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Income Taxes | 12 Months Ended
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Aug. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Note 7 – Income Taxes For financial reporting purposes earnings (losses) before income taxes include the following components:
|  | For the years ended August 31, |
($ in thousands) |  | 2021 |  |  | 2020 |  |  | 2019 |
United States |  | $ | 28,605 |  |  | $ | 38,928 |  |  | $ | (1,949 | )
Foreign |  |  | 21,781 |  |  |  | 9,915 |  |  |  | 4,056 |
|  | $ | 50,386 |  |  | $ | 48,843 |  |  | $ | 2,107 |
Significant components of the income tax provision are as follows:
|  | For the years ended August 31, |
($ in thousands) |  | 2021 |  |  | 2020 |  |  | 2019 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 2,432 |  |  | $ | 4,231 |  |  | $ | 2,190 |
State |  |  | 733 |  |  |  | 1,421 |  |  |  | 324 |
Foreign |  |  | 2,738 |  |  |  | 3,178 |  |  |  | 3,107 |
Total current |  |  | 5,903 |  |  |  | 8,830 |  |  |  | 5,621 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 2,251 |  |  |  | 2,630 |  |  |  | (3,209 | )
State |  |  | 281 |  |  |  | 121 |  |  |  | (624 | )
Foreign |  |  | (621 | ) |  |  | (1,367 | ) |  |  | (1,853 | )
Total deferred |  |  | 1,911 |  |  |  | 1,384 |  |  |  | (5,686 | )
Total income tax provision |  | $ | 7,814 |  |  | $ | 10,214 |  |  | $ | (65 | )
Total income tax provision resulted in effective tax rates differing from that of the statutory United States federal income tax rates. The reasons for these differences are:
|  | For the years ended August 31, |
|  | 2021 |  |  |  |  |  |  | 2020 |  |  |  |  |  |  | 2019 |  |  |  |  |
($ in thousands) |  | Amount |  |  | % |  |  | Amount |  |  | % |  |  | Amount |  |  | % |
U.S. statutory rate |  | $ | 10,581 |  |  |  | 21.0 |  |  | $ | 10,257 |  |  |  | 21.0 |  |  | $ | 443 |  |  |  | 21.0 |
State and local taxes, net of federal tax benefit |  |  | 859 |  |  |  | 1.7 |  |  |  | 1,079 |  |  |  | 2.2 |  |  |  | (379 | ) |  |  | (18.0 | )
Foreign tax rate differences |  |  | (390 | ) |  |  | (0.8 | ) |  |  | (292 | ) |  |  | (0.6 | ) |  |  | 164 |  |  |  | 7.8 |
U.S. tax reform |  |  | 339 |  |  |  | 0.7 |  |  |  | (165 | ) |  |  | (0.3 | ) |  |  | 160 |  |  |  | 7.6 |
Deferred tax asset valuation allowance |  |  | (2,169 | ) |  |  | (4.3 | ) |  |  | (479 | ) |  |  | (1.0 | ) |  |  | 142 |  |  |  | 6.7 |
Federal credits |  |  | (629 | ) |  |  | (1.2 | ) |  |  | (419 | ) |  |  | (0.9 | ) |  |  | (338 | ) |  |  | (16.0 | )
Uncertain tax benefits |  |  | (622 | ) |  |  | (1.2 | ) |  |  | 165 |  |  |  | 0.3 |  |  |  | (153 | ) |  |  | (7.3 | )
Other |  |  | (155 | ) |  |  | (0.4 | ) |  |  | 68 |  |  |  | 0.1 |  |  |  | (104 | ) |  |  | (4.9 | )
Effective rate |  | $ | 7,814 |  |  |  | 15.5 |  |  | $ | 10,214 |  |  |  | 20.9 |  |  | $ | (65 | ) |  |  | (3.1 | )
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:
|  | August 31, |
($ in thousands) |  | 2021 |  |  | 2020 |
Deferred tax assets: |  |  |  |  |  |  |  |
Accrued expenses |  | $ | 10,172 |  |  | $ | 10,376 |
Warranty |  |  | 3,096 |  |  |  | 2,439 |
Defined benefit pension plan |  |  | 1,626 |  |  |  | 1,767 |
Inventory |  |  | 2,403 |  |  |  | 2,362 |
Share-based compensation |  |  | 1,197 |  |  |  | 1,185 |
Vacation |  |  | 749 |  |  |  | 780 |
Net operating loss and capital loss carry forwards |  |  | 2,245 |  |  |  | 3,009 |
Deferred revenue |  |  | 1,565 |  |  |  | 2,282 |
Allowance for doubtful accounts |  |  | 870 |  |  |  | 683 |
Other |  |  | 1,169 |  |  |  | 2,233 |
Gross deferred tax assets |  |  | 25,092 |  |  |  | 27,116 |
Valuation allowance |  |  | (1,091 | ) |  |  | (3,218 | )
Net deferred tax assets |  | $ | 24,001 |  |  | $ | 23,898 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Intangible assets |  | $ | (5,607 | ) |  | $ | (6,054 | )
Property, plant, and equipment |  |  | (11,113 | ) |  |  | (8,798 | )
Total deferred tax liabilities |  | $ | (16,720 | ) |  | $ | (14,852 | )
Net deferred tax assets |  | $ | 7,281 |  |  | $ | 9,046 |
In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The discrete items recorded in fiscal 2021 include a benefit of $1.7 million related to the release of a valuation allowance related to net operating loss carryforwards in a foreign jurisdiction that are now expected to be realizable. The valuation allowance related to the net operating loss in the certain foreign tax jurisdiction amounted to $0 and $1.7 million as of August 31, 2021 and 2020, respectively. The Company has also recorded a valuation allowance of $0.8 million and $1.2 million as of August 31, 2021 and 2020, respectively, related to capital losses from business divestitures where the Company believes it is more likely than not that the benefit from the capital loss will not be realized. Remaining valuation allowance relates to deferred tax assets in a certain foreign tax jurisdiction not subject to tax due to a free trade zone exemption. The Company does not intend to, and has not historically, repatriated earnings of its foreign subsidiaries. Thus, the Company has not provided a deferred income tax liability on these undistributed earnings that are indefinitely reinvested. The Company would recognize a deferred income tax liability if the Company were to determine that such earnings were no longer indefinitely reinvested. There are other taxes that may be incurred if the Company would repatriate earnings of its foreign subsidiaries. It is not practicable to estimate the amount of income taxes that would be incurred if the Company would repatriate earnings of its foreign subsidiaries. The Company recognizes tax benefits only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. Unrecognized tax benefits are tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. A reconciliation of changes in unrecognized tax benefits is as follows:
|  | August 31, |
($ in thousands) |  | 2021 |  |  | 2020 |
Unrecognized tax benefits at beginning of the year |  | $ | 1,141 |  |  | $ | 2,389 |
Increases for positions taken in current year |  |  | — |  |  |  | 52 |
Increases for positions taken in prior years |  |  | — |  |  |  | 266 |
Decreases for positions taken in prior years |  |  | (36 | ) |  |  | (1,360 | )
Reduction resulting from lapse of applicable statute of limitations |  |  | (287 | ) |  |  | (206 | )
Decreases for settlements with tax authorities |  |  | (94 | ) |  |  | — |
Unrecognized tax benefits at end of the year |  | $ | 724 |  |  | $ | 1,141 |
The net amount of unrecognized tax benefits at both August 31, 2021 and 2020 that, if recognized, would impact the Company’s effective tax rate was $0.5 million and $0.8 million, respectively. Recognition of these tax benefits would have a favorable impact on the Company’s effective tax rate. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. Total accrued liabilities for interest and penalties included in the unrecognized tax benefits liability were $0.8 million and $1.1 million for each of the years ended August 31, 2021 and 2020, respectively. While it is expected that the amount of unrecognized tax benefits will change in the next twelve months as a result of the expiration of statutes of limitations, the Company does not expect this change to have a significant impact on its results of operations or financial position. The Company files income tax returns in the United States and various state and foreign jurisdictions. The Company is no longer subject to income tax examination by US federal and most state tax authorities for tax years prior to fiscal 2017. Other major jurisdictions where we conduct business generally have statutes of limitations ranging from three to five years.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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