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INCOME TAXES | 9 Months Ended
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Feb. 24, 2019
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income tax expense from continuing operations for the third quarter of fiscal 2019 and 2018 was $67.2 million and a benefit of $91.4 million, respectively. Income tax expense from continuing operations for the first three quarters of fiscal 2019 and 2018 was $147.0 million and $138.1 million, respectively. The effective tax rate (calculated as the ratio of income tax expense to pre-tax income from continuing operations, inclusive of equity method investment earnings) from continuing operations was 21.7% and (35.5)% for the third quarter of fiscal 2019 and 2018, respectively. The effective tax rate from continuing operations was 20.9% and 16.0% for the first three quarters of fiscal 2019 and 2018, respectively. The effective tax rate in the third quarter of fiscal 2019 reflects the following:
• | a benefit recognized due to the non-taxability of the novation of a legacy guarantee,
• | a benefit recognized due to a reduction in the fair value of equity awards subject to limitations on deductibility that were issued to Pinnacle executives as replacement awards at the time of the acquisition, and
• | an increase to the deemed repatriation tax liability.
The effective tax rate for the first three quarters of fiscal 2019 reflects the above-cited items, as well as the impact of foreign restructuring resulting in a benefit related to undistributed foreign earnings for which the indefinite reinvestment assertion is no longer made, additional tax expense on the repatriation of foreign earnings, an adjustment of valuation allowance associated with the expected capital gains from the planned divestiture of the Wesson® oil business, additional tax expense on non-deductible facilitative costs associated with the acquisition of Pinnacle, and additional income tax expense related to state taxes. The effective tax rate in the third quarter of fiscal 2018 reflects the following:
• | the impact of U.S. tax reform,
• | an adjustment of valuation allowance associated with the termination of the sales agreement for the Wesson® oil business,
• | an indirect cost of pension contribution made on February 26, 2018,
• | a reserve for the effect of a law change in Mexico, and
• | an income tax benefit allowed upon the vesting/exercise of employee stock compensation awards by our employees, beyond that which is attributable to the original fair value of the awards upon the date of grant.
The effective tax rate for the first three quarters of fiscal 2018 reflects the above-cited items, as well as additional expense related to undistributed foreign earnings for which the indefinite reinvestment assertion is no longer made. The amount of gross unrecognized tax benefits for uncertain tax positions was $49.4 million as of February 24, 2019 and $32.5 million as of May 27, 2018. Included in the balance as of February 24, 2019 was $1.0 million for tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The May 27, 2018 balance had no tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The gross unrecognized tax benefits excluded related liabilities for gross interest and penalties of $11.5 million and $7.7 million as of February 24, 2019 and May 27, 2018, respectively. The net amount of unrecognized tax benefits at February 24, 2019 and May 27, 2018 that, if recognized, would impact the Company's effective tax rate was $42.6 million and $27.8 million, respectively. Included in those amounts is $9.3 million and $6.7 million, respectively, that would be reported in discontinued operations. Recognition of these tax benefits would have a favorable impact on the Company's effective tax rate. We estimate that it is reasonably possible that the amount of gross unrecognized tax benefits will decrease by up to $16.6 million over the next twelve months due to various federal, state, and foreign audit settlements and the expiration of statutes of limitations. As of February 24, 2019 and May 27, 2018, we had a deferred tax asset of $721.9 million and $721.6 million, respectively, that was generated from the capital loss realized on the sale of the Private Brands operations with corresponding valuation allowances of $697.7 million and $721.6 million, respectively, to reflect the uncertainty regarding the ultimate realization of the tax asset. During the first three quarters of fiscal 2019, the valuation allowance was adjusted by $24.2 million due to expected capital gains from the planned divestiture of the Wesson® oil business. Historically, we have not provided U.S. deferred taxes on the cumulative undistributed earnings of our foreign subsidiaries. We have determined that previously undistributed earnings of certain foreign subsidiaries no longer meet the requirements for indefinite reinvestment under applicable accounting guidance and, therefore, recognized $0.5 million of income tax expense in the first three quarters of fiscal 2019. We believe our subsidiaries have invested or will invest the remaining undistributed earnings indefinitely, or the earnings will be remitted in a tax-neutral transaction.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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