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Income Taxes | 12 Months Ended
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Feb. 26, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES In Q1 2021, the U.S. government enacted tax legislation to provide economic stimulus and support to businesses during the COVID-19 pandemic, referred to as the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which enabled companies to carry back tax losses to years prior to the enactment of the Tax Cuts and Jobs Act when the federal statutory income tax rate was 35%. Additionally, the CARES Act included an administrative correction of the depreciation recovery period for qualified improvement property which impacted certain leasehold improvement costs that resulted in the acceleration of depreciation on these assets retroactively to 2018. Provision for Income Taxes The provision for income taxes on income before income tax expense (benefit) consists of:
Provision for Income Tax Expense (Benefit) | Year Ended
February 26, 2021 | February 28, 2020 | February 22, 2019
Current income tax expense (benefit): |  |  |  |  |  |
Federal | $ | (30.4) |  |  | $ | 6.8 |  |  | $ | 18.4 |  |
State and local | 1.9 |  |  | 10.9 |  |  | 6.0 |  |
Foreign | 12.9 |  |  | 15.4 |  |  | 14.6 |  |
| (15.6) |  |  | 33.1 |  |  | 39.0 |  |
Deferred income tax expense (benefit): |  |  |  |  |  |
Federal | 13.7 |  |  | 10.3 |  |  | (3.6) |  |
State and local | (1.1) |  |  | (2.8) |  |  | 1.2 |  |
Foreign | 2.8 |  |  | 4.9 |  |  | 1.3 |  |
| 15.4 |  |  | 12.4 |  |  | (1.1) |  |
Income tax expense (benefit) | $ | (0.2) |  |  | $ | 45.5 |  |  | $ | 37.9 |  |
Income taxes were based on the following sources of income (loss) before income tax expense (benefit):
Source of Income (Loss) Before Income Tax Expense (Benefit) | Year Ended
February 26, 2021 | February 28, 2020 | February 22, 2019
Domestic | $ | (10.1) |  |  | $ | 195.8 |  |  | $ | 119.4 |  |
Foreign | 36.0 |  |  | 49.4 |  |  | 44.5 |  |
| $ | 25.9 |  |  | $ | 245.2 |  |  | $ | 163.9 |  |
The total income tax expense (benefit) we recognized is reconciled to that computed by applying the U.S. federal statutory tax rate of 21.0%, as follows:
Income Tax Provision Reconciliation | Year Ended
February 26, 2021 | February 28, 2020 | February 22, 2019
Tax expense at the U.S. federal statutory rate | $ | 5.4 |  |  | $ | 51.5 |  |  | $ | 34.4 |  |
State and local income taxes, net of federal | 0.6 |  |  | 6.4 |  |  | 5.7 |  |
Impact of the CARES Act | (11.7) |  |  | — |  |  | — |  |
Sale of PolyVision (1) | — |  |  | (11.6) |  |  | — |  |
Valuation allowance provisions and adjustments (2) | 0.4 |  |  | (1.3) |  |  | (1.3) |  |
Goodwill impairment charge (3) | 3.4 |  |  | — |  |  | — |  |
COLI income (4) | (2.7) |  |  | (1.4) |  |  | (1.6) |  |
Foreign operations, less applicable foreign tax credits (5) | 5.4 |  |  | 4.9 |  |  | 7.8 |  |
Impact of change to non-U.S. federal statutory tax rates (6) | 0.4 |  |  | (1.2) |  |  | (0.8) |  |
Officer compensation limitation | 1.9 |  |  | 1.1 |  |  | 1.0 |  |
Research tax credit | (3.0) |  |  | (2.9) |  |  | (2.9) |  |
Other | (0.3) |  |  | — |  |  | (4.4) |  |
Total income tax expense (benefit) recognized | $ | (0.2) |  |  | $ | 45.5 |  |  | $ | 37.9 |  |
________________________ (1)The tax basis of PolyVision exceeded the book equity of the entity. For U.S. federal tax purposes, this generated a capital loss and related benefit, which varied from the expected U.S. federal tax expense on the financial statement gain on disposal. (2)The valuation allowance provisions and adjustments are based on current year activity, which are further detailed below. (3)We recorded a goodwill impairment charge related to our Orangebox U.K. reporting unit which is non-deductible for tax purposes. (4)The increase in the cash surrender value of COLI policies, net of normal insurance expenses, plus maturity benefits are non-taxable. (5)The foreign operations, less applicable foreign tax credits, amounts include the rate differential between local statutory rates and the U.S. rate on foreign operations. (6)A cancellation of scheduled changes to the statutory tax rates in the U.K. and France resulted in the revaluation of certain deferred tax assets in those jurisdictions. Deferred Income Taxes The significant components of deferred income taxes are as follows:
Deferred Income Taxes | February 26, 2021 | February 28, 2020
Deferred income tax assets: |  |  |  |
Employee benefit plan obligations and deferred compensation | $ | 57.6 |  |  | $ | 68.9 |  |
Operating lease obligations | 62.7 |  |  | 64.2 |  |
Foreign and domestic net operating loss carryforwards | 45.2 |  |  | 39.1 |  |
Reserves and accruals | 15.1 |  |  | 17.1 |  |
Tax credit carryforwards | 22.0 |  |  | 19.1 |  |
Other, net | 15.0 |  |  | 17.1 |  |
Total deferred income tax assets | 217.6 |  |  | 225.5 |  |
Valuation allowances | (6.6) |  |  | (5.7) |  |
Net deferred income tax assets | 211.0 |  |  | 219.8 |  |
Deferred income tax liabilities: |  |  |  |
Right-of-use operating lease assets | 57.4 |  |  | 61.4 |  |
Property, plant and equipment | 32.3 |  |  | 28.6 |  |
Intangible assets | 13.0 |  |  | 9.8 |  |
Prepaid expenses | 2.0 |  |  | 2.2 |  |
Total deferred income tax liabilities | 104.7 |  |  | 102.0 |  |
Net deferred income taxes | $ | 106.3 |  |  | $ | 117.8 |  |
Net deferred income taxes is comprised of the following components: |  |  |  |
Deferred income tax assets—non-current | 113.3 |  |  | 124.6 |  |
Deferred income tax liabilities—non-current | 7.0 |  |  | 6.8 |  |
As of February 26, 2021, the valuation allowance of $6.6 included $3.5 relating to foreign deferred tax assets. In updating our assessment of the ultimate realization of deferred tax assets, we considered the following factors: •recent financial performance including cumulative losses, •the predictability of future income, •prudent and feasible tax planning strategies that could be implemented to protect the loss of the deferred tax assets and •the effect of reversing taxable temporary differences. Based on our evaluation of these factors, particularly cumulative losses, we were unable to assert that it is more likely than not that the deferred tax assets in our owned dealers and sales offices in France, Australia, Morocco and Hong Kong would be realized as of February 26, 2021. During 2021, we liquidated our owned dealer in Brazil, requiring the reversal of the valuation allowance on its deferred tax assets, which reduced tax expense by $1.0. During 2020, we determined that it was more likely than not that all of the deferred tax assets, including net operating losses, of our owned dealer in the U.K. would be utilized, and the reversal of the valuation allowance on these items reduced tax expense by $3.1. Also during 2020, we determined that it was not more likely than not that all of the deferred tax assets, including net operating losses, of our owned dealer in Australia would be utilized, and recorded a valuation allowance which increased tax expense by $1.2. We have the ability to repatriate foreign subsidiary earnings to our U.S. parent without incurring additional U.S. federal income tax. We have provided deferred income taxes where appropriate on earnings of subsidiaries expected to be distributed. However, we have not recorded deferred taxes on any remaining historical outside basis differences in non-U.S. subsidiaries as we continue to assert indefinite reinvestment on those basis differences that are not related to amounts previously taxed in the U.S. or undistributed earnings generated after 2018. Taxes Payable or Receivable Income taxes currently payable or receivable are reported on the Consolidated Balance Sheets as follows:
Income Taxes | February 26, 2021 | February 28, 2020
Other current assets: |  |  |  |
Income taxes receivable | $ | 49.5 |  |  | $ | 8.0 |  |
Other long-term assets: |  |  |  |
Income taxes receivable | $ | — |  |  | $ | 7.8 |  |
Accrued expenses: |  |  |  |
Income taxes payable | $ | 7.4 |  |  | $ | 13.9 |  |
Net Operating Loss and Tax Credit Carryforwards Operating loss and tax credit carryforwards expire as follows:
Fiscal Year Ending February | Net Operating Loss Carryforwards (Gross) | Net Operating Loss Carryforwards (Tax Effected) | Tax Credit Carryforwards
Federal | State | International | Federal | State | International | Total
2022 | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |
2023-2041 | 0.9 |  |  | 56.3 |  |  | 0.7 |  |  | 0.2 |  |  | 4.5 |  |  | 0.2 |  |  | 4.9 |  |  | 22.0 |  |
No expiration | — |  |  | — |  |  | 173.2 |  |  | — |  |  | — |  |  | 41.2 |  |  | 41.2 |  |  | — |  |
| $ | 0.9 |  |  | $ | 56.3 |  |  | $ | 173.9 |  |  | 0.2 |  |  | 4.5 |  |  | 41.4 |  |  | 46.1 |  |  | 22.0 |  |
Valuation allowances |  |  |  |  |  |  | — |  |  | — |  |  | (3.0) |  |  | (3.0) |  |  | (3.1) |  |
Net benefit |  |  |  |  |  |  | $ | 0.2 |  |  | $ | 4.5 |  |  | $ | 38.4 |  |  | $ | 43.1 |  |  | $ | 18.9 |  |
Future tax benefits for net operating loss and tax credit carryforwards are recognized to the extent that realization of these benefits is considered more likely than not. It is considered more likely than not that a benefit of $62.0 will be realized on these net operating loss and tax credit carryforwards. This determination is based on the expectation that related operations will be sufficiently profitable or various tax, business and other planning strategies available to us will enable utilization of the carryforwards. We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. Valuation allowances are recorded to the extent realization of these carryovers is not more likely than not. Uncertain Tax Positions We are subject to taxation in the U.S. and various states and foreign jurisdictions with varying statutes of limitation. Tax years that remain subject to examination by major tax jurisdictions include: the U.S. 2016 through 2021 (certain U.S. tax years are open to assessment due to the carryback of tax losses to those years), Canada 2017 through 2021, France 2015 through 2021 and Germany 2014 through 2021. We adjust these reserves, as well as the related interest and penalties, in light of changing facts and circumstances. We are audited by the U.S. Internal Revenue Service under the Compliance Assurance Process (“CAP”). Under CAP, the U.S. Internal Revenue Service works with large business taxpayers to identify and resolve issues prior to the filing of a tax return. Accordingly, we record minimal liabilities for U.S. federal uncertain tax positions. We recognize interest and penalties associated with uncertain tax positions in income tax expense (benefit), and these amounts were not material in 2021, 2020 or 2019. A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows:
Unrecognized Tax Benefits | Year Ended
February 26, 2021 | February 28, 2020 | February 22, 2019
Balance as of beginning of period | $ | 2.0 |  |  | $ | 2.0 |  |  | $ | 2.2 |  |
Gross decreases—tax positions in prior period | — |  |  | — |  |  | — |  |
Currency translation adjustment | 0.3 |  |  | — |  |  | (0.2) |  |
Balance as of end of period | $ | 2.3 |  |  | $ | 2.0 |  |  | $ | 2.0 |  |
We have taken tax positions in a non-U.S. jurisdiction that do not meet the more likely than not test required under the uncertain tax position accounting guidance. Since the tax positions have increased net operating loss carryforwards, the underlying deferred tax asset is shown net of a $2.3 liability for uncertain tax positions as of February 26, 2021. No other amounts are recorded as a liability for uncertain tax positions, including interest and penalties, on the Consolidated Balance Sheets. Unrecognized tax benefits of $2.3, if favorably resolved, would be recorded as an income tax benefit. We do not expect the amount of unrecognized tax benefits will significantly change due to expiring statutes or audit activity in the next twelve months.

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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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