Annual report [Section 13 and 15(d), not S-K Item 405]

Note 12 - Income Taxes

v3.25.4
Note 12 - Income Taxes
 12 Months Ended
Oct. 31, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 12. Income Taxes

 

The sources of income before income taxes for the fiscal years ended  October 31, 2025 and 2024 are as follows:

 

(in thousands)

  

Year Ended October 31, 2025

    

Year Ended October 31, 2024

  

United States

   $ 6,722     $ 18,264  

Foreign

     3,330       6,047  

Total

   $ 10,052     $ 24,311  

 

The components of the provision for income taxes for the fiscal years ended  October 31, 2025 and 2024 are as follows:

 

(in thousands)

  

Year Ended October 31, 2025

    

Year Ended October 31, 2024

  

Current tax provision:

                

Federal

   $ 751     $ 1,924  

State and local

     395       723  

Total current tax provision

   $ 1,146     $ 2,647  
                 

Deferred tax provision:

                

Federal

   $ 1,326     $ 3,012  

Foreign

     881       1,893  

State and local

     326       552  

Total deferred tax provision

   $ 2,533     $ 5,457  
                 

Net provision for income taxes

   $ 3,679     $ 8,104  

 

For the fiscal years ended October 31, 2025 and 2024, 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, 2025

    

Year Ended October 31, 2024

  

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

   $ 2,109     $ 5,105  

State income taxes, net of federal deduction

     456       1,003  

Change in deferred tax rate

     346       (31 )

Stock compensation shortfall (benefit)

     (37 )     1,023  
Foreign income inclusion     -       103  
Foreign rate differential     131       266  
Non-deductible (non-taxable) items     282       194  

Taxes related to prior year filings

     382       215  

Executive compensation limitation

     12       251  

Other

     (2 )     (25 )

Income tax provision

   $ 3,679     $ 8,104  

 

The tax effects of the temporary differences giving rise to the Company’s net deferred tax assets and liabilities for fiscal years ending  October 31, 2025 and 2024 are summarized as follows:

 

(in thousands)

  

Year Ended October 31, 2025

    

Year Ended October 31, 2024

  

Deferred tax assets:

                

Accrued insurance reserve

   $ 2,450     $ 2,579  

Accrued sales and use tax

     495       72  

Accrued bonuses and vacation

     1,452       1,591  

Accrued payroll tax

     248       200  

Foreign tax credit carryforward

     80       80  

State tax credit carryforward

     -       21  

Interest expense carryforward

     4,846       1,396  

Stock-based compensation

     613       443  

Operating lease liability

     5,697       6,406  

Other

     143       156  

Net operating loss carryforward

     6,093       10,982  

Total deferred tax assets

   $ 22,117     $ 23,926  

Valuation allowance

     (80 )     (123 )

Net deferred tax assets

   $ 22,037     $ 23,803  
                 

Deferred tax liabilities:

                

Intangible assets

     (13,569 )     (14,598 )

Prepaid expenses

     (774 )     (200 )

Property and equipment

     (91,562 )     (89,329 )

Right-of-use operating lease asset

     (5,563 )     (6,323 )

Total net deferred tax liabilities

     (111,468 )     (110,450 )
                 

Net deferred tax liabilities

   $ (89,431 )   $ (86,647 )

 

As of October 31, 2025, the Company has the following tax carryforwards:

 

(in millions)

  

Year Ended October 31, 2025

  

Year that Carryforwards Begin to Expire

Federal net operating loss carryforwards

   $ 11.9  

Indefinite carryforward

State net operating loss carryforwards

     21.5  

FY29

Foreign net operating loss carryforwards

     11.0  

Indefinite carryforward

Foreign tax carryforwards

     0.1  

FY26

Federal interest expense carryforwards

  

20.5

  

Indefinite carryforward

State interest expense carryforwards

     15.9  

Indefinite carryforward

Total tax carryforwards

   $ 80.9    

 

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.

 

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, 2025 and 2024.

 

The following table summarizes the changes in the Company's unrecognized tax benefits during the fiscal years ended October 31, 2025 and 2024. 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, 2025

    

Year Ended October 31, 2024

  

Balance, beginning of year

   $ 1,077     $ 1,203  

Decrease in prior year position

     (117 )     (126 )

Balance, end of year

   $ 960     $ 1,077  

 

As of October 31, 2025 and 2024, the Company has recognized no interest or penalties.

 

On July 4, 2025, the U.S. government enacted The One Big Beautiful Bill Act of 2025 which includes, among other provisions, the reinstatement of bonus depreciation on qualified property and modifications to the calculation for excess business interest expense limitation under §163(j). The Company has evaluated the provisions effective for the current year and incorporated the related deferred tax impacts into its year end tax provision. The impacts of these changes were not material.