Entity information:
INCOME TAXES

Income (loss) from continuing operations before taxes is as follows:
 
Year Ended August 31,
 
2017
 
2016
 
2015
 
(In thousands)
U.S.
$
(32,930
)
 
$
(433,199
)
 
$
(43,770
)
Foreign
65,263

 
66,694

 
72,200

Income from continuing operations before taxes
$
32,333

 
$
(366,505
)
 
$
28,430



The provisions for U.S. and foreign income taxes consist of the following:
 
Year Ended August 31,
 
2017
 
2016
 
2015
 
(In thousands)
Current taxes:
 
 
 
 
 
U.S.
$
(1,561
)
 
$
813

 
$
1,674

Foreign
21,691

 
28,466

 
18,078

Total current tax expense (benefit)
20,130

 
29,279

 
19,752

Deferred taxes:
 
 
 
 
 
U.S.
(18,552
)
 
(34,069
)
 
(19,985
)
Foreign
(3,418
)
 
(3,850
)
 
732

Total deferred tax expense (benefit)
(21,970
)
 
(37,919
)
 
(19,253
)
Total income tax expense (benefit)
$
(1,840
)
 
$
(8,640
)
 
$
499



A reconciliation of the statutory U.S. federal income tax rate with the effective tax rates of (5.7)% in 2017, 2.4% in 2016, and 1.8% in 2015 is as follows:
 
Year Ended August 31,
 
2017
 
2016
 
2015
 
Amount
 
% of
Pretax
Income
 
Amount
 
% of
Pretax
Income
 
Amount
 
% of
Pretax
Income
 
(In thousands, except for %s)
U.S. statutory federal income tax rate
$
11,317

 
35.0
 %
 
$
(128,277
)
 
35.0
 %
 
$
9,951

 
35.0
 %
Foreign rate differential, net of U.S. tax on certain foreign current year earnings
2,213

 
6.8

 
10,069

 
(2.7
)
 
(692
)
 
(2.4
)
Foreign losses with no tax benefit
1,026

 
3.2

 
1,866

 
(0.5
)
 
3,956

 
14.0

Worthless stock deduction
(14,735
)
 
(45.6
)
 
—

 
—

 
—

 
—

U.S. non-deductible transaction costs
—

 
—

 
—

 
—

 
1,349

 
4.7

State taxes, net of federal benefit
(3,894
)
 
(12.0
)
 
2,564

 
(0.7
)
 
(202
)
 
(0.7
)
Valuation allowance charges (reversals)
—

 
—

 
863

 
(0.2
)
 
(12,279
)
 
(43.2
)
Non-deductible goodwill impairment
—

 
—

 
106,503

 
(29.1
)
 
—

 
—

Establishment (resolution) of uncertain tax
positions
1,724

 
5.3

 
482

 
(0.1
)
 
(1,030
)
 
(3.6
)
Other
509

 
1.6

 
(2,710
)
 
0.7

 
(554
)
 
(2.0
)
Provision (benefit) for U.S. and foreign income taxes
$
(1,840
)
 
(5.7
)%
 
$
(8,640
)
 
2.4
 %
 
$
499

 
1.8
 %


Deferred tax assets and (liabilities) consist of the following:
 
As of August 31,
 
2017
 
2016
 
(In thousands)
Pensions
$
23,585

 
$
28,400

Inventory reserves
3,503

 
2,176

Bad debt reserves
2,071

 
1,680

Accruals
6,509

 
7,844

Postretirement benefits other than pensions
6,599

 
6,255

Foreign net operating loss carryforwards
23,305

 
21,967

Foreign tax credit carryforwards
5,442

 
5,442

Alternative minimum tax carryforwards
1,493

 
2,289

Interest carryforwards
6,039

 
2,713

U.S. net operating loss carryforwards
35,288

 
33,059

Other
11,299

 
13,498

Gross deferred tax assets
125,133

 
125,323

Valuation allowance
(33,648
)
 
(29,089
)
Total deferred tax assets
91,485

 
96,234

Property, plant and equipment
(12,039
)
 
(16,194
)
Intangibles
(80,991
)
 
(89,919
)
Unremitted foreign earnings
—

 
(9,003
)
Other
(4,529
)
 
(3,925
)
Gross deferred tax liabilities
(97,559
)
 
(119,041
)
Net deferred tax assets (liabilities)
$
(6,074
)
 
$
(22,807
)


The effective tax rate for the year ended August 31, 2017 was less than the U.S. statutory federal income tax rate primarily because of a worthless stock tax deduction relating to the Company's investment in an insolvent foreign subsidiary. The fiscal 2017 effective tax rate benefit represents a U.S. tax deduction for prior accounting losses for which no tax benefit has previously been allowed.

As of August 31, 2017, the Company has a U.S. federal net operating loss carryforward of $83.5 million which will begin to expire in 2035, resulting in a deferred tax asset of $29.3 million. In connection with the acquisition of Citadel during the year ended August 31, 2015, the Company reversed its valuation allowance on most of its federal deferred tax assets. This reversal was due to deferred tax liabilities recorded as part of the Citadel acquisition.

As of August 31, 2017, the Company has foreign net operating loss carryforwards of $76.7 million resulting in a deferred tax asset of $23.3 million. These foreign net operating loss carryforwards are primarily from countries with unlimited carryforward periods, but include $4.9 million of carryforwards subject to expiration in years 2020 to 2025. A valuation allowance totaling $15.1 million has been recorded against this deferred tax asset where recovery of the carryforward is uncertain.

As of August 31, 2017, the Company has domestic state and local net operating loss carryforwards of $166.9 million resulting in a deferred tax asset of $6.0 million partially offset by a valuation allowance of $4.3 million. These net operating loss carryforwards expire in years 2018 to 2037.

As of August 31, 2017, the Company has $2.3 million in foreign tax credit carryforwards that will expire in 2019 and $5.4 million of foreign tax credit carryforwards that will expire in 2025. The foreign tax credit carryforwards have been offset by a full valuation allowance.

The amount of foreign tax credit carryforwards and U.S. net operating loss carryforwards shown in the table above for fiscal 2017 has been reduced by unrealized stock compensation attributes of $2.6 million.

As of August 31, 2017, the Company has $1.5 million of alternative minimum tax carryforwards which have an unlimited carryforward period.

Deferred charges included $31.6 million and $36.2 million from the tax effect of temporary differences at August 31, 2017 and 2016, respectively.

As of August 31, 2017, the Company’s gross unrecognized tax benefits totaled $4.2 million. If recognized $3.3 million of the total unrecognized tax benefits would favorably affect the Company’s effective tax rate. The Company elects to report interest and penalties related to income tax matters in income tax expense. At August 31, 2017, the Company had $1.4 million of accrued interest and penalties on unrecognized tax benefits.

The Company's statute of limitations is open in various jurisdictions as follows: Germany - from 2005 onward, France - from 2010 onward, U.S. - from 2013 onward, Belgium - from 2015 onward, other foreign jurisdictions - from 2011 onward.

The amount of unrecognized tax benefits is expected to change in the next 12 months; however, the change is not expected to have a significant impact on the financial position of the Company.

A reconciliation of unrecognized tax benefits is as follows:
 
Year Ended August 31,
 
2017
 
2016
 
2015
 
(In thousands)
Beginning balance
$
2,993

 
$
2,031

 
$
3,845

Decreases related to prior year tax positions
(194
)
 
(53
)
 
(259
)
Increases related to prior year tax positions
1,661

 
275

 
509

Increases related to current year tax positions
489

 
826

 
61

Settlements
(945
)
 
—

 
(376
)
Lapse of statute of limitations
—

 
(71
)
 
(1,192
)
Foreign currency impact
223

 
(15
)
 
(557
)
Ending balance
$
4,227

 
$
2,993

 
$
2,031



As of August 31, 2017, no taxes have been provided on the undistributed earnings of certain foreign subsidiaries amounting to $515.9 million because the Company intends to permanently reinvest these earnings. Quantification of the deferred tax liability associated with these undistributed earnings is not practicable.