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Income Taxes | 12 Months Ended
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Jul. 31, 2016
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Earnings (loss) from continuing operations consists of the following:
|  | Years Ended July 31,
|  | 2016 |  | 2015 |  | 2014
United States |  | $ | 61,349 |  |  | $ | (582 | ) |  | $ | (134,596 | )
Other Nations |  | 47,996 |  |  | 25,577 |  |  | 81,487 |
Total |  | $ | 109,345 |  |  | $ | 24,995 |  |  | $ | (53,109 | )
Income tax expense (benefit) from continuing operations consists of the following:
|  | Years Ended July 31,
|  | 2016 |  | 2015 |  | 2014
Current income tax expense (benefit): |  |  |  |  |  |
United States |  | $ | 5,048 |  |  | $ | 9,075 |  |  | $ | (1,137 | )
Other Nations |  | 19,929 |  |  | 18,806 |  |  | 19,513 |
States (U.S.) |  | 1,348 |  |  | (352 | ) |  | 1,090 |
|  | $ | 26,325 |  |  | $ | 27,529 |  |  | $ | 19,466 |
Deferred income tax expense (benefit): |  |  |  |  |  |
United States |  | $ | 3,946 |  |  | $ | (5,906 | ) |  | $ | (22,754 | )
Other Nations |  | (1,387 | ) |  | (1,868 | ) |  | (1,803 | )
States (U.S.) |  | 351 |  |  | 338 |  |  | 128 |
|  | $ | 2,910 |  |  | $ | (7,436 | ) |  | $ | (24,429 | )
Total income tax expense (benefit) |  | $ | 29,235 |  |  | $ | 20,093 |  |  | $ | (4,963 | )
Deferred income taxes result from temporary differences in the recognition of revenues and expenses for financial statement and income tax purposes. The approximate tax effects of temporary differences are as follows:
|  | July 31, 2016
|  | Assets |  | Liabilities |  | Total
Inventories |  | $ | 5,142 |  |  | $ | (153 | ) |  | $ | 4,989 |
Prepaid catalog costs |  | — |  |  | (1,577 | ) |  | (1,577 | )
Employee benefits |  | 6,347 |  |  | — |  |  | 6,347 |
Accounts receivable |  | 1,619 |  |  | (15 | ) |  | 1,604 |
Fixed Assets |  | 2,847 |  |  | (2,695 | ) |  | 152 |
Intangible Assets |  | 1,144 |  |  | (31,777 | ) |  | (30,633 | )
Capitalized R&D expenditures |  | 855 |  |  | — |  |  | 855 |
Deferred compensation |  | 20,549 |  |  | — |  |  | 20,549 |
Postretirement benefits |  | 4,152 |  |  | — |  |  | 4,152 |
Tax credit carry-forwards and net operating losses |  | 56,790 |  |  | — |  |  | 56,790 |
Less valuation allowance |  | (37,992 | ) |  | — |  |  | (37,992 | )
Other, net |  | 10,918 |  |  | (15,173 | ) |  | (4,255 | )
Total |  | $ | 72,371 |  |  | $ | (51,390 | ) |  | $ | 20,981 |
|  | July 31, 2015
|  | Assets |  | Liabilities |  | Total
Inventories |  | $ | 4,387 |  |  | $ | (197 | ) |  | $ | 4,190 |
Prepaid catalog costs |  | — |  |  | (2,179 | ) |  | (2,179 | )
Employee benefits |  | 1,612 |  |  | — |  |  | 1,612 |
Accounts receivable |  | 1,136 |  |  | (14 | ) |  | 1,122 |
Fixed Assets |  | 3,344 |  |  | (3,213 | ) |  | 131 |
Intangible Assets |  | 1,242 |  |  | (26,570 | ) |  | (25,328 | )
Capitalized R&D expenditures |  | 1,140 |  |  | — |  |  | 1,140 |
Deferred compensation |  | 19,549 |  |  | — |  |  | 19,549 |
Postretirement benefits |  | 3,563 |  |  | — |  |  | 3,563 |
Tax credit carry-forwards and net operating losses |  | 66,744 |  |  | — |  |  | 66,744 |
Less valuation allowance |  | (39,922 | ) |  | — |  |  | (39,922 | )
Other, net |  | 9,538 |  |  | (12,475 | ) |  | (2,937 | )
Total |  | $ | 72,333 |  |  | $ | (44,648 | ) |  | $ | 27,685 |
In November 2015, the FASB issued new accounting guidance on the balance sheet classification of deferred taxes. The new guidance requires that all deferred taxes be presented as non-current on the Consolidated Balance Sheets. In the fourth quarter of fiscal 2016, the Company adopted this guidance and reclassified current deferred tax assets and current deferred tax liabilities from prepaid expenses and other current assets and other current liabilities, respectively, to deferred income taxes and other liabilities, respectively, in prior-period Consolidated Balance Sheets to conform to the current period's presentation. The impact of this reclassification on the July 31, 2015 Consolidated Balance Sheet was a reclassification of $12,442 from prepaid expenses and other current assets to deferred income taxes and $254 from other current liabilities to other liabilities. Tax loss carry-forwards at July 31, 2016 are comprised of:
• | Foreign net operating loss carry-forwards of $119,874, of which $89,637 have no expiration date and the remainder of which expire within the next eight years.
• | State net operating loss carry-forwards of $42,095, which expire from 2017 to 2034.
• | Foreign tax credit carry-forwards of $14,381, which expire from 2021 to 2025.
• | State research and development credit carry-forwards of $11,526, which expire from 2017 to 2031.
The valuation allowance decreased by $1,930 during the fiscal year ended July 31, 2016, primarily due to the appreciation of the U.S. Dollar against the Swedish Krona and the utilization of net operating loss carryforwards in China and India. These decreases were partially offset by the increase in valuation allowances in Brazil due to the generation of current year net operating losses. If realized or reversed in future periods, substantially all of the valuation allowance would impact the income tax rate. The valuation allowance increased by $2,513 during the fiscal year ended July 31, 2015, mainly due to increased valuation allowances against state tax credit carryforwards and increased valuation allowances in certain jurisdictions, including Brazil, China, Sweden, and the United Kingdom. These increases were partially offset by reductions in the tax rates applied to valuation allowances in the United Kingdom. Rate Reconciliation A reconciliation of the tax computed by applying the statutory U.S. federal income tax rate to earnings (loss) from continuing operations before income taxes to the total income tax expense is as follows:
|  | Years Ended July 31,
|  | 2016 |  | 2015 |  | 2014
Tax at statutory rate |  | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Impairment charges (1) |  | — | % |  | 55.8 | % |  | (40.3 | )%
State income taxes, net of federal tax benefit (2) |  | 0.8 | % |  | 1.6 | % |  | (1.1 | )%
International rate differential |  | 0.4 | % |  | (2.2 | )% |  | (1.3 | )%
Rate variances arising from foreign subsidiary distributions |  | 0.5 | % |  | (0.3 | )% |  | (7.5 | )%
Adjustments to tax accruals and reserves (3) |  | (3.7 | )% |  | 17.8 | % |  | 25.5 | %
Research and development tax credits and section 199 manufacturer’s deduction |  | (3.6 | )% |  | (3.9 | )% |  | 3.6 | %
Non-deductible divestiture fees and account write-offs |  | (0.4 | )% |  | (4.8 | )% |  | (5.2 | )%
Deferred tax and other adjustments (4) |  | (1.4 | )% |  | (21.1 | )% |  | 0.7 | %
Other, net |  | (0.9 | )% |  | 2.5 | % |  | (0.1 | )%
Effective tax rate |  | 26.7 | % |  | 80.4 | % |  | 9.3 | %
(1) | For the year ended July 31, 2015, $39.8 million of the total impairment charge of $46.9 million recorded is nondeductible for income tax purposes. For the year ended July 31, 2014, $61.1 million of the total impairment charge of $148.6 million recorded is nondeductible for income tax purposes.
(2) | The year ended July 31, 2014 includes a $3.1 million increase in valuation allowances against certain state tax credit carryforwards.
(3) | The years ended July 31, 2014 and 2015 include increases in current year uncertain tax positions, while the year ended July 31, 2016 includes reductions of uncertain tax positions resulting from the closure of audits and lapses in statutes of limitations.
(4) | The year ended July 31, 2015 includes $5.0 million of foreign tax credit carryforward from the fiscal 2014 U.S. tax return.
Uncertain Tax Positions The Company follows the guidance in ASC 740, "Income Taxes" regarding uncertain tax positions. The guidance requires application of a “more likely than not” threshold to the recognition and de-recognition of tax positions. A reconciliation of unrecognized tax benefits (excluding interest and penalties) is as follows:
Balance at July 31, 2013 | $ | 37,575 |
Additions based on tax positions related to the current year | 4,596 |
Additions for tax positions of prior years | — |
Reductions for tax positions of prior years | (14,569 | )
Lapse of statute of limitations | (3,711 | )
Settlements with tax authorities | (5,832 | )
Cumulative Translation Adjustments and other | (210 | )
Balance as of July 31, 2014 | $ | 17,849 |
Additions based on tax positions related to the current year | 5,862 |
Additions for tax positions of prior years | — |
Reductions for tax positions of prior years | (280 | )
Lapse of statute of limitations | (805 | )
Settlements with tax authorities | (221 | )
Cumulative Translation Adjustments and other | (1,272 | )
Balance as of July 31, 2015 | $ | 21,133 |
Additions based on tax positions related to the current year | 3,093 |
Additions for tax positions of prior years | 1,290 |
Reductions for tax positions of prior years | (9,369 | )
Lapse of statute of limitations | (344 | )
Settlements with tax authorities | (456 | )
Cumulative Translation Adjustments and other | (53 | )
Balance as of July 31, 2016 | $ | 15,294 |
The $15,294 of unrecognized tax benefits, if recognized, would affect the Company's effective income tax rate. The Company has classified $9,304 and $15,402, excluding interest and penalties, of the reserve for uncertain tax positions in Other Liabilities on the Consolidated Balance Sheets as of July 31, 2016 and 2015, respectively. The Company has classified $5,990 and $5,731, excluding interest and penalties, as a reduction of long-term deferred income tax assets on the Consolidated Balance Sheets as of July 31, 2016 and 2015, respectively. The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense (benefit) on the Consolidated Statements of Earnings. Interest expense is recognized on the amount of potentially underpaid taxes associated with the Company's tax positions, beginning in the first period in which interest starts accruing under the respective tax law and continuing until the tax positions are settled. The Company recognized an increase of $3 and decreases of $157 and $498 in interest expense during the years ended July 31, 2016, 2015, and 2014, respectively. There was a $66 increase to the reserve for uncertain tax positions for penalties during the year ended July 31, 2016, no changes during the fiscal year ended July 31, 2015, and an increase of $25 for the year ended July 31, 2014. These amounts are net of reversals due to reductions for tax positions of prior years, statute of limitations, and settlements. At July 31, 2016 and 2015, the Company had $1,530 and $1,531, respectively, accrued for interest on unrecognized tax benefits. Penalties are accrued if the tax position does not meet the minimum statutory threshold to avoid the payment of a penalty. At July 31, 2016 and 2015, the Company had $2,730 and $2,664, respectively, accrued for penalties on unrecognized tax benefits. The Company estimates that it is reasonably possible that the unrecognized tax benefits may be reduced by $3,878 within twelve months as a result of the resolution of worldwide tax matters, tax audit settlements, amended tax filings, and/or statute expirations. The maximum amount that would be recognized through the Consolidated Statements of Earnings as an income tax benefit is $3,878. During the year ended July 31, 2016, the Company recognized $428 of tax benefits (including interest and penalties) associated with the lapse of statutes of limitations. The Company also recognized $10,728 of tax benefits (including interest and penalties) associated with the reduction of tax positions for prior years due to the closure of tax audits. The Company and its subsidiaries file income tax returns in the U.S., various state, and foreign jurisdictions. The following table summarizes the open tax years for the Company's major jurisdictions:
Jurisdiction |  | Open Tax Years
United States — Federal |  | F’15 — F’16
France |  | F’12 — F’16
Germany |  | F’09 — F’16
United Kingdom |  | F’14 — F’16
Unremitted Earnings The Company does not provide for U.S. deferred taxes on cumulative earnings of non-U.S. affiliates and associated companies that have been reinvested indefinitely. These earnings relate to ongoing operations and at July 31, 2016, were approximately $259,334. These earnings have been reinvested in non-U.S. business operations, and the Company does not intend to repatriate these earnings to fund U.S. operations. It is not practicable to determine the income tax liability that would be payable if such earnings were not indefinitely reinvested. At July 31, 2016, $139,747 of the total $141,228 in cash and cash equivalents was held outside of the U.S.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 + Details
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