Annual report pursuant to Section 13 and 15(d)

Income Taxes (Tables)

v3.22.2.2
Income Taxes (Tables)
12 Months Ended
Aug. 31, 2022
Income Tax Disclosure [Abstract]  
Income Tax Expense from Continuing Operations
Income tax expense from continuing operations is summarized as follows (in thousands):
  Year ended August 31,
  2022 2021 2020
Currently payable:
Federal $ 1,765  $ (18,243) $ (35)
Foreign 7,824  12,441  10,004 
State 164  539  142 
9,753  (5,263) 10,111 
Deferred:
Federal 1,580  9,677  (7,791)
Foreign (7,538) 185  (1,632)
State 606  (836) 1,604 
(5,352) 9,026  (7,819)
Income tax expense $ 4,401  $ 3,763  $ 2,292 
Reconciliation of Income Taxes at Federal Statutory Rate to Effective Tax Rate 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,
  2022 2021 2020
Federal statutory rate 21.0  % 21.0  % 21.0  %
State income taxes, net of Federal effect 2.3  (0.2) (0.6)
Tax on foreign earnings (1)
1.3  2.8  38.7 
Foreign derived intangible income deduction (4.5) (3.2) — 
Compensation adjustment 6.6  3.1  6.6 
Impairment and other divestiture charges (2)
1.1  1.6  3.3 
Valuation allowance additions and releases (3)
2.1  7.1  (8.1)
Changes in liability for unrecognized tax benefits 3.4  (18.5) (5.3)
U.S. legislative changes, net impact —  (9.8) (32.5)
Taxable liquidation of subsidiaries (4)
(11.4) —  52.6 
Foreign non-deductible expenses 8.5  1.2  7.4 
Changes in tax rates (3.6) (3.4) (9.0)
Audits and adjustments (5)
(6.7) 8.0  (27.4)
Research and development tax credit (2.5) (1.8) (11.5)
Other items 0.7  0.7  (6.0)
Effective income tax rate 18.3  % 8.6  % 29.2  %
(1) The Company generated $1.3 million, $1.7 million and $5.4 million of withholding tax expense for fiscal 2022, 2021 and 2020, respectively, and $2.3 million, $4.6 million and $4.0 million of foreign-derived tax credits for fiscal 2022, 2021 and 2020, respectively.
(2) Fiscal 2022, 2021 and 2020 pretax earnings include $2.4 million, $6.2 million and $(3.2) million, respectively, in impairment & divestiture charges (benefits) related to goodwill, intangible assets, tangible assets and the cumulative effect of foreign currency rate changes of which $1.3 million, $3.5 million and $0.3 million, respectively, are not deductible for income tax purposes.
(3) Incremental valuation allowances of $0.9 million and $4.9 million and $9.4 million were recorded in fiscal 2022, 2021 and 2020, respectively, due to uncertainty regarding realization of tax assets, which were offset by a reduction of $5.5 million, $9.1 million and $12.3 million of valuation allowances for fiscal 2022, 2021 and 2020, respectively.
(4) During fiscal 2022 and 2020, the Company generated a net benefit of $2.7 million and a net expense of $4.1 million, respectively, as a result of taxable liquidations of subsidiaries.
(5) During fiscal 2022, the Company generated $1.6 million of tax benefit related to audits and adjustments as compared to a tax expense of $3.5 million in fiscal 2021 and a tax benefit of $2.2 million in fiscal 2020.
Temporary Differences and Carryforwards of Deferred Tax Assets and Liabilities
Temporary differences and carryforwards that gave rise to deferred tax assets and liabilities include the following items (in thousands):
  August 31,
  2022 2021
Deferred income tax assets:
Operating loss and tax credit carryforwards $ 78,717  $ 77,691 
Compensation related liabilities 6,002  6,110 
Postretirement benefits 5,995  8,364 
Inventory 2,780  3,177 
Lease liabilities 9,637  11,609 
Book reserves and other items 9,873  11,471 
Total deferred income tax assets 113,004  118,422 
Valuation allowance (61,630) (66,155)
Net deferred income tax assets 51,374  52,267 
Deferred income tax liabilities:
Depreciation and amortization (30,149) (29,444)
Lease assets (9,637) (11,609)
Other items (1,024) (781)
Deferred income tax liabilities (40,810) (41,834)
Net deferred income tax asset (1)
$ 10,564  $ 10,433 
(1) The net deferred income tax asset is reflected on the balance sheet in two categories: an asset of $17.9 million and $14.8 million for fiscal 2022 and 2021, respectively, is included in "Other long-term assets" and a liability of $7.3 million and $4.4 million for fiscal 2022 and 2021, respectively, is included in "Deferred income taxes".
Changes in Gross Liability for Unrecognized Tax benefits, Excluding Interest and Penalties
Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, are as follows (in thousands):
2022 2021 2020
Beginning balance $ 15,658  $ 23,205  $ 24,167 
Increases based on tax positions related to the current year 433  381  869 
Increase for tax positions taken in a prior period 1,084  304 
Decrease for tax positions taken in a prior period (57) —  — 
Decrease due to lapse of statute of limitations (1,271) (7,931) (2,334)
Decrease due to settlements (31) —  — 
Changes in foreign currency exchange rates (436) (4) 199 
Ending balance $ 15,380  $ 15,658  $ 23,205