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Income Taxes
 12 Months Ended
Aug. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

Note 17 — Income Taxes

Components of income tax expense (benefit) were as follows:

 

 

 

Year Ended August 31,

 

(In millions)

 

2024

 

 

2023

 

 

2022

 

Current

 

 

 

 

 

 

 

 

 

Federal

 

$

2.0

 

 

$

7.4

 

 

$

(6.7

)

State

 

 

2.2

 

 

 

2.7

 

 

 

0.9

 

Foreign

 

 

38.8

 

 

 

9.7

 

 

 

19.2

 

 

 

43.0

 

 

 

19.8

 

 

 

13.4

 

Deferred

 

 

 

 

 

 

 

 

 

Federal

 

 

14.6

 

 

 

7.9

 

 

 

2.2

 

State

 

 

0.1

 

 

 

0.6

 

 

 

1.4

 

Foreign

 

 

(2.0

)

 

 

(3.4

)

 

 

1.6

 

 

 

12.7

 

 

 

5.1

 

 

 

5.2

 

Change in valuation allowance

 

 

6.3

 

 

 

(0.3

)

 

 

(0.5

)

Income tax expense (benefit)

 

$

62.0

 

 

$

24.6

 

 

$

18.1

 

 

 

 

 

 

 

 

 

 

 

Earnings before income tax and earnings from unconsolidated affiliates for the years ended August 31, 2024, 2023 and 2022 were $111.4 million, $32.2 million and $12.4 million, respectively, for our domestic U.S. operations and $112.3 million, $58.8 million and $48.2 million, respectively for our foreign operations.

The reconciliation between effective and statutory tax rates on operations is as follows:

 

 

Year Ended August 31,

 

 

 

2024

 

 

2023

 

 

2022

 

Federal statutory rate

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

State income taxes, net of federal benefit

 

 

1.4

 

 

 

3.0

 

 

 

3.1

 

Foreign operations

 

 

4.6

 

 

 

6.2

 

 

 

9.0

 

U.S. tax on foreign earnings

 

 

2.3

 

 

 

4.5

 

 

 

1.8

 

U.S. impact of foreign branch

 

 

(1.9

)

 

 

—

 

 

 

—

 

Carryback rate benefit

 

 

—

 

 

 

—

 

 

 

(3.2

)

Permanent differences

 

 

4.0

 

 

 

(5.8

)

 

 

5.4

 

Base erosion and anti-avoidance tax (BEAT)

 

 

0.5

 

 

 

1.6

 

 

 

—

 

Change in valuation allowance

 

 

2.8

 

 

 

(0.5

)

 

 

(0.8

)

Unrecognized tax benefits

 

 

0.7

 

 

 

1.4

 

 

 

(1.8

)

Noncontrolling interest in flow-through entity

 

 

(0.3

)

 

 

(2.7

)

 

 

(3.0

)

Credits

 

 

(4.7

)

 

 

0.1

 

 

 

(0.6

)

Other

 

 

(2.7

)

 

 

(1.8

)

 

 

(1.0

)

Effective tax rate

 

 

27.7

%

 

 

27.0

%

 

 

29.9

%

 

 

 

 

 

 

 

 

 

 

Due to the enactment of the Coronavirus Aid, Relief and Economic Security (CARES) Act in 2020, the Company filed a Federal claim to carryback fiscal year 2021 tax losses to the fiscal years 2016 through 2018, allowing the recovery of Federal income taxes previously paid at rates of 35.0% or 25.7%, rather than the current Federal rate of

21.0% in effect beginning with the fiscal year 2019. As of August 31, 2024, income taxes receivable includes a balance of $22.8 million related to the carryback of the 2021 loss.

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities were as follows:

 

 

As of August 31,

 

(In millions)

 

2024

 

 

2023

 

Deferred tax assets:

 

 

 

 

 

 

Accrued payroll and related liabilities

 

$

31.7

 

 

$

37.1

 

Deferred revenue

 

 

6.7

 

 

 

6.6

 

Inventories and other

 

 

26.7

 

 

 

12.4

 

Maintenance and warranty accruals

 

 

3.5

 

 

 

3.5

 

Lease liability

 

 

14.7

 

 

 

16.5

 

Net operating losses

 

 

35.9

 

 

 

18.4

 

Investment, asset tax credits and other

 

 

16.3

 

 

 

0.9

 

 

 

135.5

 

 

 

95.4

 

Valuation allowance

 

 

(15.9

)

 

 

(9.6

)

Deferred tax liabilities:

 

 

 

 

 

 

Fixed assets

 

 

(187.3

)

 

 

(131.9

)

Intangibles

 

 

(5.2

)

 

 

(5.1

)

Right-of-use asset

 

 

(14.4

)

 

 

(16.0

)

Other

 

 

(8.7

)

 

 

(13.8

)

 

 

(215.6

)

 

 

(166.8

)

Net deferred tax liability

 

$

(96.0

)

 

$

(81.0

)

 

 

 

 

 

 

 

As of August 31, 2024, the Company had $67.4 million of federal NOL carryforwards that do not expire, $15.4 million of federal credit carryforwards that will begin to expire in 2028, $193.0 million of state net operating loss carryforwards that will begin to expire in 2029, $0.9 million of state credit carryforwards that will begin to expire in 2025, $9.9 million of foreign net operating loss carryforwards that begin to expire in calendar 2024 and $26.2 million of foreign net operating loss carryforwards that do not expire. The Company has placed a valuation allowance of $15.9 million against the deferred tax assets for which a benefit is not more likely than not to be realized, including those for loss and credit carryforwards unlikely to be used before their expiration dates or where the possibility of utilization is remote. The net increase in the total valuation allowance was approximately $6.3 million for the year ended August 31, 2024.

The Company's cumulative undistributed foreign earnings, if repatriated, would be accompanied by foreign withholdings taxes. However, the Company does not intend to repatriate these foreign earnings and continues to assert that its foreign earnings are indefinitely reinvested. As a result, it has not recorded a liability for foreign withholding taxes associated with undistributed foreign earnings.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:

 

 

Year Ended August 31,

 

(In millions)

 

2024

 

 

2023

 

 

2022

 

Unrecognized Tax Benefit – Opening Balance

 

$

1.7

 

 

$

0.4

 

 

$

1.6

 

Gross increases – tax positions in prior period

 

 

1.8

 

 

 

1.3

 

 

 

—

 

Gross decreases – tax positions in prior period

 

 

—

 

 

 

—

 

 

 

(0.9

)

Settlements

 

 

—

 

 

 

—

 

 

 

—

 

Lapse of statute of limitations

 

 

(0.4

)

 

 

—

 

 

 

(0.3

)

Unrecognized Tax Benefit – Ending Balance

 

$

3.1

 

 

$

1.7

 

 

$

0.4

 

 

 

 

 

 

 

 

 

 

 

All unrecognized tax benefits, when recognized, would impact the effective tax rate.

Interest and penalties related to income taxes are classified as a component of Income tax expense. As of August 31, 2024 and 2023, the total amount of accrued interest was $0.8 million and $0.6 million, respectively. Income tax

expense for the years ended August 31, 2024, 2023 and 2022 included interest expense (benefit) related to unrecognized tax benefits of $0.2 million, $0.5 million and ($0.3) million, respectively.

The Company has not accrued any penalties on the unrecognized tax benefits and does not anticipate a significant decrease in unrecognized tax benefits during the next twelve months. The Company is subject to taxation in the U.S. and in various states and foreign jurisdictions. The Company is effectively no longer subject to U.S. Federal examination for fiscal years ending before 2016, to state and local examinations before 2015, or to foreign examinations before 2016. The Company currently has ongoing examinations in the U.S., Poland, and Romania.