Income Taxes (Tables)

12 Months Ended

Aug. 31, 2022

Income Tax Disclosure [Abstract]

Income Tax Expense from Continuing Operations

Income tax expense from continuing operations is summarized as follows (in thousands):

	Year ended August 31,
	2022		2021		2020
Currently payable:
Federal	$	1,765	$	(18,243)	$	(35)
Foreign	7,824		12,441		10,004
State	164		539		142
	9,753		(5,263)		10,111
Deferred:
Federal	1,580		9,677		(7,791)
Foreign	(7,538)		185		(1,632)
State	606		(836)		1,604
	(5,352)		9,026		(7,819)
Income tax expense	$	4,401	$	3,763	$	2,292

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,
	2022		2021		2020
Federal statutory rate	21.0	%	21.0	%	21.0	%
State income taxes, net of Federal effect	2.3		(0.2)		(0.6)
Tax on foreign earnings (1)	1.3		2.8		38.7
Foreign derived intangible income deduction	(4.5)		(3.2)		—
Compensation adjustment	6.6		3.1		6.6
Impairment and other divestiture charges (2)	1.1		1.6		3.3
Valuation allowance additions and releases (3)	2.1		7.1		(8.1)
Changes in liability for unrecognized tax benefits	3.4		(18.5)		(5.3)
U.S. legislative changes, net impact	—		(9.8)		(32.5)
Taxable liquidation of subsidiaries (4)	(11.4)		—		52.6
Foreign non-deductible expenses	8.5		1.2		7.4
Changes in tax rates	(3.6)		(3.4)		(9.0)
Audits and adjustments (5)	(6.7)		8.0		(27.4)
Research and development tax credit	(2.5)		(1.8)		(11.5)
Other items	0.7		0.7		(6.0)
Effective income tax rate	18.3	%	8.6	%	29.2	%

(1) The Company generated $1.3 million, $1.7 million and $5.4 million of withholding tax expense for fiscal 2022, 2021 and 2020, respectively, and $2.3 million, $4.6 million and $4.0 million of foreign-derived tax credits for fiscal 2022, 2021 and 2020, respectively.

(2) Fiscal 2022, 2021 and 2020 pretax earnings include $2.4 million, $6.2 million and $(3.2) million, respectively, in impairment & divestiture charges (benefits) related to goodwill, intangible assets, tangible assets and the cumulative effect of foreign currency rate changes of which $1.3 million, $3.5 million and $0.3 million, respectively, are not deductible for income tax purposes.

(3) Incremental valuation allowances of $0.9 million and $4.9 million and $9.4 million were recorded in fiscal 2022, 2021 and 2020, respectively, due to uncertainty regarding realization of tax assets, which were offset by a reduction of $5.5 million, $9.1 million and $12.3 million of valuation allowances for fiscal 2022, 2021 and 2020, respectively.

(4) During fiscal 2022 and 2020, the Company generated a net benefit of $2.7 million and a net expense of $4.1 million, respectively, as a result of taxable liquidations of subsidiaries.

(5) During fiscal 2022, the Company generated $1.6 million of tax benefit related to audits and adjustments as compared to a tax expense of $3.5 million in fiscal 2021 and a tax benefit of $2.2 million in fiscal 2020.

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,
	2022		2021
Deferred income tax assets:
Operating loss and tax credit carryforwards	$	78,717	$	77,691
Compensation related liabilities	6,002		6,110
Postretirement benefits	5,995		8,364
Inventory	2,780		3,177
Lease liabilities	9,637		11,609
Book reserves and other items	9,873		11,471
Total deferred income tax assets	113,004		118,422
Valuation allowance	(61,630)		(66,155)
Net deferred income tax assets	51,374		52,267
Deferred income tax liabilities:
Depreciation and amortization	(30,149)		(29,444)
Lease assets	(9,637)		(11,609)
Other items	(1,024)		(781)
Deferred income tax liabilities	(40,810)		(41,834)
Net deferred income tax asset (1)	$	10,564	$	10,433

(1) The net deferred income tax asset is reflected on the balance sheet in two categories: an asset of $17.9 million and $14.8 million for fiscal 2022 and 2021, respectively, is included in "Other long-term assets" and a liability of $7.3 million and $4.4 million for fiscal 2022 and 2021, respectively, is included in "Deferred income taxes".

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):

	2022		2021		2020
Beginning balance	$	15,658	$	23,205	$	24,167
Increases based on tax positions related to the current year	433		381		869
Increase for tax positions taken in a prior period	1,084		7		304
Decrease for tax positions taken in a prior period	(57)		—		—
Decrease due to lapse of statute of limitations	(1,271)		(7,931)		(2,334)
Decrease due to settlements	(31)		—		—
Changes in foreign currency exchange rates	(436)		(4)		199
Ending balance	$	15,380	$	15,658	$	23,205