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Income Taxes | 12 Months Ended
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Aug. 31, 2014
Income Taxes [Abstract] |
Income Taxes | 13.INCOME TAXES Our provision for income taxes consisted of the following (in thousands):
YEAR ENDED |  |  |  |  |  |
AUGUST 31, |  | 2014 |  | 2013 |  | 2012
Current: |  |  |  |  |  |
Federal | $ | (237) | $ | 1,251 | $ | -
State |  | 146 |  | 273 |  | 228
Foreign |  | 2,557 |  | 3,256 |  | 2,553
|  | 2,466 |  | 4,780 |  | 2,781
Deferred: |  |  |  |  |  |
Federal |  | 1,217 |  | 864 |  | 3,397
State |  | 277 |  | (414) |  | (3)
Foreign |  | (268) |  | (151) |  | (269)
|  | 1,226 |  | 299 |  | 3,125
| $ | 3,692 | $ | 5,079 | $ | 5,906
The allocation of the total income tax provision is as follows (in thousands):
YEAR ENDED |  |  |  |  |  |
AUGUST 31, |  | 2014 |  | 2013 |  | 2012
Net income | $ | 3,692 | $ | 5,079 | $ | 5,906
Other comprehensive income |  | 24 |  | (260) |  | (73)
| $ | 3,716 | $ | 4,819 | $ | 5,833
Income before income taxes consisted of the following (in thousands):
YEAR ENDED |  |  |  |  |  |
AUGUST 31, |  | 2014 |  | 2013 |  | 2012
United States | $ | 19,256 | $ | 14,939 | $ | 11,006
Foreign |  | 2,503 |  | 4,459 |  | 2,741
| $ | 21,759 | $ | 19,398 | $ | 13,747
The differences between income taxes at the statutory federal income tax rate and the consolidated income tax rate reported in our consolidated income statements were as follows:
YEAR ENDED AUGUST 31, | 2014 | 2013 | 2012
Federal statutory income tax rate | 35.0% | 35.0% | 35.0%
State income taxes, net of federal effect | 1.9 | 1.6 | 2.7
Foreign jurisdictions tax differential | (0.4) | 1.0 | 1.8
Tax differential on income subject to both U.S. and foreign taxes | 0.5 | (3.3) | (3.4)
Effect of claiming foreign tax credits instead of deductions for prior years | (19.3) | (12.2) | -
Uncertain tax positions | (2.6) | 1.8 | 3.2
Management stock loan interest and non-deductible expenses | - | 1.3 | 2.2
Non-deductible executive compensation | 0.9 | 0.9 | 1.4
Non-deductible meals and entertainment | 0.8 | 0.8 | 0.9
Other | 0.2 | (0.7) | (0.8)
| 17.0% | 26.2% | 43.0%
In prior fiscal years, we elected to take deductions on our U.S. federal income tax returns for foreign income taxes paid, rather than claiming foreign tax credits. During those years we either generated or used net operating loss carryforwards and were therefore unable to utilize foreign tax credits. In fiscal 2011 we began claiming foreign tax credits on our U.S. federal income tax returns. Although we could not utilize the credits we claimed for fiscal 2012 and fiscal 2011 in those respective years, we concluded it was more likely than not that these foreign tax credits will be utilized in the future. As of August 31, 2014 and 2013, we have no remaining U.S. federal net operating loss carryforwards. Additionally, overall U.S. taxable income and foreign source income for fiscal 2014 and 2013 were sufficient to utilize all of the foreign tax credits generated during those fiscal years, plus additional credits generated in prior years. Accordingly, we amended our U.S. federal income tax returns from fiscal 2003 through fiscal 2007 to claim foreign tax credits instead of foreign tax deductions. Additionally, we plan to amend our U.S. federal income tax returns from fiscal 2008 through fiscal 2010 to claim foreign tax credits instead of foreign tax deductions. The net tax benefit resulting from claiming these additional foreign tax credits, which was recorded in the period the decision was made to amend the related returns, totaled $4.2 million in fiscal 2014 and $2.4 million in fiscal 2013. During the fiscal years ended August 31, 2013 and 2012, we accrued taxable interest income on outstanding management common stock loans (Note 17). Consistent with the accounting treatment for these loans, we did not recognize interest income, thus resulting in a permanent book versus tax difference. We also recognized expenses during fiscal 2013 in connection with the resolution of the management stock loans, which were not deductible for income tax purposes. We recognized tax benefits from deductions for share-based compensation in excess of the corresponding expense recorded for financial statement purposes. Instead of reducing our income tax expense for these benefits, we recorded $2.5 million and $0.9 million to additional paid-in capital in fiscal 2014 and 2013, respectively. The significant components of our deferred tax assets and liabilities were comprised of the following (in thousands):
AUGUST 31, |  | 2014 |  | 2013
Deferred income tax assets: |  |  |  |
Sale and financing of corporate |  |  |  |
headquarters | $ | 9,951 | $ | 10,289
Foreign income tax credit |  |  |  |
carryforward |  | 8,025 |  | 5,423
Unearned revenue |  | 2,253 |  | 2,257
Share-based compensation |  | 1,258 |  | 2,405
Bonus and other accruals |  | 994 |  | 1,430
Inventory and bad debt reserves |  | 847 |  | 731
Other |  | 671 |  | 1,089
Total deferred income tax assets |  | 23,999 |  | 23,624
Less: valuation allowance |  | - |  | -
Net deferred income tax assets |  | 23,999 |  | 23,624
Deferred income tax liabilities: |  |  |  |
Intangibles step-ups – indefinite lived |  | (8,475) |  | (8,418)
Intangibles step-ups – definite lived |  | (7,075) |  | (7,580)
Property and equipment depreciation |  | (3,854) |  | (4,290)
Intangible asset impairment and |  |  |  |
amortization |  | (5,157) |  | (4,614)
Unremitted earnings of foreign |  |  |  |
subsidiaries |  | (503) |  | (428)
Other |  | (80) |  | (63)
Total deferred income tax liabilities |  | (25,144) |  | (25,393)
Net deferred income taxes | $ | (1,145) | $ | (1,769)
Deferred income tax amounts are recorded as follows in our consolidated balance sheets (in thousands):
AUGUST 31, |  | 2014 |  | 2013
Current assets | $ | 4,340 | $ | 4,685
Long-term assets |  | 90 |  | 25
Long-term liabilities |  | (5,575) |  | (6,479)
Net deferred income tax liability | $ | (1,145) | $ | (1,769)
As of August 31, 2014 we have utilized all of our U.S. federal net operating loss carryforwards. The Company still has U.S. state net operating loss carryforwards generated in various jurisdictions that expire primarily between September 1, 2014 and August 31, 2029. Our U.S. foreign income tax credit carryforwards were comprised of the following at August 31, 2014 (in thousands):
Credit Generated in |  |  |  |  |  | Credits Used |  | Credits Used |  | Credits
Fiscal Year Ended |  | Credit Expires |  | Credits |  | in Prior |  | in Fiscal |  | Carried
August 31, |  | August 31, |  | Generated |  | Years |  | 2014 |  | Forward
2007 |  | 2017 | $ | 1,071 | $ | (1,071) | $ | - | $ | -
2008 |  | 2018 |  | 1,444 |  | - |  | (1,254) |  | 190
2009 |  | 2019 |  | 2,006 |  | - |  | - |  | 2,006
2010 |  | 2020 |  | 2,907 |  | - |  | - |  | 2,907
2011 |  | 2021 |  | 3,448 |  | (526) |  | - |  | 2,922
2012 |  | 2022 |  | 2,564 |  | (2,564) |  | - |  | -
2013 |  | 2023 |  | 2,808 |  | (2,808) |  | - |  | -
2014 |  | 2024 |  | 1,413 |  | - |  | (1,413) |  | -
|  |  | $ | 17,661 | $ | (6,969) | $ | (2,667) | $ | 8,025
We amended our U.S federal income tax returns from fiscal 2003 through fiscal 2007, and we plan to amend our U.S. federal income tax returns from fiscal 2008 through fiscal 2010 to claim foreign tax credits instead of the foreign tax deductions that were previously claimed. The additional taxable income from claiming these foreign tax credits results in the complete utilization of our remaining net operating loss carryforwards in fiscal 2012, as well as the ability to utilize all of the foreign tax credit generated in fiscal 2012. We have determined that projected future taxable income is adequate to allow for realization of all deferred tax assets. We considered sources of taxable income, including future reversals of taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, and reasonable, practical tax-planning strategies to generate additional taxable income. Based on the factors described above, we concluded that realization of all our deferred tax assets is more likely than not at August 31, 2014. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):
YEAR ENDED |  |  |  |  |  |
AUGUST 31, |  | 2014 |  | 2013 |  | 2012
Beginning balance | $ | 4,129 | $ | 4,212 | $ | 3,703
Additions based on tax positions |  |  |  |  |  |
related to the current year |  | 157 |  | 720 |  | 297
Additions for tax positions in |  |  |  |  |  |
prior years |  | 60 |  | 69 |  | 327
Reductions for tax positions of prior |  |  |  |  |  |
years resulting from the lapse of |  |  |  |  |  |
applicable statute of limitations |  | (663) |  | (74) |  | -
Other reductions for tax positions of |  |  |  |  |  |
prior years |  | (192) |  | (798) |  | (115)
Ending balance | $ | 3,491 | $ | 4,129 | $ | 4,212
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $2.5 million at August 31, 2014 and $3.1 million at August 31, 2013. Included in the ending balance of gross unrecognized tax benefits at August 31, 2014 is $3.0 million related to individual states’ net operating loss carryforwards. Interest and penalties related to uncertain tax positions are recognized as components of income tax expense. The net accruals and reversals of interest and penalties increased income tax expense by an insignificant amount in fiscal 2014, increased income tax expense by $0.1 million in fiscal 2013, and increased income tax expense by $0.1 million in fiscal 2012. The balance of interest and penalties included on our consolidated balance sheets at August 31, 2014 and 2013 was $0.3 million each year. We do not expect a material change in our unrecognized tax benefits over the next twelve months. We file United States federal income tax returns as well as income tax returns in various states and foreign jurisdictions. The tax years that remain subject to examinations for our major tax jurisdictions are shown below.
200 7-201 4 | Canada
2007-2014 | Australia
2009-2014 | Japan, United Kingdom
2010-2014 | United States – state and local income tax
2011-2014 | United States – federal income tax

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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 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: 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 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 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 Reference 6: 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 + Details
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