

Accrued payroll tax

    200       281  

Foreign tax credit carryforward

    80       80  

State tax credit carryforward

    21       52  

Interest expense carryforward

    1,396       1,241  

Stock-based compensation

    443       2,490  

Operating lease liability

    6,406       6,109  

Other

    156       209  

Net operating loss carryforward

    10,982       18,596  

Total deferred tax assets

  $ 23,926     $ 32,850  

Valuation allowance

    (123 )     (164 )

Net deferred tax assets

  $ 23,803     $ 32,686  
                 

Deferred tax liabilities:

               

Intangible assets

    (14,598 )     (16,352 )

Prepaid expenses

    (200 )     (242 )

Property and equipment

    (89,329 )     (90,907 )

Right-of-use operating lease asset

    (6,323 )     (5,976 )

Total net deferred tax liabilities

    (110,450 )     (113,477 )
                 

Net deferred tax liabilities

  $ (86,647 )   $ (80,791 )

 

As of October 31, 2024, the Company has the following tax carryforwards:

 

(in millions)

 

Year Ended October 31, 2024

 

Year that Carryforwards Begin to Expire

Federal net operating loss carryforwards

  $ 33.8  

Indefinite carryforward

State net operating loss carryforwards

    29.3  

FY25

Foreign net operating loss carryforwards

    10.0  

Indefinite carryforward

Foreign tax carryforwards

    0.1  

FY26

Federal interest expense carryforwards

    5.2  

Indefinite carryforward

State interest expense carryforwards

    10.5  

Indefinite carryforward

Total tax carryforwards

  $ 88.9    

 

The Company does not consider that earnings from non-U.S. affiliates will be permanently reinvested. As such, the Company has provided U.S. deferred taxes on cumulative earnings of all of its non-U.S. affiliates.

 

In assessing the realizability of 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, carryback opportunities, and tax planning strategies in making the assessment. The Company believes it is more likely than not that it will realize the benefits of these deductible differences, net of the valuation allowance provided. The valuation allowance provided by the Company relates to foreign tax credit carryforwards, certain state tax credit carryforwards, and state net operating loss carryforwards.

 

The Company files income tax returns with the U.S., various state governments and the U.K. With few immaterial exceptions, the Company is no longer subject to U.S. federal, foreign and state income tax examinations by tax authorities for tax years before October 31, 2021.

 

Pursuant to Internal Revenue Code Section 382, annual use of the Company’s net operating loss ("NOL") carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has determined that no such change in ownership happened during the fiscal years ended October 31, 2024 and 2023.

 

The following table summarizes the changes in the Company's unrecognized tax benefits during the fiscal years ended October 31, 2024 and 2023. The Company expects no material changes to unrecognized tax positions within the next twelve months. If recognized, none of these benefits would favorably impact the Company's income tax expense, before consideration of any related valuation allowance:

 

(in thousands)

 

Year Ended October 31, 2024

   

Year Ended October 31, 2023

 

Balance, beginning of year

  $ 1,203     $ 1,333  

Decrease in prior year position

    (126 )     (130 )

Balance, end of year

  $ 1,077     $ 1,203  

 

As of October 31, 2024 and 2023, the Company has recognized no interest or penalties.