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Income Taxes (Tables) | 12 Months Ended
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Aug. 31, 2021
Income Tax Disclosure [Abstract] |
Income Tax Expense from Continuing Operations | Income tax expense from continuing operations is summarized as follows (in thousands):
| Year ended August 31,
| 2021 |  | 2020 |  | 2019
Currently payable: |  |  |  |  |
Federal | $ | (18,243) |  |  | $ | (35) |  |  | $ | (2,040) |
Foreign | 12,441 |  |  | 10,004 |  |  | 9,370 |
State | 539 |  |  | 142 |  |  | 1,347 |
| (5,263) |  |  | 10,111 |  |  | 8,677 |
Deferred: |  |  |  |  |
Federal | 9,677 |  |  | (7,791) |  |  | (400) |
Foreign | 185 |  |  | (1,632) |  |  | 2,172 |
State | (836) |  |  | 1,604 |  |  | 208 |
| 9,026 |  |  | (7,819) |  |  | 1,980 |
Income tax expense | $ | 3,763 |  |  | $ | 2,292 |  |  | $ | 10,657 |
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,
| 2021 |  | 2020 |  | 2019
Federal statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State income taxes, net of Federal effect | (0.2) |  |  | (0.6) |  |  | (4.0) |
Tax on foreign earnings (1) | 2.8 |  |  | 38.7 |  |  | 20.6 |
Foreign derived intangible income deduction | (3.2) |  |  | — |  |  | (9.3) |
Compensation adjustment | 3.1 |  |  | 6.6 |  |  | 4.4 |
Impairment and other divestiture charges (2) | 1.6 |  |  | 3.3 |  |  | 19.3 |
Valuation allowance additions and releases (3) | 7.1 |  |  | (8.1) |  |  | 3.9 |
Changes in liability for unrecognized tax benefits | (18.5) |  |  | (5.3) |  |  | 4.1 |
U.S. legislative changes, net impact | (9.8) |  |  | (32.5) |  |  | (31.1) |
Taxable liquidation of subsidiaries (4) | — |  |  | 52.6 |  |  | — |
Foreign non-deductible expenses | 1.2 |  |  | 7.4 |  |  | 18.2 |
Changes in tax rates | (3.4) |  |  | (9.0) |  |  | 1.7 |
Audits and adjustments (5) | 8.0 |  |  | (27.4) |  |  | 10.0 |
Research and development tax credit | (1.8) |  |  | (11.5) |  |  | (5.2) |
Other items | 0.7 |  |  | (6.0) |  |  | 3.3 |
Effective income tax rate | 8.6 | % |  | 29.2 | % |  | 56.9 | %
(1) The Company generated $1.7 million, $5.4 million and $2.6 million of withholding tax expense for fiscal 2021, 2020 and 2019, respectively, and $4.6 million, $4.0 million and $3.5 million of foreign-derived tax credits, excluding the impact of tax reform for fiscal 2021, 2020 and 2019, respectively. (2) Fiscal 2021, 2020 and 2019 pretax earnings include $6.2 million, $(3.2) million and $22.8 million, respectively, in impairment & divestiture charges (benefits) related to goodwill, intangible assets, tangible assets and the cumulative effect of foreign currency rate changes of which $3.5 million, $0.3 million and $14.0 million, respectively, are not deductible for income tax purposes. (3) Incremental valuation allowances of $4.9 million and $9.4 million and $1.7 million were recorded in fiscal 2021, 2020 and 2019, respectively, due to uncertainty regarding realization of tax assets, which were offset by a reduction of $9.1 million, $12.3 million and $2.9 million of valuation allowances for fiscal 2021, 2020 and 2019, respectively. These amounts exclude valuation allowances against tax assets related to the tax reform. (4) During fiscal 2020, the Company generated a net expense of $4.1 million as a result of taxable liquidations of subsidiaries. (5) During fiscal 2021, the Company generated $3.5 million of tax benefit related to audits and adjustments as compared to a tax benefit of $2.2 million in fiscal 2020 and a tax expense of $1.9 million in fiscal 2019.
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,
| 2021 |  | 2020
Deferred income tax assets: |  |  |
Operating loss and tax credit carryforwards | $ | 77,691 |  |  | $ | 99,905 |
Compensation related liabilities | 6,110 |  |  | 5,941 |
Postretirement benefits | 8,364 |  |  | 9,068 |
Inventory | 3,177 |  |  | 1,793 |
Lease liabilities | 11,609 |  |  | 10,526 |
Book reserves and other items | 11,471 |  |  | 6,752 |
Total deferred income tax assets | 118,422 |  |  | 133,985 |
Valuation allowance | (66,155) |  |  | (70,414) |
Net deferred income tax assets | 52,267 |  |  | 63,571 |
Deferred income tax liabilities: |  |  |
Depreciation and amortization | (29,444) |  |  | (31,457) |
Lease assets | (11,609) |  |  | (10,526) |
Other items | (781) |  |  | (702) |
Deferred income tax liabilities | (41,834) |  |  | (42,685) |
Net deferred income tax asset (1) | $ | 10,433 |  |  | $ | 20,886 |
(1) The net deferred income tax asset is reflected on the balance sheet in two categories: an asset of $14.8 million and $22.6 million for fiscal 2021 and 2020, respectively, is included in "Other long-term assets" and a liability of $4.4 million and $1.7 million for fiscal 2021 and 2020, 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):
| 2021 |  | 2020 |  | 2019
Beginning balance | $ | 23,205 |  |  | $ | 24,167 |  |  | $ | 24,359 |
Increases based on tax positions related to the current year | 381 |  |  | 869 |  |  | 2,169 |
Increase for tax positions taken in a prior period | 7 |  |  | 304 |  |  | 1,422 |
Decrease due to lapse of statute of limitations | (7,931) |  |  | (2,334) |  |  | (3,212) |
Decrease due to settlements | — |  |  | — |  |  | (324) |
Changes in foreign currency exchange rates | (4) |  |  | 199 |  |  | (247) |
Ending balance | $ | 15,658 |  |  | $ | 23,205 |  |  | $ | 24,167 |

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