Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.8
Income Taxes
 12 Months Ended
Aug. 31, 2013
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
Income tax expense from continuing operations is summarized as follows (in thousands):
 
 
 
Year ended August 31,
 
 
 
 
2013
 
2012
 
2011
 
 
Currently payable:
 
 
 
 
 
 
 
 
Federal
 
$
24,809

 
$
22,078

 
$
(78
)
 
 
Foreign
 
13,335

 
10,396

 
20,903

 
 
State
 
902

 
1,534

 
586

 
 
 
 
39,046

 
34,008

 
21,411

 
 
Deferred:
 
 
 
 
 
 
 
 
Federal
 
(13,514
)
 
(495
)
 
14,948

 
 
Foreign
 
(9,942
)
 
(4,598
)
 
(4,223
)
 
 
State
 
(218
)
 
439

 
(4,303
)
 
 
 
 
(23,674
)
 
(4,654
)
 
6,422

 
 
 
 
$
15,372

 
$
29,354

 
$
27,833

 

 
Income tax expense from continuing operations recognized in the accompanying consolidated statements of earnings differs from the amounts computed by applying the Federal income tax rate to earnings from continuing operations before income tax expense. A reconciliation of income taxes at the Federal statutory rate to the effective tax rate is summarized in the following table:
 
 
 
Year ended August 31,
 
 
 
 
2013
 
2012
 
2011
 
 
Federal statutory rate
 
35.0
 %
 
35.0
 %
 
35.0
 %
 
 
State income taxes, net of Federal effect
 
0.9

 
1.2

 
0.4

 
 
Net effect of foreign tax rates and credits
 
(8.8
)
 
(14.6
)
 
(14.0
)
 
 
NOL utilization and changes in valuation allowance
 
(3.1
)
 
0.1

 
(3.0
)
 
 
Tax contingency reserve
 
(5.6
)
 
(2.2
)
 
(1.6
)
 
 
Prior period correction (1)
 
(6.5
)
 
—

 
—

 
 
Other items
 
(2.5
)
 
(0.5
)
 
3.4

 
 
Effective income tax rate
 
9.4
 %
 
19.0
 %
 
20.2
 %
 
(1) During the fourth quarter of fiscal 2013, the Company recorded a $10.6 million adjustment to properly state deferred income tax balances associated with its equity compensation programs. The correction is not material to current or previously issued financial statements.








Temporary differences and carryforwards that gave rise to deferred tax assets and liabilities include the following items (in thousands):
 
 
 
August 31,
 
 
 
 
2013
 
2012
 
 
Deferred income tax assets:
 
 
 
 
 
 
Operating loss and tax credit carryforwards
 
$
35,071

 
$
16,393

 
 
Compensation related liabilities
 
20,812

 
9,909

 
 
Postretirement benefits
 
7,731

 
10,679

 
 
Inventory reserves
 
7,049

 
8,045

 
 
Book reserves and other items
 
11,523

 
12,781

 
 
Total deferred income tax assets
 
82,186

 
57,807

 
 
Valuation allowance
 
(22,777
)
 
(8,153
)
 
 
Net deferred income tax assets
 
59,409

 
49,654

 
 
Deferred income tax liabilities:
 
 
 
 
 
 
Depreciation and amortization
 
(129,498
)
 
(156,751
)
 
 
Other items
 
(1,985
)
 
(2,098
)
 
 
Deferred income tax liabilities
 
(131,483
)
 
(158,849
)
 
 
Net deferred income tax liability
 
$
(72,074
)
 
$
(109,195
)
 

Certain of the operating loss and tax credit carryforwards may be carried forward indefinitely, with the remaining $12.9 million expiring at various dates between 2014 and 2021. The valuation allowance represents a reserve for operating loss and tax credit carryforwards for which utilization is uncertain.

Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, are as follows (in thousands):
 
 
 
2013
 
2012
 
2011
 
 
Beginning balance
 
$
24,608

 
$
26,179

 
$
28,225

 
 
Increase for tax positions taken in a prior period
 
3,601

 
3,400

 
4,026

 
 
Decrease for tax positions taken in a prior period
 
(7,622
)
 
(4,579
)
 
(6,072
)
 
 
Decrease due to settlements
 
(2,581
)
 
(392
)
 
—

 
 
Ending balance
 
$
18,006

 
$
24,608

 
$
26,179

 

Substantially all of these unrecognized tax benefits, if recognized, would impact the effective income tax rate. As of August 31, 2013, 2012 and 2011, the Company recognized $2.9 million, $4.5 million and $5.1 million, respectively for interest and penalties related to unrecognized tax benefits. With few exceptions, the Company is no longer subject to U.S. federal, state and local and foreign income tax examinations by tax authorities in our major tax jurisdictions for years before fiscal 2006. The Company believes it is reasonably possible that the total amount of unrecognized tax benefits could decrease up to $4.3 million within the next twelve months.
The Company’s policy is to remit earnings from foreign subsidiaries only to the extent any resultant foreign income taxes are creditable in the United States. Accordingly, the Company does not currently provide for the additional United States and foreign income taxes which would become payable upon remission of undistributed earnings of foreign subsidiaries. Undistributed earnings on which additional income taxes have not been provided amounted to approximately $427.1 million at August 31, 2013. If all such undistributed earnings were remitted, an additional income tax provision of approximately $79.8 million would have been necessary as of August 31, 2013.




Earnings before income taxes, for continuing operations, are summarized as follows (in thousands):
 
  
 
Year Ended August 31,
 
 
 
 
2013
 
2012
 
2011
 
 
Domestic
 
$
67,392

 
$
65,685

 
$
47,445

 
 
Foreign
 
95,557

 
88,945

 
90,576

 
 
 
 
$
162,949

 
$
154,630

 
$
138,021

 

Both domestic and foreign pre-tax earnings are impacted by changes in sales levels, acquisition and divestiture activities (see Note 2, “Acquisitions” and Note 3, “Discontinued Operations”), restructuring costs and the related benefits, growth investments, debt levels, interest rates and the impact of changes in foreign currency exchange rates. In addition, fiscal 2012 domestic pre-tax earnings include a $16.8 million (domestic) debt refinancing charge.
Cash paid for income taxes, net of refunds was $42.1 million, $56.5 million and $23.1 million during the years ended August 31, 2013, 2012 and 2011, respectively.