Income Taxes (Tables)

12 Months Ended

Aug. 31, 2023

Income Tax Expense from Continuing Operations

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


	Year ended August 31,
	2023		2022		2021
Currently payable:
Federal	$	5,181	$	1,765	$	(18,243)
Foreign	9,240		7,824		12,441
State	319		164		539
	14,740		9,753		(5,263)
Deferred:
Federal	(2,935)		1,580		9,677
Foreign	3,806		(7,538)		185
State	(362)		606		(836)
	509		(5,352)		9,026
Income tax expense	$	15,249	$	4,401	$	3,763

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,
	2023		2022		2021
Federal statutory rate	21.0	%	21.0	%	21.0	%
State income taxes, net of Federal effect	0.7		2.3		(0.2)
Tax on foreign earnings (1)	6.0		1.3		2.8
Foreign derived intangible income deduction	(3.1)		(4.5)		(3.2)
Compensation adjustment	1.5		6.6		3.1
Impairment and other divestiture charges	—		1.1		1.6
Valuation allowance additions and releases	(0.8)		2.1		7.1
Changes in liability for unrecognized tax benefits	(0.1)		3.4		(18.5)
U.S. legislative changes, net impact	—		—		(9.8)
Taxable liquidation of subsidiaries (2)	0.1		(11.4)		—
Foreign non-deductible expenses	1.7		8.5		1.2
Changes in tax rates	(2.0)		(3.6)		(3.4)
Audits and adjustments (3)	(2.9)		(6.7)		8.0
Research and development tax credit	(0.7)		(2.5)		(1.8)
Other items	0.7		0.7		0.7
Effective income tax rate	22.1	%	18.3	%	8.6	%

(1) The Company generated $1.6 million, $0.2 million and $1.1 million of U.S. tax on non-U.S. earnings, net of foreign tax credits for fiscal 2023, 2022 and 2021, respectively.

(2) During fiscal 2022, the Company generated a net benefit of $2.7 million as a result of taxable liquidations of subsidiaries.

(3) During fiscal 2023 and fiscal 2022, the Company generated $2.0 million and $1.6 million of tax benefit related to audits and adjustments as compared to a tax expense of $3.5 million in fiscal 2021.

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,
	2023		2022
Deferred income tax assets:
Operating loss and tax credit carryforwards	$	70,933	$	78,717
Compensation related liabilities	7,372		6,002
Postretirement benefits	5,224		5,995
Inventory	1,715		2,780
Lease liabilities	8,594		9,637
Research and development capitalization	4,544		—
Book reserves and other items	6,548		9,873
Total deferred income tax assets	104,930		113,004
Valuation allowance	(61,432)		(61,630)
Net deferred income tax assets	43,498		51,374
Deferred income tax liabilities:
Depreciation and amortization	(23,844)		(30,149)
Lease assets	(8,594)		(9,637)
Other items	(1,020)		(1,024)
Deferred income tax liabilities	(33,458)		(40,810)
Net deferred income tax asset (1)	$	10,040	$	10,564

(1) The net deferred income tax asset is reflected on the balance sheet in two categories: an asset of $15.7 million and $17.9 million for fiscal 2023 and 2022, respectively, is included in "Other long-term assets" and a liability of $5.7 million and $7.3 million for fiscal 2023 and 2022, 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):


	2023		2022		2021
Beginning balance	$	15,380	$	15,658	$	23,205
Increases based on tax positions related to the current year	279		433		381
Increase for tax positions taken in a prior period	—		1,084		7
Decrease for tax positions taken in a prior period	(56)		(57)		—
Decrease due to lapse of statute of limitations	(951)		(1,271)		(7,931)
Decrease due to settlements	—		(31)		—
Changes in foreign currency exchange rates	102		(436)		(4)
Ending balance	$	14,754	$	15,380	$	15,658