Income Taxes

12 Months Ended

Aug. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 16 - Income Taxes

(Loss) income from continuing operations before income taxes was as follows for the years ended August 31 (in thousands):

	2023			2022		2021
United States	$	(32,541	)	$	204,150	$	195,037
Foreign		4,465			12,526		12,952
Total	$	(28,076	)	$	216,676	$	207,989

Income tax (benefit) expense from continuing operations consisted of the following for the years ended August 31 (in thousands):

	2023			2022		2021
Current:
Federal	$	(377	)	$	18,114	$	27,244
State		974			1,392		3,811
Foreign		590			39		(4	)
Total current tax expense		1,187			19,545		31,051
Deferred:
Federal		(4,198	)		21,771		6,939
State		(686	)		780		(547	)
Foreign		950			2,501		492
Total deferred tax (benefit) expense		(3,934	)		25,052		6,884
Total income tax (benefit) expense	$	(2,747	)	$	44,597	$	37,935

A reconciliation of the difference between the federal statutory rate and the Company’s effective tax rate for the years ended August 31 is as follows:

	2023			2022			2021
Federal statutory rate		21.0	%		21.0	%		21.0	%
State taxes, net of credits		5.0			1.6			1.4
Foreign income taxed at different rates		(1.2	)		—			(0.5	)
Valuation allowance on deferred tax assets		(6.1	)		0.4			(1.0	)
Federal rate change		—			—			0.4
Non-deductible officers’ compensation		(7.8	)		2.5			1.2
Other non-deductible expenses		(1.6	)		0.3			0.4
Noncontrolling interests		0.3			(0.3	)		(0.5	)
Research and development credits		6.4			(0.9	)		(1.5	)
Tax return to provision adjustment		(1.2	)		(2.4	)		—
Unrecognized tax benefits		(8.5	)		1.2			0.9
Interest income		1.4			(0.1	)		(0.1	)
Excess tax benefit from stock-based compensation		3.2			(1.6	)		(0.2	)
Foreign derived intangible income		—			(1.0	)		(2.5	)
Other		(1.1	)		(0.1	)		(0.8	)
Effective tax rate		9.8	%		20.6	%		18.2	%

Effective Tax Rate

The Company’s effective tax rate from continuing operations for fiscal 2023 was a benefit on pre-tax loss of 9.8%, compared to an expense on pre-tax income of 20.6% and 18.2% for fiscal 2022 and 2021, respectively. The Company’s effective tax rate from continuing operations for fiscal 2023 was lower than the U.S. federal statutory rate of 21% primarily due to the aggregate effect of the relatively low absolute level of pre-tax earnings, permanent differences from non-deductible expenses, and unrecognized tax benefits. The Company's effective tax rate from continuing operations for fiscal 2022 approximated the U.S. federal statutory rate of 21%, reflecting tax benefits from vesting of share-based awards, the foreign derived intangible income (“FDII”) deduction, and research and development credits, offset by the aggregate impact of state taxes and permanent differences from non-deductible expenses. The Company's effective tax rate from continuing operations for fiscal 2021 was lower than the U.S. federal statutory rate of 21% primarily due to the benefit from the FDII deduction, the impact of research and development credits, and the release of the valuation allowance against Puerto Rico deferred tax assets.

Inflation Reduction Act

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law, which included the introduction of a new 15% Corporate Alternative Minimum Tax (“CAMT”), as well as a 1% excise tax on corporate share repurchases. The Company does not meet the threshold to be subject to the CAMT, and there were no other impacts of the IRA to the Company in fiscal 2023 or 2022.

Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities comprised the following as of August 31 (in thousands):

	2023			2022
Deferred tax assets:
Operating lease liabilities	$	17,605		$	17,901
Amortizable goodwill and other intangibles		13,488			9,914
Employee benefit accruals		8,772			12,241
Net operating loss carryforwards		20,280			7,499
Environmental liabilities		10,109			9,742
Other contingencies		5,579			5,199
State credit carryforwards		7,711			7,212
Inventory valuation methods		2,508			2,749
Other		7,193			3,687
Valuation allowances		(17,042	)		(15,342	)
Total deferred tax assets		76,203			60,802
Deferred tax liabilities:
Accelerated depreciation and other basis differences		61,938			60,539
Operating lease right-of-use assets		17,573			17,353
Investment in operating partnerships		25,769			15,553
Prepaid expense acceleration and other		6,827			6,087
Total deferred tax liabilities		112,107			99,532
Net deferred tax liabilities	$	(35,904	)	$	(38,730	)

As of August 31, 2023, deferred tax assets related to U.S. federal operating loss carryforwards were $11 million with no expiration period, and deferred tax assets related to state operating loss carryforwards were $9 million, the majority of which had a valuation allowance. State operating loss carryforwards will expire if not used in various years beginning in 2023. State credit carryforwards will expire if not used between 2023 and 2037.

Valuation Allowances

The Company assesses the realizability of its deferred tax assets on a quarterly basis through an analysis of potential sources of future taxable income, including prior year taxable income available to absorb a carryback of tax losses, reversals of existing taxable temporary differences, tax planning strategies, and forecasts of taxable income. The Company considers all negative and positive evidence, including the weight of the evidence, to determine if valuation allowances against deferred tax assets are required. In fiscal 2021, the Company released the valuation allowance against its Puerto Rican deferred tax assets resulting in a discrete tax benefit of $2 million. The release of this valuation allowance was the result of sufficient positive evidence at the time, including cumulative income in the Company’s Puerto Rico tax jurisdiction in recent years and projections of future taxable income based primarily on the Company's improved financial performance, that it is more-likely-than-not that the deferred tax assets will be realized. The Company continues to maintain valuation allowances against certain state and Canadian deferred tax assets. Canadian deferred tax assets against which the Company continues to maintain a valuation allowance relate to indefinite-lived assets.

Accounting for Uncertainty in Income Taxes

The following table summarizes the activity related to the Company’s reserve for unrecognized tax benefits, excluding interest and penalties, for the years ended August 31 (in thousands):

	2023		2022			2021
Unrecognized tax benefits, as of the beginning of the year	$	10,326	$	8,320		$	7,456
Additions (reductions) for tax positions of prior years		281		1,055			(574	)
Additions for tax positions of the current year		1,223		974			1,486
Reductions for lapse of statutes		—		(23	)		(48	)
Unrecognized tax benefits, as of the end of the year	$	11,830	$	10,326		$	8,320

The Company anticipates an immaterial impact on earnings from releases from the reserve in the next 12 months. The recognized amount of tax-related penalties and interest was not material for each of the fiscal years presented in this report.

The Company files federal and state income tax returns in the U.S. and foreign tax returns in Puerto Rico and Canada. For U.S. federal income tax returns, fiscal years 2014 to 2022 remain subject to examination under the statute of limitations.