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Income Taxes | 12 Months Ended
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Mar. 02, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Earnings before income taxes consisted of the following:
(In thousands) |  | 2024 |  | 2023 |  | 2022
United States |  | $ | 133,185 |  |  | $ | 126,859 |  |  | $ | 70,039 |
International |  | (3,932) |  |  | (10,238) |  |  | (56,170) |
Earnings before income taxes |  | $ | 129,253 |  |  | $ | 116,621 |  |  | $ | 13,869 |
The components of income tax expense for each of the last three fiscal years are as follows:
(In thousands) |  | 2024 |  | 2023 |  | 2022
Current |  |  |  |  |  |
Federal |  | $ | 32,900 |  |  | $ | 9,621 |  |  | $ | 13,806 |
State and local |  | 6,172 |  |  | 7,670 |  |  | 4,823 |
International |  | 286 |  |  | 231 |  |  | 39 |
Total current |  | 39,358 |  |  | 17,522 |  |  | 18,668 |
Deferred |  |  |  |  |  |
Federal |  | (8,361) |  |  | (5,120) |  |  | (1,528) |
State and local |  | (1,387) |  |  | (2,487) |  |  | (4,270) |
International |  | — |  |  | 422 |  |  | (2,158) |
Total deferred |  | (9,748) |  |  | (7,185) |  |  | (7,956) |
Total non-current tax (benefit) expense |  | 30 |  |  | 2,177 |  |  | (329) |
Total income tax expense |  | $ | 29,640 |  |  | $ | 12,514 |  |  | $ | 10,383 |
Income tax payments, net of refunds, were $33.0 million, $27.4 million and $8.2 million in fiscal 2024, 2023 and 2022, respectively. The following table provides a reconciliation of the statutory federal income tax rate to our consolidated effective tax rates:
|  | 2024 |  | 2023 |  | 2022
Statutory federal income tax rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State and local income taxes, net of federal tax benefit |  | 2.4 |  |  | 3.5 |  |  | 16.4 |
Foreign tax rate differential |  | (0.2) |  |  | (0.2) |  |  | (15.4) |
Valuation allowance |  | 1.0 |  |  | (4.7) |  |  | 63.2 |
Nontaxable gain (loss) on life insurance policies |  | — |  |  | 0.2 |  |  | 1.2 |
Deduction for foreign derived intangible income |  | (0.3) |  |  | (0.2) |  |  | (2.6) |
Research & development tax credit |  | (1.3) |  |  | (1.5) |  |  | (9.4) |
§162(m) Executive Compensation Limitation |  | 0.8 |  |  | 0.8 |  |  | 3.5 |
Tax benefit of share based awards |  | (0.6) |  |  | (0.8) |  |  | (5.2) |
Worthless stock deduction |  | — |  |  | (6.0) |  |  | — |
Other, net |  | 0.1 |  |  | (1.4) |  |  | 2.2 |
Consolidated effective income tax rate |  | 22.9 | % |  | 10.7 | % |  | 74.9 | %
The effective tax rate for fiscal 2024 increased 12.2 percentage points from fiscal 2023, primarily due to the impact of discrete items in fiscal 2023. Deferred tax assets and deferred tax liabilities at March 2, 2024 and February 25, 2023 were:
(In thousands) |  | 2024 |  | 2023
Deferred tax assets |  |  |  |
Accrued expenses |  | $ | 4,565 |  |  | $ | 1,862 |
Deferred compensation |  | 11,138 |  |  | 9,666 |
Section 174 capitalized costs |  | 12,450 |  |  | 12,222 |
Goodwill and other intangibles |  | 2,342 |  |  | 4,316 |
Liability for unrecognized tax benefits |  | 2,122 |  |  | 1,884 |
Unearned income |  | 7,467 |  |  | 11,007 |
Operating lease liabilities |  | 13,064 |  |  | 13,639 |
Net operating losses and tax credits |  | 12,332 |  |  | 11,459 |
Other |  | 4,773 |  |  | 3,656 |
Total deferred tax assets |  | 70,253 |  |  | 69,711 |
Less: valuation allowance |  | (10,803) |  |  | (9,048) |
Deferred tax assets, net of valuation allowance |  | 59,450 |  |  | 60,663 |
Deferred tax liabilities |  |  |  |
Depreciation |  | 20,510 |  |  | 21,965 |
Operating lease, right-of-use assets |  | 11,955 |  |  | 12,660 |
Bad debt |  | 8,291 |  |  | 8,262 |
Prepaid expenses |  | 2,131 |  |  | 2,467 |
Other |  | 2,520 |  |  | 3,546 |
Total deferred tax liabilities |  | 45,407 |  |  | 48,900 |
Net deferred tax assets (liabilities) |  | $ | 14,043 |  |  | $ | 11,763 |
The Company has state and foreign net operating loss carryforwards with a tax effect of $12.3 million. A valuation allowance of $9.0 million has been established for these net operating loss carryforwards due to the uncertainty of the use of the tax benefits in future periods. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing Deferred Tax Assets. This has resulted in valuation allowances being recorded against Deferred Tax Assets in prior years in Brazil, Canada and various states. The Company files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions, Canada, Brazil and other international jurisdictions. The Company is no longer subject to U.S. federal tax examinations or state and local tax examinations for years prior to fiscal 2021. The Company is not currently under U.S. federal examination for years subsequent to fiscal 2020, and there is very limited audit activity of the Company’s income tax returns in U.S. state jurisdictions or international jurisdictions. The Company considers the earnings of its non-U.S. subsidiaries to be indefinitely invested outside of the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and specific plans for reinvestment of those subsidiary earnings. Should the Company decide to repatriate the foreign earnings, it would need to adjust the income tax provision in the period it was determined that the earnings will no longer be indefinitely invested outside the U.S. If we were to prevail on all unrecognized tax benefits recorded, $3.3 million, $3.8 million and $1.7 million for fiscal 2024, 2023 and 2022, respectively, would benefit the effective tax rate. Also included in the balance of unrecognized tax benefits for fiscal 2024, 2023 and 2022 are $1.8 million, $1.5 million, and $1.7 million, respectively, of tax benefits that, if recognized, would result in decreases to deferred taxes. Penalties and interest related to unrecognized tax benefits are recorded in income tax expense. For fiscal 2024, 2023 and 2022, we accrued penalties and interest related to unrecognized tax benefits of $0.6 million, $0.4 million, and $0.3 million, respectively. The following table provides a reconciliation of the total amounts of gross unrecognized tax benefits:
(In thousands) |  | 2024 |  | 2023 |  | 2022
Gross unrecognized tax benefits at beginning of year |  | $ | 5,312 |  |  | $ | 3,321 |  |  | $ | 3,755 |
Gross increases in tax positions for prior years |  | 91 |  |  | 2,298 |  |  | 108 |
Gross decreases in tax positions for prior years |  | (65) |  |  | (255) |  |  | (145) |
Gross increases based on tax positions related to the current year |  | 579 |  |  | 291 |  |  | 420 |
Gross decreases based on tax positions related to the current year |  | — |  |  | (27) |  |  | — |
Settlements |  | (354) |  |  | — |  |  | (147) |
Statute of limitations expiration |  | (510) |  |  | (316) |  |  | (670) |
Gross unrecognized tax benefits at end of year |  | $ | 5,053 |  |  | $ | 5,312 |  |  | $ | 3,321 |
In December 2021, the OECD issued model rules for a new global minimum tax framework (“Pillar Two”), and various governments around the world have issued, or are in the process of issuing, legislation to implement these rules. The Company is within the scope of the OECD Pillar Two model rules and is assessing the impact thereof. As of March 4, 2024, we believe the implementation of these rules will not have a material impact on our financial results.

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