Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v3.7.0.1
Income Taxes
 9 Months Ended
May 31, 2017
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The Company's income tax expense or benefit is impacted by a number of factors, including the amount of taxable earnings generated in foreign jurisdictions with tax rates that are 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 maximize tax credits and deductions. Both fiscal 2017 and 2016 include the benefits of tax planning initiatives. Comparative earnings (loss) before income taxes, income tax benefit and effective income tax rates are as follows (amounts in thousands):
 
Three Months Ended May 31,
 
Nine Months Ended May 31,
 
2017
 
2016
 
2017
 
2016
Earnings (loss) before income taxes
$
18,482

 
$
20,339

 
$
25,724

 
$
(141,242
)
Income tax benefit
(4,029
)
 
(827
)
 
(6,827
)
 
(18,666
)
Effective income tax rate
(21.8
)%
 
(4.1
)%
 
(26.5
)%
 
13.2
 %
Adjusted effective income tax rate (1)
(21.8
)%
 
(4.1
)%
 
(26.5
)%
 
(2.8
)%

(1) Adjusted effective income tax rate excludes the impairment charge of $186.5 million ($169.1 million after tax) in the nine months ended May 31, 2016.
Both the current and prior year effective income tax rates were impacted by the proportion of earnings in foreign jurisdictions with income tax rates lower than the U.S. federal income tax rate, the amount of income tax benefits from tax planning initiatives, and certain discrete income tax benefits. The Company's earnings (loss) before income taxes, excluding impairment charges, includes approximately 80% of earnings from foreign jurisdictions for both the estimated full-year fiscal 2017 and actual fiscal 2016. This foreign income tax rate differential had the effect of reducing the effective income tax rate from the 35% U.S. statutory tax rate by 11.2% and 15.8%, for the three months ended May 31, 2017 and 2016, respectively. In addition, the income tax benefit for the three months ended May 31, 2017 was the result of the recognition of income tax planning benefits resulting from certain losses from prior years for which no benefit was previously recognized which resulted in a 26.9% reduction from the 35% U.S. statutory rate and an overall net $3.3 million reduction in tax reserves primarily associated with the lapsing of income tax statutes of limitations. Similarly, the income tax benefit for the three months ended May 31, 2016 was the net result of prior year tax planning related to certain currency gains and losses recognized for tax purposes which resulted in a 9.5% reduction from the 35% U.S. statutory tax rate and a $2.3 million benefit from a discrete income tax adjustment (favorable provision to income tax return adjustments), partially offset by the provision for taxes due on earnings. These factors, combined with year-to-date activity, yielded an income tax benefit of 26.5% and 2.8% for the nine months ended May 31, 2017 and 2016, respectively, excluding the second quarter fiscal 2016 impairment charge. The tax benefits related to tax planning initiatives are not expected to repeat in future periods due to certain tax attributes that are no longer available and subsequent changes in relevant tax laws.