Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v3.3.1.900
Income Taxes
 6 Months Ended
Feb. 29, 2016
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The Company's income tax expense is impacted by a number of factors, including the amount of taxable earnings derived in foreign jurisdictions with tax rates that are higher or lower than the U.S. federal statutory rate, permanent items, state tax rates and the ability to utilize various tax credits and net operating loss carryforwards. The Company's global operations, acquisition activity and specific tax attributes provide opportunities for continuous global tax planning initiatives to generate tax credits and deductions. Both the current and prior periods include the benefits of tax planning initiatives. Comparative pre-tax earnings (loss), income tax expense (benefit) and effective income tax rates are as follows (amounts in thousands):
 
 
Three Months Ended
 
Six Months Ended
 
 
February 29,
2016
 
February 28,
2015
 
February 29,
2016
 
February 28,
2015
Loss before income taxes
 
$
(179,216
)
 
$
(62,858
)
 
$
(161,581
)
 
$
(30,392
)
Income tax (benefit) expense
 
(20,026
)
 
1,980

 
(17,839
)
 
9,772

Effective income tax rate
 
11.2
 %
 
(3.1
)%
 
11.0
 %
 
(32.2
)%
 
 
 
 
 
 
 
 
 
Adjusted effective income tax rate(1)
 
(35.6
)%
 
17.2
 %
 
(1.6
)%
 
21.3
 %

(1) Adjusted effective income tax rate excludes the impairment charge of $186.5 million ($169.1 million after tax) and $84.4 million ($82.6 million after tax) in fiscal 2016 and fiscal 2015, respectively.
The comparability of pre-tax income (loss), income tax expense (benefit) and the related effective income tax rate is impacted by the current year and prior year impairment charges. Excluding the impairment charges, income tax expense for the three and six months ended February 29, 2016 was lower than the comparable prior year periods primarily due to lower earnings, a favorable mix of taxable earnings and the result of tax benefits from global tax planning initiatives. 
The (35.6%) adjusted effective income tax rate in the second quarter of fiscal 2016 is the result of a favorable year-to-date adjustment to the quarterly income tax provision due to a reduction in estimated annual pre-tax profits. Reduced pre-tax profits, coupled with an increased proportion of taxable earnings generated in foreign jurisdictions with tax rates lower than the U.S also benefited income tax expense in the quarter. The fiscal 2016 income tax provision included approximately 85% of earnings from foreign jurisdictions with tax rates lower than the U.S. federal income tax rate compared to approximately 65% in the prior year. Both the current and prior year second quarter tax provision included a similar benefit from global tax planning initiatives; however the impact on the effective tax rate was substantially larger in the current year, as quarterly pre-tax earnings (excluding the impairment charge) were down $14.2 million year-over-year. Current year tax planning initiatives relate to the deductibility of foreign currency losses for tax purposes.
The (1.6%) adjusted effective income tax rate for the first half of fiscal 2016 is due to the benefit of tax planning initiatives, which generate foreign tax credits that exceed the amount of taxes due on current year earnings, which are primarily in lower tax rate jurisdictions.