Income Tax

12 Months Ended

Aug. 31, 2011

Income Tax [Abstract]

INCOME TAX

NOTE 12. INCOME TAX

The domestic and foreign components of income (loss) from continuing operations before provision for income taxes were as follows (in thousands):

	Year ended August 31,
(in thousands)	2011			2010			2009
United States	$	(21,377	)	$	(148,829	)	$	132,027
Foreign		(88,722	)		(55,777	)		(130,093	)
Total	$	(110,099	)	$	(204,606	)	$	1,934

The provision for income taxes from continuing operations includes the following:

	Year ended August 31,
(in thousands)	2011			2010			2009
Current:
United States	$	23,452		$	(104,135	)	$	43,488
Foreign		352			(2,684	)		(4,537	)
State and local		5,226			(18,581	)		20,903
Current taxes (benefit)	$	29,030		$	(125,400	)	$	59,854
Deferred:
United States	$	(28,048	)	$	39,399		$	(20,566	)
Foreign		9,742			34,749			(22,003	)
State and local		5,616			(8,008	)		(3,612	)
Deferred taxes	$	(12,690	)	$	66,140		$	(46,181	)
Total taxes (benefit) on income	$	16,340		$	(59,260	)	$	13,673
Taxes (benefit) on discontinued operations		(2,988	)		(21,142	)		12,926
Taxes (benefit) on continuing operations	$	19,328		$	(38,118	)	$	747

The Company had net tax refunds of $79.9 million and $38.4 million during the years ended 2011 and 2010, respectively. Taxes of $33.8 million were paid in 2009.

The tax effects of significant temporary differences giving rise to deferred tax assets and liabilities are as follows:

	August 31,
(in thousands)	2011			2010
Deferred tax assets:
Deferred compensation and employee benefits	$	49,317		$	50,207
Net operating losses and credits		63,866			75,798
Reserves and other accrued expenses		44,683			22,857
Allowance for doubtful accounts		10,423			11,561
Inventory		3,603			—
Intangibles		11,098			10,335
Deferred revenue		—			2,851
Other		7,881			8,793
Total deferred tax assets	$	190,871		$	182,402
Valuation Allowance for deferred tax assets		(75,289	)		(53,860	)
Deferred tax assets, net	$	115,582		$	128,542
Deferred tax liabilities:
Fixed Assets	$	84,825		$	110,892
Inventory		—			4,426
Other		5,996			6,116
Total deferred tax liabilities	$	90,821		$	121,434
Deferred tax assets, net of deferred tax liabilities	$	24,761		$	7,108

Net operating losses giving rise to deferred tax assets consist of $334.9 million of state net operating losses that expire during the tax years ending from 2011 to 2031 and foreign net operating losses of $247.1 million that expire during the tax years ending from 2011 to 2017. These assets will be reduced as tax expense is recognized in future periods.

During the year ended August 31, 2011, the Company recorded a valuation allowance in the amount of $29.6 million against deferred tax assets primarily for the benefit of net operating loss carryforwards in certain jurisdictions due to the uncertainty of their realization. The valuation allowance was offset by expired net operating losses.

It is the Company’s intention to indefinitely reinvest all undistributed earnings of non-U.S. subsidiaries, which amounts to $456.9 million. As these earnings are considered permanently reinvested, no provisions for U.S. Federal or state income taxes are required.

Reconciliations of the United States statutory rates to the effective rates from continuing operations were as follows:

	Year ended August 31,
	2011			2010			2009
Tax expense (benefit) at statutory rate of 35%	$	(38,534	)	$	(71,612	)		677
State and local taxes		7,351			(12,530	)		13,440
Section 199 manufacturing deduction		(1,175	)		—			(3,313	)
Foreign rate differential		12,876			9,044			22,857
Change in valuation allowance		29,553			41,775			5,015
Liability for non-US earnings		8,848			—			(34,777	)
Other		409			(4,795	)		(3,152	)
Taxes (benefit) on continuing operations	$	19,328		$	(38,118	)	$	747
Effective tax rates from continuing operations		(17.6	%)		18.6	%		38.6	%

The Company’s effective tax rate from discontinued operations for the years ended 2011, 2010 and 2009 were (100.8%), 35.4% and 40.4%, respectively.

As of August 31, 2011, gross unrecognized tax benefits totaled $10.8 million and accrued interest and penalties totaled $1.5 million, for an aggregate gross amount of $12.3 million.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):

(in thousands)	2011			2010			2009
Balance at September 1	$	20,367		$	1,532		$	4,223
Change in tax positions of current year		2,440			1,640			—
Change for tax positions of prior years		(12,045	)		17,302			(1,426	)
Reductions due to settlements with taxing authorities		—			—			(122	)
Reductions due to statute of limitations lapse		—			(107	)		(1,143	)
Balance at August 31	$	10,762		$	20,367		$	1,532

If these tax positions were recognized, the impact on the effective tax rate would not be significant.

The Company classifies any interest recognized on an underpayment of income taxes and any statutory penalties recognized on a tax position as tax expense and the balances at the end of a reporting period are recorded as part of the current or non-current reserve for uncertain income tax positions. For the year ended August 31, 2011, before any tax benefits, the Company recorded a decrease of accrued interest and penalties on unrecognized tax benefits of $1.0 million.

During the next twelve months, it is reasonably possible that the statute of limitations may lapse pertaining to positions taken by the Company in prior year tax returns or that income tax audits in various taxing jurisdictions could be finalized. As a result, the total amount of unrecognized tax benefits may decrease, which could reduce the liability for uncertain tax positions by approximately $3.1 million.

The Company files income tax returns in the United States and multiple foreign jurisdictions with varying statutes of limitations. In the normal course of business, the Company and its subsidiaries are subject to examination by various taxing authorities. The following is a summary of tax years subject to examination:

U.S Federal — 2009 and forward
U.S. States — 2006 and forward
Foreign — 2005 and forward

During the current year, the Company settled an examination with the Internal Revenue Service (“IRS”) related to 2006 to 2008 and recorded an expense of $0.8 million. The Company is also under examination by several U.S. states. We believe our recorded tax liabilities as of August 31, 2011 sufficiently reflect the anticipated outcome of these examinations.