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Income Taxes | 12 Months Ended
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Aug. 31, 2015
Income Taxes [Abstract] |
Income Taxes | 15.INCOME TAXES Our provision for income taxes consisted of the following (in thousands):
YEAR ENDED |  |  |  |  |  |
AUGUST 31, |  | 2015 |  | 2014 |  | 2013
Current: |  |  |  |  |  |
Federal | $ | 220 | $ | (237) | $ | 1,251
State |  | 208 |  | 146 |  | 273
Foreign |  | 2,691 |  | 2,557 |  | 3,256
|  | 3,119 |  | 2,466 |  | 4,780
Deferred: |  |  |  |  |  |
Federal |  | 3,239 |  | 1,217 |  | 864
State |  | 138 |  | 277 |  | (414)
Foreign |  | (200) |  | (268) |  | (151)
|  | 3,177 |  | 1,226 |  | 299
| $ | 6,296 | $ | 3,692 | $ | 5,079
The allocation of the total income tax provision is as follows (in thousands):
YEAR ENDED |  |  |  |  |  |
AUGUST 31, |  | 2015 |  | 2014 |  | 2013
Net income | $ | 6,296 | $ | 3,692 | $ | 5,079
Other comprehensive income |  | (52) |  | 24 |  | (260)
| $ | 6,244 | $ | 3,716 | $ | 4,819
Income before income taxes consisted of the following (in thousands):
YEAR ENDED |  |  |  |  |  |
AUGUST 31, |  | 2015 |  | 2014 |  | 2013
United States | $ | 15,073 | $ | 19,256 | $ | 14,939
Foreign |  | 2,339 |  | 2,503 |  | 4,459
| $ | 17,412 | $ | 21,759 | $ | 19,398
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, | 2015 | 2014 | 2013
Federal statutory income tax rate | 35.0% | 35.0% | 35.0%
State income taxes, net of federal effect | 2.3 | 1.9 | 1.6
Foreign jurisdictions tax differential | 1.2 | (0.4) | 1.0
Tax differential on income subject to both U.S. and foreign taxes | 0.5 | 0.5 | (3.3)
Effect of claiming foreign tax credits instead of deductions for prior years | (3.2) | (19.3) | (12.2)
Uncertain tax positions | (0.9) | (2.6) | 1.8
Management stock loan interest and non-deductible expenses | - | - | 1.3
Non-deductible executive compensation | 0.2 | 0.9 | 0.9
Non-deductible meals and entertainment | 1.1 | 0.8 | 0.8
Other | - | 0.2 | (0.7)
| 36.2% | 17.0% | 26.2%
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. Since August 31, 2012, 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 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. In fiscal 2015 we finalized the calculations of the impact of amending previously filed federal income tax returns to realize foreign tax credits previously treated as expired under the tax positions taken in the original returns. The income tax benefit recognized from these foreign tax credits totaled $0.6 million in fiscal 2015. During the fiscal year ended August 31, 2013, we accrued taxable interest income on outstanding management common stock loans (Note 19). 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 $0.1 million, $2.5 million, and $0.9 million to additional paid-in capital in the fiscal years ending August 31, 2015, 2014, and 2013. The significant components of our deferred tax assets and liabilities were comprised of the following (in thousands):
AUGUST 31, |  | 2015 |  | 2014
Deferred income tax assets: |  |  |  |
Sale and financing of corporate |  |  |  |
headquarters | $ | 9,531 | $ | 9,951
Foreign income tax credit |  |  |  |
carryforward |  | 5,106 |  | 8,025
Share-based compensation |  | 1,671 |  | 1,258
Inventory and bad debt reserves |  | 1,025 |  | 847
Bonus and other accruals |  | 934 |  | 994
Unearned revenue |  | 328 |  | 2,253
Other |  | 810 |  | 671
Total deferred income tax assets |  | 19,405 |  | 23,999
Less: valuation allowance |  | - |  | -
Net deferred income tax assets |  | 19,405 |  | 23,999
Deferred income tax liabilities: |  |  |  |
Intangibles step-ups – indefinite lived |  | (8,515) |  | (8,475)
Intangibles step-ups – definite lived |  | (6,552) |  | (7,075)
Property and equipment depreciation |  | (3,139) |  | (3,854)
Intangible asset impairment and |  |  |  |
amortization |  | (5,001) |  | (5,157)
Unremitted earnings of foreign |  |  |  |
subsidiaries |  | (546) |  | (503)
Other |  | (77) |  | (80)
Total deferred income tax liabilities |  | (23,830) |  | (25,144)
Net deferred income taxes | $ | (4,425) | $ | (1,145)
Deferred income tax amounts are recorded as follows in our consolidated balance sheets (in thousands):
AUGUST 31, |  | 2015 |  | 2014
Current assets | $ | 2,479 | $ | 4,340
Long-term assets |  | 194 |  | 90
Long-term liabilities |  | (7,098) |  | (5,575)
Net deferred income tax liability | $ | (4,425) | $ | (1,145)
As of August 31, 2015 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, 2015 and August 31, 2029. Our U.S. foreign income tax credit carryforwards were comprised of the following at August 31, 2015 (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 |  | 2015 |  | Forward
2008 |  | 2018 | $ | 1,444 | $ | (1,444) | $ | - | $ | -
2009 |  | 2019 |  | 2,006 |  | (1,041) |  | (965) |  | -
2010 |  | 2020 |  | 2,907 |  | - |  | (1,247) |  | 1,660
2011 |  | 2021 |  | 3,446 |  | - |  | - |  | 3,446
2012 |  | 2022 |  | 2,563 |  | (2,563) |  | - |  | -
2013 |  | 2023 |  | 2,815 |  | (2,815) |  | - |  | -
2014 |  | 2024 |  | 1,378 |  | (1,378) |  | - |  | -
2015 |  | 2025 |  | 1,441 |  | - |  | (1,441) |  | -
|  |  | $ | 18,000 | $ | (9,241) | $ | (3,653) | $ | 5,106
We amended our U.S. federal income tax returns from fiscal 2003 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, 2015. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):
YEAR ENDED |  |  |  |  |  |
AUGUST 31, |  | 2015 |  | 2014 |  | 2013
Beginning balance | $ | 3,491 | $ | 4,129 | $ | 4,212
Additions based on tax positions |  |  |  |  |  |
related to the current year |  | 244 |  | 157 |  | 720
Additions for tax positions in |  |  |  |  |  |
prior years |  | 144 |  | 60 |  | 69
Reductions for tax positions of prior |  |  |  |  |  |
years resulting from the lapse of |  |  |  |  |  |
applicable statute of limitations |  | (339) |  | (663) |  | (74)
Other reductions for tax positions of |  |  |  |  |  |
prior years |  | (425) |  | (192) |  | (798)
Ending balance | $ | 3,115 | $ | 3,491 | $ | 4,129
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $2.2 million at August 31, 2015 and $2.5 million at August 31, 2014. Included in the ending balance of gross unrecognized tax benefits at August 31, 2015 is $2.8 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 2015 and fiscal 2014, and increased income tax expense by $0.1 million in fiscal 2013. The balance of interest and penalties included on our consolidated balance sheets at August 31, 2015 and 2014 was $0.3 million each year. We do not expect a material change in our unrecognized tax benefits over the next 12 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.
2008-2015 | Canada
2008-2015 | Australia
2010-2015 | Japan, United Kingdom
2011-2015 | United States – state and local income tax
2012-2015 | 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 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 2: 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 Reference 3: 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 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 SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 + Details
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