Annual report pursuant to Section 13 and 15(d)

Income Taxes (Tables)

v3.10.0.1
Income Taxes (Tables)
 12 Months Ended
Aug. 31, 2018
Income Tax Disclosure [Abstract]  
Income Tax Expense from Continuing Operations
Income tax expense (benefit) is summarized as follows (in thousands):
 
Year ended August 31,
 
2018
 
2017
 
2016
Currently payable:
 
 
 
 
 
Federal
$
919

 
$
(14,769
)
 
$
2,205

Foreign
12,532

 
15,665

 
11,838

State
120

 
(850
)
 
912

 
13,571

 
46

 
14,955

Deferred:
 
 
 
 
 
Federal
(7,837
)
 
603

 
(12,470
)
Foreign
3,905

 
(16,837
)
 
(23,797
)
State
(663
)
 
(290
)
 
(3,858
)
 
(4,595
)
 
(16,524
)
 
(40,125
)
Income tax expense (benefit)
$
8,976

 
$
(16,478
)
 
$
(25,170
)
Reconciliation of Income Taxes at Federal Statutory Rate to Effective Tax Rate
 
Year ended August 31,
 
2018
 
2017
 
2016
Federal statutory rate (1)
25.7
 %
 
35.0
 %
 
35.0
 %
State income taxes, net of Federal effect
5.1

 
1.1

 
1.2

Net effects of foreign tax rate differential and credits (2) (8)
26.9

 
(3.5
)
 
2.4

Domestic manufacturing deduction
3.9

 
0.6

 
0.3

Foreign branch currency losses
3.2

 
(0.3
)
 
4.9

Compensation adjustment (3)
(11.1
)
 
—

 
—

Impairment and other divestiture charges (4)
(125.9
)
 
(11.2
)
 
(27.0
)
Valuation allowance additions and releases (5)
(31.7
)
 
(16.2
)
 
(0.7
)
Changes in liability for unrecognized tax benefits (6)
51.7

 
(3.7
)
 
(0.9
)
U.S. tax reform, net impact
(3.9
)
 
—

 
—

Taxable liquidation of foreign subsidiaries (7)
(11.7
)
 
22.1

 
—

Foreign non-deductible expenses (8)
(18.2
)
 
(4.6
)
 
(1.7
)
Changes in tax rates (8)
2.2

 
(2.1
)
 
0.9

Business divestitures
—

 
—

 
3.9

U.S. credits and adjustments (8)
11.4

 
2.5

 
1.3

Other items (8)
1.6

 
0.2

 
(0.3
)
Effective income tax rate
(70.8
)%
 
19.9
 %
 
19.3
 %

(1) The Federal statutory rate is a blended rate which reflects 35% through December 31, 2017 and the lowered rate of 21% beginning on January 1, 2018 due to tax reform.
(2) During fiscal 2018, the Company generated $10.3 million of foreign tax credits, excluding the impact of tax reform and had a higher proportion of non-U.S. earnings.
(3) The adoption of ASU 2016-09, Compensation-Stock Compensation resulted in the recognition of excess tax expense in the Company’s provision for income taxes within the Consolidated Statement of Earnings rather than paid-in capital of $1.5 million for the fiscal year 2018.
(4) Fiscal 2018, 2017 and 2016 pretax (loss) earnings include $73.1 million, $117.0 million and $186.5 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 $45.1 million, $69.0 million and $118.5 million, respectively, are not deductible for income tax purposes.
(5) Incremental valuation allowances of $18.1 million, which excludes $7.1 million of valuation allowances related to foreign tax credits that are categorized with tax reform and $15.1 million were recorded in fiscal 2018 and 2017, respectively, due to uncertainty regarding utilization of foreign operating loss carryforwards, which were partially offset by a reduction of $12.8 million and $0.6 million of valuation allowances for fiscal 2018 and 2017, respectively.
(6) The liability for unrecognized tax benefits decreased $6.6 million in fiscal 2018 primarily due to settlements and lapsing of tax audit statutes.
(7) During fiscal 2018 and 2017, the Company generated a net expense of $1.5 million and 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,
 
2018
 
2017
Deferred income tax assets:
 
 
 
Operating loss and tax credit carryforwards
$
45,947

 
$
41,985

Compensation related liabilities
10,450

 
17,319

Postretirement benefits
8,813

 
14,359

Inventory
2,081

 
2,958

Book reserves and other items
18,986

 
14,224

Total deferred income tax assets
86,277

 
90,845

Valuation allowance
(35,076
)
 
(22,671
)
Net deferred income tax assets
51,201

 
68,174

Deferred income tax liabilities:
 
 
 
Depreciation and amortization
(48,148
)
 
(77,548
)
Other items
(633
)
 
(1,910
)
Deferred income tax liabilities
(48,781
)
 
(79,458
)
Net deferred income tax asset (liability) (1)
$
2,420

 
$
(11,284
)
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):
 
2018
 
2017
 
2016
Beginning balance
$
31,446

 
$
29,174

 
$
29,924

Increases based on tax positions related to the current year
2,599

 
6,057

 
1,050

Increase for tax positions taken in a prior period
359

 
297

 
475

Decrease for tax positions taken in a prior period
(349
)
 
(627
)
 
—

Decrease due to lapse of statute of limitations
(9,163
)
 
(4,008
)
 
(1,027
)
Decrease due to settlements
—

 
—

 
—

Changes in foreign currency exchange rates
(533
)
 
553

 
(1,248
)
Ending balance
$
24,359

 
$
31,446

 
$
29,174

Earnings before Income Taxes, Including both Continuing and Discontinued Operations
(Loss) earnings before income taxes, are summarized as follows (in thousands):
  
Year Ended August 31,
 
2018
 
2017
 
2016
Domestic
$
(11,325
)
 
$
12,635

 
$
(19,182
)
Foreign
(1,347
)
 
(95,326
)
 
(111,162
)
 
$
(12,672
)
 
$
(82,691
)
 
$
(130,344
)