XML 59 R21.htm IDEA: XBRL DOCUMENT v2.4.0.6
Income Taxes
 6 Months Ended
Feb. 28, 2013
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes

The effective tax rate for the Company’s operations for the three and six months ended February 28, 2013 was 2.7% and 14.2% compared to 31.5% for the three and six months ended February 29, 2012, respectively.

A reconciliation of the difference between the federal statutory rate and the Company’s effective rate is as follows:
 
Three Months Ended
 
Six Months Ended
 
2/28/2013
 
2/29/2012
 
2/28/2013
 
2/29/2012
Federal statutory rate
35.0
 %
 
35.0
 %
 
35.0
 %
 
35.0
 %
State taxes, net of credits
(0.5
)
 
(3.7
)
 
(1.0
)
 
(1.5
)
Foreign income taxed at different rates
0.6

 
0.2

 
0.7

 
(0.6
)
Section 199 deduction
(11.9
)
 
(1.2
)
 
(12.9
)
 
(1.4
)
Non-deductible officers’ compensation
0.5

 
0.9

 
0.6

 
0.8

Noncontrolling interests
(2.2
)
 
(2.3
)
 
(5.1
)
 
(2.2
)
Research and development credits
(2.2
)
 
—

 
(3.6
)
 
—

Valuation allowance on deferred tax assets
(16.8
)
 
—

 
—

 
—

Foreign interest income
—


2.0

 
—

 
1.2

Other
0.2

 
0.6

 
0.5

 
0.2

Effective tax rate
2.7
 %
 
31.5
 %
 
14.2
 %
 
31.5
 %


In the second quarter of fiscal 2013, the Company released a valuation allowance on deferred tax assets of a foreign subsidiary and recorded a benefit of $2 million. The release was attributable to a change in the Company's facts and circumstances with respect to the feasibility of implementing a change in the Company's foreign subsidiaries' operating structure which will allow the Company to rely on future forecasted taxable income and conclude that the deferred tax assets will more-likely-than-not be realized. The new structure is expected to enable the Company to realize further synergies between its Metals Recycling and Auto Parts operations and will also result in a combined tax reporting entity which will allow recently generated taxable losses at the foreign subsidiary to offset income at a currently profitable foreign entity, thus allowing for expected realization of deferred tax assets. The new operating structure is currently being implemented and is expected to be in place in the fourth quarter of fiscal 2013. The valuation allowance had been recognized in the first quarter of fiscal 2013 as a result of negative evidence, including recent losses at the subsidiary, outweighing the more subjective positive evidence, thus indicating that at that time it was more likely than not that the associated tax benefit would not be realized. During the second quarter of fiscal 2013, the Company's ability to control the implementation of the new foreign entity operating structure increased, including by virtue of an agreement to purchase the noncontrolling interests in a foreign subsidiary which was completed on March 8, 2013. In the second quarter of fiscal 2013 the Company also recognized a tax benefit of $1 million related to increased domestic production activities deductions and research and development credits.

The Company files federal and state income tax returns in the U.S. and foreign tax returns in Puerto Rico and Canada. The federal statute of limitations has expired for fiscal 2009 and prior years. The Canadian and several state tax authorities are currently examining returns for fiscal years 2005 to 2009.