Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.8
Income Taxes
 12 Months Ended
Aug. 31, 2014
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
Income tax expense from continuing operations is summarized as follows (in thousands):
 
 
 
Year ended August 31,
 
 
 
 
2014
 
2013
 
2012
 
 
Currently payable:
 
 
 
 
 
 
 
 
Federal
 
$
23,211

 
$
24,809

 
$
22,078

 
 
Foreign
 
9,059

 
13,335

 
10,396

 
 
State
 
(657
)
 
902

 
1,534

 
 
 
 
31,613

 
39,046

 
34,008

 
 
Deferred:
 
 
 
 
 
 
 
 
Federal
 
4,224

 
(13,514
)
 
(495
)
 
 
Foreign
 
(4,130
)
 
(9,942
)
 
(4,598
)
 
 
State
 
866

 
(218
)
 
439

 
 
 
 
960

 
(23,674
)
 
(4,654
)
 
 
 
 
$
32,573

 
$
15,372

 
$
29,354

 

 
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,
 
 
 
 
2014
 
2013
 
2012
 
 
Federal statutory rate
 
35.0
 %
 
35.0
 %
 
35.0
 %
 
 
State income taxes, net of Federal effect
 
0.8

 
0.9

 
1.2

 
 
Net effect of foreign tax rates and credits
 
(10.5
)
 
(8.8
)
 
(14.6
)
 
 
NOL utilization and changes in valuation allowance
 
(4.1
)
 
(3.1
)
 
0.1

 
 
Tax contingency reserve
 
(0.7
)
 
(5.6
)
 
(2.2
)
 
 
Change in income tax accounting method, net
 
(5.6
)
 
—

 
—

 
 
Business (RV) divestiture
 
3.0

 
—

 
—

 
 
Prior period correction (1)
 
—

 
(6.5
)
 
—

 
 
Other items
 
0.8

 
(2.5
)
 
(0.5
)
 
 
Effective income tax rate
 
18.7
 %
 
9.4
 %
 
19.0
 %
 
(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 was 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,
 
 
 
 
2014
 
2013
 
 
Deferred income tax assets:
 
 
 
 
 
 
Operating loss and tax credit carryforwards
 
$
25,295

 
$
29,611

 
 
Compensation related liabilities
 
23,496

 
20,864

 
 
Postretirement benefits
 
5,082

 
7,731

 
 
Inventory
 
2,775

 
8,657

 
 
Book reserves and other items
 
12,214

 
12,643

 
 
Total deferred income tax assets
 
68,862

 
79,506

 
 
Valuation allowance
 
(12,841
)
 
(17,268
)
 
 
Net deferred income tax assets
 
56,021

 
62,238

 
 
Deferred income tax liabilities:
 
 
 
 
 
 
Depreciation and amortization
 
(124,688
)
 
(151,370
)
 
 
Other items
 
(5,728
)
 
(2,077
)
 
 
Deferred income tax liabilities
 
(130,416
)
 
(153,447
)
 
 
Net deferred income tax liability
 
$
(74,395
)
 
$
(91,209
)
 

The Company has $51.6 million of state net operating loss carryforwards, which are available to reduce future state tax liabilities. These state net operating carryforwards expire at various times through 2031. The Company also has $95.4 million of foreign loss carryforwards which are available to reduce certain future foreign tax liabilities. Approximately half of the foreign loss carryforwards are not subject to any time restrictions on their future use and the remaining expire at various times through 2024. The valuation allowance represents a reserve for net 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):
 
 
2014
 
2013
 
2012
Beginning balance
 
$
18,006

 
$
24,608

 
$
26,179

Increases based on tax positions related to the current year
 
21,300

 
3,601

 
2,776

Increase (decrease) for tax positions taken in a prior period
 
—

 
(100
)
 
624

Decrease due to settlements
 
—

 
(2,581
)
 
(392
)
Decrease due to lapse of statute of limitations
 
(7,030
)
 
(7,522
)
 
(4,579
)
Ending balance
 
$
32,276

 
$
18,006

 
$
24,608


Substantially all of these unrecognized tax benefits, if recognized, would impact the effective income tax rate. As of August 31, 2014, 2013 and 2012, the Company recognized $2.0 million, $2.9 million and $4.5 million, respectively for interest and penalties related to unrecognized tax benefits. The Company recognizes interest and penalties related to underpayment of income taxes as a component of income tax expense. 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 $0.5 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 $324.0 million at August 31, 2014. If all such undistributed earnings were remitted, an additional income tax provision of $31.0 million would have been necessary as of August 31, 2014. The percentage of incremental U.S. taxes on unremitted earnings as of August 31, 2014 was 9.4%.
Earnings before income taxes, for continuing operations, are summarized as follows (in thousands):
 
  
 
Year Ended August 31,
 
 
 
 
2014
 
2013
 
2012
 
 
Domestic
 
$
84,854

 
$
67,392

 
$
65,685

 
 
Foreign
 
89,172

 
95,557

 
88,945

 
 
 
 
$
174,026

 
$
162,949

 
$
154,630

 

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 and Divestitures”), 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 2014 domestic earnings included a $13.5 million gain on the RV divesiture, while fiscal 2012 domestic earnings include a $16.8 million debt refinancing charge.
Cash paid for income taxes, net of refunds was $57.2 million, $42.1 million and $56.5 million during the years ended August 31, 2014, 2013 and 2012, respectively.