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INCOME TAXES
 3 Months Ended
Aug. 29, 2025
INCOME TAXES  
INCOME TAXES

5. INCOME TAXES  

 

The following table provides details of income taxes: 

 

 

 

Three Months Ended

 

 

 

August 29,

 

 

August 30,

 

(In thousands)

 

2025

 

 

2024

 

Income (loss) before income tax expense (benefit)

 

$(2,836)

 

$814

 

Income tax expense (benefit)

 

$(752)

 

$154

 

Effective tax rate

 

 

26.5%

 

 

18.9%

 

The Company’s effective tax rate varies from the U.S. federal statutory rate of 21% primarily due to the tax deduction from stock-based compensation. During interim periods, tax expenses are accrued for jurisdictions that are anticipated to be profitable for fiscal 2026.

 

For the three months ended August 29, 2025, the Company utilized the discrete effective tax rate method as allowed by Accounting Standards Codification (“ASC”) 740-270-30-18 to compute the interim tax provision for the U.S. jurisdiction. Considering the near break-even level of pretax income (loss) forecasted for the year and significant permanent differences, relatively small changes in estimates of pretax income would result in significant volatility in the estimated annual effective tax rate. As a result of this potential volatility, the Company computed the interim tax provision on a year-to-date discrete basis for U.S. operations. For the three months ended August 29, 2025, the Company recognized a tax benefit due to year-to-date losses in the United States. Tax expense for the three months ended August 30, 2024 was primarily due to taxable income in the U.S. and in profitable foreign subsidiaries.

 

 The Company accounts for uncertain tax positions consistent with authoritative guidance. The guidance prescribes a “more likely than not” recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income taxes.