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Income Taxes
 12 Months Ended
Aug. 31, 2012
Income Taxes [Abstract]  
Income Taxes

Note 13. Income Taxes

Income before income taxes consisted of the following (in thousands):

 

                         
    Fiscal Year Ended August 31,  
    2012     2011     2010  

United States

   $ 36,666     $ 37,309     $ 37,779  

Foreign(1)

     14,247       16,222       15,778  
   

 

 

    

 

 

    

 

 

  

Income before income taxes

   $   50,913     $   53,531     $   53,557  
   

 

 

    

 

 

    

 

 

  

 

(1) 

Included in these amounts are income before income taxes for the Europe segment of $11.1 million, $14.5 million and $14.4 million for the fiscal years ended August 31, 2012, 2011 and 2010, respectively.

 

The provision for income taxes consisted of the following (in thousands):

 

                         
    Fiscal Year Ended August 31,  
     2012     2011     2010  

Current:

                        

Federal

   $ 10,100     $ 9,321     $ 10,062  

State

     3       951       1,216  

Foreign

     3,820       4,627       4,524  
   

 

 

    

 

 

    

 

 

  

Total current

     13,923       14,899       15,802  
   

 

 

    

 

 

    

 

 

  

Deferred:

                        

United States

     1,449       2,162       1,675  

Foreign

     56       37       (15 ) 
   

 

 

    

 

 

    

 

 

  

Total deferred

     1,505       2,199       1,660  
   

 

 

    

 

 

    

 

 

  

Provision for income taxes

   $ 15,428     $ 17,098     $ 17,462  
   

 

 

    

 

 

    

 

 

  

Deferred tax assets and deferred tax liabilities consisted of the following (in thousands):

 

                 
    August 31,  
    2012     2011  

Deferred tax assets:

                

Accrued payroll and related expenses

   $ 886     $ 803  

State income taxes paid

     302       644  

Accounts receivable

     702       550  

Reserves and accruals

     2,676       2,508  

Stock-based compensation expense

     2,121       2,391  

Net operating loss

     214       159  

Uniform capitalization

     1,156       565  

Other

     1,167       1,401  
   

 

 

    

 

 

  

Total gross deferred tax assets

     9,224       9,021  

Valuation allowance

     (141 )      (78 ) 
   

 

 

    

 

 

  

Total deferred tax assets

     9,083       8,943  
   

 

 

    

 

 

  

Deferred tax liabilities:

                

Property and equipment, net

     (1,163 )      (1,005 ) 

Amortization of tax goodwill and intangible assets

     (24,708 )      (23,169 ) 

Investment in low income housing partnerships

     (982 )      (1,032 ) 

Investment in VML partnership

     (489 )      (491 ) 

Other

     (197 )      (210 ) 
   

 

 

    

 

 

  

Total deferred tax liabilities

     (27,539 )      (25,907 ) 
   

 

 

    

 

 

  

Net deferred tax liabilities

   $ (18,456 )    $ (16,964 ) 
   

 

 

    

 

 

  

As of August 31, 2012, the Company had state net operating loss (“NOL”) carryforwards of approximately $4.8 million which begin to expire in fiscal year 2017. Utilization of the related deferred tax asset is dependent upon the generation of future taxable income in related jurisdictions. At this time, management has concluded that it is not “more likely than not” that this will occur for a portion of the state NOL, and accordingly, has recorded a valuation allowance against this deferred tax asset in the amount of $0.1 million.

 

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows (in thousands):

 

                         
    Fiscal Year Ended August 31,  
    2012     2011     2010  

Amount computed at U.S. statutory federal tax rate

   $ 17,820     $ 18,736     $ 18,745  

State income taxes, net of federal tax benefits

     (16 )      734       882  

Effect of foreign operations

     (1,377 )      (1,377 )      (1,230 ) 

Benefit from qualified domestic production deduction

     (951 )      (798 )      (633 ) 

Research and experimentation credits

     (22 )      (117 )      0  

Other

     (26 )      (80 )      (302 ) 
   

 

 

    

 

 

    

 

 

  

Provision for income taxes

   $   15,428     $   17,098     $   17,462  
   

 

 

    

 

 

    

 

 

  

As of August 31, 2012, the Company has not provided for U.S. federal and state income taxes and foreign withholding taxes on $72.2 million of undistributed earnings of certain foreign subsidiaries since these earnings are considered indefinitely reinvested outside of the United States. The amount of unrecognized deferred U.S. federal and state income tax liability, net of unrecognized foreign tax credits, is estimated to be approximately $5.5 million as of August 31, 2012. This net liability is impacted by changes in foreign currency exchange rates and, as a result, will fluctuate with any changes in such rates. If management decides to repatriate such foreign earnings in future periods, the Company would incur incremental U.S. federal and state income taxes as well as foreign withholding taxes. However, the Company’s intent is to keep these funds indefinitely reinvested outside the U.S. and its current plans do not demonstrate a need to repatriate them to fund the U.S. operations. Regarding certain foreign subsidiaries not indefinitely reinvested, the Company has provided for U.S. income taxes and foreign withholding taxes on the undistributed earnings.

Reconciliations of the beginning and ending amounts of the Company’s gross unrecognized tax benefits, excluding interest and penalties, are as follows (in thousands):

 

                 
    Fiscal Year Ended August 31,  
    2012     2011  

Unrecognized tax benefits—beginning of fiscal year

   $         1,374     $         3,600  

Gross increases – tax positions in prior periods

     7       90  

Gross decreases – tax positions in prior periods

     (67 )      0  

Gross increases – current period tax positions

     422       202  

Gross decreases – current period tax positions

     0       (2,105 ) 

Expirations of statute of limitations for assessment

     (406 )      (291 ) 

Settlements

     (307 )      (122 ) 
   

 

 

    

 

 

  

Unrecognized tax benefits—end of fiscal year

   $ 1,023     $ 1,374  
   

 

 

    

 

 

  

The total amount of unrecognized tax benefits, excluding associated interest and penalties, was $1.0 million as of August 31, 2012 and $1.4 million as of August 31, 2011, of which $0.8 million and $1.0 million, respectively, would impact the effective tax rate if recognized. The gross liability for income taxes related to unrecognized tax benefits is included in other long-term liabilities in the Company’s consolidated balance sheets.

The total balance of accrued interest and penalties related to uncertain tax positions was $0.3 million and $0.4 million as of August 31, 2012 and 2011, respectively. The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense and the accrued interest and penalties are included in deferred and other long-term liabilities in the Company’s consolidated balance sheets. There were no material interest or penalties included in income tax expense for the fiscal years ended August 31, 2012 and 2011.

The Company is subject to taxation in the U.S. and in various state and foreign jurisdictions. Due to expired statutes, the Company’s federal income tax returns for years prior to fiscal year 2009 are not subject to examination by the U.S. Internal Revenue Service. Generally, for the majority of state and foreign jurisdictions where the Company does business, periods prior to fiscal year 2008 are no longer subject to examination. The Company is currently under audit in a state jurisdiction for fiscal years 2009 through 2011. The Company has estimated that up to $0.2 million of unrecognized tax benefits related to income tax positions may be affected by the resolution of tax examinations or expiring statutes of limitation within the next twelve months. Audit outcomes and the timing of settlements are subject to significant uncertainty.