XML 32 R18.htm IDEA: XBRL DOCUMENT v3.22.2
Income Taxes
 12 Months Ended
Apr. 30, 2022
Income Tax Disclosure [Abstract]  
Income Taxes

Note 11. Income Taxes

Income tax provision

The U.S. and foreign components of income before income taxes and the provision for income taxes are as follows:

 

 

Fiscal Year Ended

 

 

 

April 30, 2022

 

 

May 1, 2021

 

 

May 2, 2020

 

(in millions)

 

(52 Weeks)

 

 

(52 Weeks)

 

 

(53 Weeks)

 

Income before income taxes:

 

 

 

 

 

 

 

 

 

U.S.

 

$

31.2

 

 

$

28.3

 

 

$

47.3

 

Foreign

 

 

87.3

 

 

 

106.6

 

 

 

101.4

 

Total income before income taxes

 

$

118.5

 

 

$

134.9

 

 

$

148.7

 

Income tax expense:

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

U.S. (federal and state)

 

$

5.2

 

 

$

5.8

 

 

$

5.1

 

Foreign

 

 

13.5

 

 

 

15.9

 

 

 

12.8

 

Total current expense

 

 

18.7

 

 

 

21.7

 

 

 

17.9

 

Deferred:

 

 

 

 

 

 

 

 

 

U.S. (federal and state)

 

 

0.2

 

 

 

1.3

 

 

 

6.1

 

Foreign

 

 

(2.6

)

 

 

(10.4

)

 

 

1.3

 

Total deferred (benefit) expense

 

 

(2.4

)

 

 

(9.1

)

 

 

7.4

 

Total income tax expense

 

$

16.3

 

 

$

12.6

 

 

$

25.3

 

A reconciliation of income tax expense to the U.S. statutory federal income tax rate of 21% is as follows:

 

 

Fiscal Year Ended

 

(in millions)

 

April 30, 2022

 

 

May 1, 2021

 

 

May 2, 2020

 

Income tax at statutory rate

 

$

24.9

 

 

$

28.3

 

 

$

31.2

 

Effect of:

 

 

 

 

 

 

 

 

 

State income taxes, net of federal benefit

 

 

0.6

 

 

 

0.1

 

 

 

1.5

 

Withholding taxes

 

 

2.5

 

 

 

2.7

 

 

 

2.3

 

Non-deductible compensation

 

 

2.1

 

 

 

0.5

 

 

 

0.2

 

Foreign tax differential

 

 

(8.1

)

 

 

(10.8

)

 

 

(8.3

)

U.S. tax on foreign income

 

 

(1.7

)

 

 

2.8

 

 

 

(1.0

)

Foreign investment tax credit

 

 

—

 

 

 

(7.2

)

 

 

(0.8

)

Research and development

 

 

(2.6

)

 

 

(2.2

)

 

 

(0.6

)

Change in tax reserve

 

 

(0.1

)

 

 

0.1

 

 

 

2.2

 

Change in valuation allowance

 

 

(2.0

)

 

 

1.8

 

 

 

0.8

 

Tax rate change, foreign

 

 

0.1

 

 

 

(0.1

)

 

 

(0.1

)

Other, net

 

 

0.6

 

 

 

(3.4

)

 

 

(2.1

)

Income tax expense

 

$

16.3

 

 

$

12.6

 

 

$

25.3

 

Effective income tax rate

 

 

13.8

%

 

 

9.3

%

 

 

17.0

%

 

In fiscal 2022, the effective income tax rate was favorably impacted by the amount of income earned in foreign jurisdictions with lower tax rates and the release of a valuation allowance of $2.0 million due to a tax law change. In addition, the Company benefited from less U.S. tax on foreign income of $1.7 million attributable to lower earnings in non-U.S. jurisdictions which was partially offset with non-deductible compensation of $2.1 million.

In fiscal 2021, the effective income tax rate was favorably impacted by the amount of income earned in foreign jurisdictions with lower tax rates, tax credits and various deductions allowed in foreign jurisdictions. The Company received a benefit of approximately $7.2 million related to a favorable tax ruling in a foreign jurisdiction.

In fiscal 2020, the effective income tax rate was primarily affected by the amount of income earned in foreign jurisdictions with lower tax rates, the amount of tax credits earned, withholding taxes, tax reserves, and the current taxation of foreign earnings. The Company had a favorable impact from operations in foreign countries with tax rates lower than the U.S. statutory tax rate. The Company earned $0.8 million in investment tax credits primarily related to an investment in qualified expenditures. This was offset by a change in tax reserves of $2.2 million and foreign withholding taxes of $2.3 million.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. ThCARES Act, among other things, includes various income and payroll tax provisions, modifications to federal net operating loss rules, business interest deduction limitations, and bonus depreciation eligibility for qualified improvement property. The CARES Act did not significantly impact the fiscal 2021 consolidated financial statements.

Deferred income taxes and valuation allowances

Significant components of the Company's deferred income tax assets and liabilities were as follows:

(in millions)

 

April 30, 2022

 

 

May 1, 2021

 

Deferred tax liabilities:

 

 

 

 

 

 

Fixed assets

 

$

(4.3

)

 

$

(2.9

)

Amortization

 

 

(48.1

)

 

 

(49.1

)

Foreign tax

 

 

(3.1

)

 

 

(2.0

)

Lease assets

 

 

(4.5

)

 

 

(4.9

)

Derivative financial instruments

 

 

(1.1

)

 

 

—

 

Other liabilities

 

 

(0.6

)

 

 

(0.4

)

Deferred tax liabilities, gross

 

 

(61.7

)

 

 

(59.3

)

Deferred tax assets:

 

 

 

 

 

 

Deferred compensation and stock award amortization

 

 

6.9

 

 

 

6.9

 

Inventory

 

 

3.5

 

 

 

2.7

 

Lease liabilities

 

 

4.7

 

 

 

5.3

 

Derivative financial instruments

 

 

—

 

 

 

1.6

 

Foreign investment tax credit

 

 

29.8

 

 

 

34.7

 

Net operating loss carryforwards

 

 

17.4

 

 

 

15.6

 

Foreign tax credits

 

 

1.3

 

 

 

1.4

 

Other

 

 

3.4

 

 

 

3.3

 

Deferred tax assets, gross

 

 

67.0

 

 

 

71.5

 

Less valuation allowance

 

 

(6.8

)

 

 

(9.3

)

Deferred tax assets, net of valuation allowance

 

 

60.2

 

 

 

62.2

 

Net deferred tax (liability) asset

 

$

(1.5

)

 

$

2.9

 

Balance sheet classification:

 

 

 

 

 

 

Long-term asset

 

 

36.8

 

 

 

41.2

 

Long-term liability

 

 

(38.3

)

 

 

(38.3

)

Net deferred tax (liability) asset

 

$

(1.5

)

 

$

2.9

 

 

The Company recorded a net deferred tax liability for U.S. and foreign income taxes of $1.5 million for fiscal 2022 and a net deferred tax asset of $2.9 million for fiscal 2021. In assessing the realizability of the deferred tax assets, the Company considers whether it is more likely than not that some portion or the entire deferred tax asset will be realized. Ultimately, the realization of the deferred tax asset is dependent upon the generation of sufficient earnings in future periods in which these temporary items can be utilized. In that regard, the Company has a valuation allowance of $6.8 million related to federal, state, and foreign net operating loss carryovers and other credits and determined that these deferred tax assets did not reach the more likely than not realizable standard.

As of April 30, 2022, the Company had available $36.3 million of federal, $68.9 million of state and $14.9 million of foreign gross operating loss carryforwards with a valuation allowance of $24.2 million for federal, $24.1 million for state and $0 for foreign. The U.S. federal net operating loss carryforwards will substantially start to expire in 2026 and beyond. The state net operating loss carryforwards will substantially start to expire in 2032 and beyond.

Total unused credits are $31.2 million as of April 30, 2022, the majority of which can be carried forward indefinitely.

Indefinite reinvestment

The Company has not provided for deferred income taxes on the undistributed earnings of foreign subsidiaries except for certain identified amounts. The amount the Company expects to repatriate is based on a variety of factors including current year earnings of the foreign subsidiaries, foreign investment needs, and U.S. cash flow considerations. The Company considers the remaining undistributed foreign earnings that are not specifically identified to be indefinitely reinvested of $354.3 million. It is not practicable to determine the amount of deferred tax liability on such foreign earnings as the actual tax liability is dependent on circumstances that exist when the remittance occurs.

Unrecognized tax benefits

The Company operates in multiple jurisdictions throughout the world and the income tax returns of its subsidiaries in various jurisdictions are subject to periodic examination by the tax authorities. The Company regularly assesses the status of these examinations and the various outcomes to determine the adequacy of its provision for income taxes. The amount of gross unrecognized tax benefits totaled $5.1 million and $5.3 million as of April 30, 2022 and May 1, 2021, respectively. These amounts represent the amount of unrecognized benefits that, if recognized, would favorably impact the effective tax rate if resolved in the Company’s favor. The Company recognizes interest and penalties related to income tax uncertainties in income tax expense. Accrued interest and penalties were $0.2 million at both April 30, 2022 and May 1, 2021.

The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits:

(in millions)

 

April 30, 2022

 

 

May 1, 2021

 

Balance at beginning of period

 

$

5.3

 

 

$

5.2

 

Increases for positions related to the current year

 

 

—

 

 

 

0.2

 

Lapsing of statutes of limitations

 

 

(0.2

)

 

 

(0.1

)

Balance at end of period

 

$

5.1

 

 

$

5.3

 

 

At April 30, 2022, it is not possible to reasonably estimate the expected change to the total amount of unrecognized tax benefits in the next twelve months.

The U.S. federal statute of limitations remains open for fiscal years ended on or after 2019 and for state tax purposes on or after fiscal year 2013. Tax authorities may have the ability to review and adjust net operating losses or tax credits that were generated prior to these fiscal years. In the major foreign jurisdictions, fiscal 2014 and subsequent periods remain open and subject to examination by taxing authorities.