Annual report pursuant to Section 13 and 15(d)

Income Taxes (Tables)

v3.8.0.1
Income Taxes (Tables)
 12 Months Ended
Aug. 31, 2017
Income Tax Disclosure [Abstract]  
Income Tax Expense from Continuing Operations
Income tax (benefit) expense is summarized as follows (in thousands):
 
Year ended August 31,
 
2017
 
2016
 
2015
Currently payable:
 
 
 
 
 
Federal
$
(14,769
)
 
$
2,205

 
$
(126
)
Foreign
15,665

 
11,838

 
21,200

State
(850
)
 
912

 
(1,616
)
 
46

 
14,955

 
19,458

Deferred:
 
 
 
 
 
Federal
603

 
(12,470
)
 
(4,416
)
Foreign
(16,837
)
 
(23,797
)
 
(9,199
)
State
(290
)
 
(3,858
)
 
(324
)
 
(16,524
)
 
(40,125
)
 
(13,939
)
Income tax (benefit) expense
$
(16,478
)
 
$
(25,170
)
 
$
5,519

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,
 
2017
 
2016
 
2015
Federal statutory rate
35.0
 %
 
35.0
 %
 
35.0
 %
State income taxes, net of Federal effect
1.1

 
1.2

 
(0.2
)
Net effects of foreign tax rate differential and credits (1)
(2.7
)
 
1.6

 
(58.4
)
Domestic manufacturing deduction
0.6

 
0.3

 
(5.1
)
Foreign branch currency (gains) losses
(0.3
)
 
4.9

 
—

Impairment and other divestiture charges (2)
(11.2
)
 
(27.0
)
 
78.6

Valuation allowance additions and releases (3)
(16.2
)
 
(0.7
)
 
15.5

Changes in liability for unrecognized tax benefits (4)
(3.7
)
 
(0.9
)
 
(42.1
)
Taxable liquidation of foreign subsidiaries (5)
22.1

 
—

 
—

Foreign non-deductible expenses
(4.6
)
 
—

 
—

Changes in tax rates
(2.1
)
 
—

 
—

Business divestitures
—

 
3.9

 
—

Other items
1.9

 
1.0

 
(1.6
)
Effective income tax rate
19.9
 %
 
19.3
 %
 
21.7
 %

(1) During fiscal 2015, the Company generated $10.0 million of foreign tax credits, the result of a non-recurring non-permanent loan from a foreign subsidiary (which were utilized to reduce fiscal 2015 tax obligations) and had a higher proportion of non-U.S. earnings.
(2) Fiscal 2017, 2016 and fiscal 2015 net (loss) earnings include $117.0 million, $186.5 million and $84.4 million, respectively, in impairment and other divestiture charges related to goodwill, intangible assets, tangible assets and the cumulative effect of foreign currency rate changes of which $47.9 million, $68.0 million and $6.3 million, respectively, are deductible for income tax purposes.
(3) Incremental valuation allowances of $15.1 million and $5.7 million were recorded in fiscal 2017 and 2015, respectively, due to uncertainty regarding utilization of foreign operating loss carryforwards, which were partially offset by a reduction of $0.6 million and $2.3 million of reserves for fiscal 2017 and 2015, respectively.
(4) The liability for unrecognized tax benefits decreased $9.5 million in fiscal 2015 primarily due to settlements and lapsing of tax audit statutes.
(5) During fiscal 2017, the Company generated a net benefit of $14.9 million, the result of taxable liquidations of foreign subsidiaries.
    
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,
 
2017
 
2016
Deferred income tax assets:
 
 
 
Operating loss and tax credit carryforwards
$
41,985

 
$
36,761

Compensation related liabilities
17,319

 
25,086

Postretirement benefits
14,359

 
8,727

Inventory
2,958

 
3,044

Book reserves and other items
14,224

 
8,317

Total deferred income tax assets
90,845

 
81,935

Valuation allowance
(22,671
)
 
(8,147
)
Net deferred income tax assets
68,174

 
73,788

Deferred income tax liabilities:
 
 
 
Depreciation and amortization
(77,548
)
 
(83,020
)
Other items
(1,910
)
 
(5,493
)
Deferred income tax liabilities
(79,458
)
 
(88,513
)
Net deferred income tax liability
$
(11,284
)
 
$
(14,725
)
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):
 
2017
 
2016
 
2015
Beginning balance
$
29,174

 
$
29,924

 
$
39,509

Increases based on tax positions related to the current year
6,057

 
1,050

 
2,183

Increase for tax positions taken in a prior period
297

 
475

 
8,935

Decrease for tax positions taken in a prior period
(627
)
 
—

 
(633
)
Decrease due to lapse of statute of limitations
(4,008
)
 
(1,027
)
 
(4,464
)
Decrease due to settlements
—

 
—

 
(14,180
)
Changes in foreign currency exchange rates
553

 
(1,248
)
 
(1,426
)
Ending balance
$
31,446

 
$
29,174

 
$
29,924

Earnings before Income Taxes, Including both Continuing and Discontinued Operations
arnings before income taxes, are summarized as follows (in thousands):
  
Year Ended August 31,
 
2017
 
2016
 
2015
Domestic
$
12,635

 
$
(19,182
)
 
$
14,593

Foreign
(95,326
)
 
(111,162
)
 
10,798

 
$
(82,691
)
 
$
(130,344
)
 
$
25,391