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Income Taxes | 12 Months Ended
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Feb. 23, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES 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 23, 2024 | February 24, 2023 | February 25, 2022
Current income tax expense (benefit): |  |  |  |  |  |
Federal | $ | 6.6 |  |  | $ | 1.3 |  |  | $ | — |  |
State and local | 3.5 |  |  | 0.8 |  |  | 1.0 |  |
Foreign | 14.9 |  |  | 14.9 |  |  | 10.0 |  |
| 25.0 |  |  | 17.0 |  |  | 11.0 |  |
Deferred income tax expense (benefit): |  |  |  |  |  |
Federal | (0.1) |  |  | (2.3) |  |  | (14.0) |  |
State and local | (1.8) |  |  | 1.4 |  |  | (1.3) |  |
Foreign | 2.9 |  |  | 0.2 |  |  | 1.9 |  |
| 1.0 |  |  | (0.7) |  |  | (13.4) |  |
Income tax expense (benefit) | $ | 26.0 |  |  | $ | 16.3 |  |  | $ | (2.4) |  |
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 23, 2024 | February 24, 2023 | February 25, 2022
Domestic | $ | 42.3 |  |  | $ | 2.1 |  |  | $ | (38.0) |  |
Foreign | 64.8 |  |  | 49.5 |  |  | 39.6 |  |
| $ | 107.1 |  |  | $ | 51.6 |  |  | $ | 1.6 |  |
For income tax purposes, our domestic operations act as the global principal in our supply chain with routine income earned by our foreign operations for contract manufacturing and sales and distribution functions. The result is that our foreign operations earn consistent income, and our domestic operations earn the resulting variable residual income. The total income tax expense (benefit) 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 23, 2024 | February 24, 2023 | February 25, 2022
Tax expense at the U.S. federal statutory rate | $ | 22.5 |  |  | $ | 10.8 |  |  | $ | 0.3 |  |
State and local income taxes, net of federal tax effect | 1.3 |  |  | 2.0 |  |  | (0.2) |  |
Foreign operations, less applicable foreign tax credits (1) | 5.9 |  |  | 4.0 |  |  | 3.1 |  |
Contingent consideration (2) | (2.0) |  |  | 0.9 |  |  | — |  |
Valuation allowance provisions and adjustments (3) | 1.9 |  |  | 1.0 |  |  | (2.7) |  |
COLI income (4) | (2.2) |  |  | (0.4) |  |  | (1.3) |  |
Impact of change to non-U.S. federal statutory tax rates (5) | — |  |  | (0.1) |  |  | (0.3) |  |
Officer compensation limitation | 1.9 |  |  | 1.0 |  |  | 1.3 |  |
Research tax credit | (3.5) |  |  | (2.9) |  |  | (2.4) |  |
Other U.S. domestic tax credits | (0.3) |  |  | (0.3) |  |  | (0.7) |  |
Stock compensation | 0.4 |  |  | 0.4 |  |  | 0.3 |  |
Other | 0.1 |  |  | (0.1) |  |  | 0.2 |  |
Total income tax expense (benefit) recognized | $ | 26.0 |  |  | $ | 16.3 |  |  | $ | (2.4) |  |
________________________ (1)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. (2)In 2024, we recorded a decrease in the fair value of the contingent consideration liability related to the acquisition of Viccarbe, which is nontaxable. In 2023, we recorded an increase in the fair value of this liability, which is non-deductible for tax purposes. (3)The valuation allowance provisions and adjustments are based on current year activity, which are further detailed below. (4)The increase in the cash surrender value of COLI policies, net of normal insurance expenses, plus maturity benefits are non-taxable. (5)Changes to the statutory tax rates in 2023 and 2022, primarily 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 23, 2024 | February 24, 2023
Deferred income tax assets: |  |  |  |
Employee benefit plan obligations and deferred compensation | $ | 51.9 |  |  | $ | 52.5 |  |
Operating lease obligations | 47.6 |  |  | 55.0 |  |
Foreign and domestic net operating loss carryforwards | 33.0 |  |  | 35.8 |  |
Capitalized research expenditures | 23.9 |  |  | 16.4 |  |
Reserves and allowances | 18.6 |  |  | 18.0 |  |
Tax credit carryforwards | 12.7 |  |  | 17.9 |  |
Other, net | 6.5 |  |  | 14.4 |  |
Total deferred income tax assets | 194.2 |  |  | 210.0 |  |
Valuation allowances | (6.2) |  |  | (4.3) |  |
Net deferred income tax assets | 188.0 |  |  | 205.7 |  |
Deferred income tax liabilities: |  |  |  |
Right-of-use operating lease assets | 43.9 |  |  | 50.9 |  |
Property, plant and equipment | 17.4 |  |  | 28.9 |  |
Intangible assets | 18.1 |  |  | 16.6 |  |
Total deferred income tax liabilities | 79.4 |  |  | 96.4 |  |
Net deferred income taxes | $ | 108.6 |  |  | $ | 109.3 |  |
Net deferred income taxes is comprised of the following components: |  |  |  |
Deferred income tax assets—non-current | 115.8 |  |  | 117.3 |  |
Deferred income tax liabilities—non-current | 7.2 |  |  | 8.0 |  |
As of February 23, 2024, the valuation allowances of $6.2 related to foreign deferred tax assets. In updating our assessment of the realizability of deferred tax assets, we considered the following factors: •recent financial performance, including cumulative losses where applicable, •the predictability of future income during the relevant carryforward period, •prudent and feasible tax planning strategies that could be implemented to utilize 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 a manufacturing facility in China and sales offices in Australia, Hong Kong and Morocco would be realized as of February 23, 2024. We have the ability to repatriate foreign subsidiary earnings to our U.S. parent without incurring additional U.S. federal income tax beyond foreign currency exchange impacts. We have recorded deferred income taxes related to withholding and other taxes where appropriate on earnings of subsidiaries not expected to be permanently reinvested. 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. Taxes Payable or Receivable Income taxes currently payable or receivable are reported on the Consolidated Balance Sheets as follows:
Income Taxes | February 23, 2024 | February 24, 2023
Other current assets: |  |  |  |
Income taxes receivable | $ | 11.5 |  |  | $ | 5.3 |  |
Other current liabilities: |  |  |  |
Income taxes payable | $ | 2.6 |  |  | $ | 4.8 |  |
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
2025 | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |
2026-2044 | 0.8 |  |  | 22.5 |  |  | 7.6 |  |  | 0.2 |  |  | 1.4 |  |  | 1.9 |  |  | 3.5 |  |  | 12.7 |  |
No expiration | — |  |  | 3.7 |  |  | 120.2 |  |  | — |  |  | 0.2 |  |  | 29.7 |  |  | 29.9 |  |  | — |  |
| $ | 0.8 |  |  | $ | 26.2 |  |  | $ | 127.8 |  |  | 0.2 |  |  | 1.6 |  |  | 31.6 |  |  | 33.4 |  |  | 12.7 |  |
Valuation allowances |  |  |  |  |  |  | — |  |  | — |  |  | (4.3) |  |  | (4.3) |  |  | — |  |
Net benefit |  |  |  |  |  |  | $ | 0.2 |  |  | $ | 1.6 |  |  | $ | 27.3 |  |  | $ | 29.1 |  |  | $ | 12.7 |  |
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 $41.8 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 carryforwards 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. 2023 and 2024, Canada 2020 through 2024, France 2020 through 2024 and Germany 2015 through 2024. 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 2024, 2023 or 2022. A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows:
Unrecognized Tax Benefits | Year Ended
February 23, 2024 | February 24, 2023 | February 25, 2022
Balance as of beginning of period | $ | 2.0 |  |  | $ | 2.1 |  |  | $ | 2.3 |  |
Gross decreases—tax positions in prior period | — |  |  | — |  |  | — |  |
Currency translation adjustment | — |  |  | (0.1) |  |  | (0.2) |  |
Balance as of end of period | $ | 2.0 |  |  | $ | 2.0 |  |  | $ | 2.1 |  |
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 $2.0 liability for uncertain tax positions as of February 23, 2024. No other material amounts are recorded as a liability for uncertain tax positions, including interest and penalties, on the Consolidated Balance Sheets. Unrecognized tax benefits of $2.0, if favorably resolved, would be recorded as an income tax benefit. We do not expect the amount of unrecognized tax benefits to significantly change due to expiring statutes or audit activity in the next twelve months.

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