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Income Taxes | 12 Months Ended
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May 31, 2025
Income Tax Disclosure [Abstract] |
Income Taxes | 9. INCOME TAXES (Loss) income before income taxes included the following components (in thousands):
|  | Fiscal Year Ended |
|  | May 31, 2025 |  |  | June 1, 2024 |  |  | May 27, 2023 |
United States |  | $ | (5,912 | ) |  | $ | (3,274 | ) |  | $ | 22,258 |
Foreign |  |  | 4,381 |  |  |  | 3,431 |  |  |  | 2,772 |
(Loss) income before income taxes |  | $ | (1,531 | ) |  | $ | 157 |  |  | $ | 25,030 |
The (benefit) provision for income taxes for fiscal 2025, fiscal 2024 and fiscal 2023 consisted of the following (in thousands):
|  | Fiscal Year Ended |
|  | May 31, 2025 |  |  | June 1, 2024 |  |  | May 27, 2023 |
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | 1,858 |  |  | $ | (2,020 | ) |  | $ | 954 |
State |  |  | 45 |  |  |  | (141 | ) |  |  | 1,212 |
Foreign |  |  | 966 |  |  |  | 1,235 |  |  |  | 547 |
Total current |  |  | 2,869 |  |  |  | (926 | ) |  |  | 2,713 |
Deferred: |  |  |  |  |  |  |  |  |
Federal |  |  | (3,764 | ) |  |  | (26 | ) |  |  | — |
State |  |  | 595 |  |  |  | 1,007 |  |  |  | — |
Foreign |  |  | (88 | ) |  |  | 41 |  |  |  | (16 | )
Total deferred |  |  | (3,257 | ) |  |  | 1,022 |  |  |  | (16 | )
Income tax (benefit) provision |  | $ | (388 | ) |  | $ | 96 |  |  | $ | 2,697 |
The differences between income taxes at the U.S. federal statutory income tax rate of 21.0% for fiscal 2025, fiscal 2024 and fiscal 2023 and the reported income tax provision for fiscal 2025, fiscal 2024 and fiscal 2023, are summarized as follows:
|  | Fiscal Year Ended |
|  | May 31, 2025 |  |  | June 1, 2024 |  |  | May 27, 2023 |
Federal statutory rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
Effect of: |  |  |  |  |  |  |  |  |
State income taxes, net of federal tax benefit |  |  | 16.8 |  |  |  | (90.1 | ) |  |  | 3.6 |
Foreign income inclusion |  |  | (3.2 | ) |  |  | 149.0 |  |  |  | 0.5 |
Foreign taxes at other rates |  |  | (10.8 | ) |  |  | 189.0 |  |  |  | 0.4 |
Permanent tax differences |  |  | (3.0 | ) |  |  | (93.0 | ) |  |  | 0.1 |
Tax reserves |  |  | (18.2 | ) |  |  | 63.7 |  |  |  | 0.1 |
Change in valuation allowance for deferred tax assets |  |  | (40.3 | ) |  |  | 548.6 |  |  |  | (7.0 | )
Foreign return to provision adjustments |  |  | 13.5 |  |  |  | 179.9 |  |  |  | (0.7 | )
Restricted stock |  |  | 3.3 |  |  |  | (33.6 | ) |  |  | (3.1 | )
Research and development credit |  |  | 28.9 |  |  |  | (302.1 | ) |  |  | (3.7 | )
U.S. return to provision adjustments |  |  | 18.1 |  |  |  | (648.6 | ) |  |  | — |
Other |  |  | (0.7 | ) |  |  | 77.6 |  |  |  | (0.4 | )
Effective tax rate |  |  | 25.4 | % |  |  | 61.4 | % |  |  | 10.8 | %
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Our deferred tax assets and liabilities reflect operations as of May 31, 2025 and June 1, 2024. Significant components were as follows (in thousands):
|  | Fiscal Year Ended |
|  | May 31, 2025 |  |  | June 1, 2024 |
Deferred tax assets: |  |  |  |  |  |
Net operating loss carryforwards - foreign and domestic |  | $ | 1,969 |  |  | $ | 1,940 |
Inventory valuations |  |  | 1,883 |  |  |  | 1,475 |
Goodwill |  |  | 107 |  |  |  | 895 |
Research and Development tax credits |  |  | 125 |  |  |  | — |
Deferred revenue |  |  | 319 |  |  |  | — |
Severance reserve |  |  | 154 |  |  |  | 131 |
Foreign capital loss |  |  | 1,063 |  |  |  | 949 |
Section 174 capitalization |  |  | 3,643 |  |  |  | 2,305 |
Other |  |  | 3,325 |  |  |  | 1,926 |
Subtotal |  |  | 12,588 |  |  |  | 9,621 |
Valuation allowance - foreign and domestic |  |  | (2,804 | ) |  |  | (2,116 | )
Net deferred tax assets after valuation allowance |  |  | 9,784 |  |  |  | 7,505 |
Deferred tax liabilities: |  |  |  |  |  |
Accelerated depreciation |  |  | (1,120 | ) |  |  | (2,071 | )
Tax on undistributed earnings |  |  | — |  |  |  | (24 | )
Other |  |  | (1 | ) |  |  | — |
Subtotal |  |  | (1,121 | ) |  |  | (2,095 | )
Net deferred tax assets |  | $ | 8,663 |  |  | $ | 5,410 |
Supplemental disclosure of net deferred tax assets, excluding valuation allowance: |  |  |  |  |  |
Domestic |  | $ | 10,205 |  |  | $ | 6,405 |
Foreign |  |  | 1,263 |  |  |  | 1,121 |
Total |  | $ | 11,468 |  |  | $ | 7,526 |
During fiscal 2025, the Company recorded Research and Development ("R&D") tax credits of $0.4 million. These credits represent the expected U.S. federal credits to be claimed for fiscal 2025. Net deferred tax assets related to domestic state net operating loss ("NOL") carryforwards amounted to approximately $1.9 million as of May 31, 2025 and $1.8 million as of June 1, 2024. Net deferred tax assets related to foreign NOL carryforwards were $0.1 million as of both May 31, 2025 and June 1, 2024 with various or indefinite expiration dates. During the fourth quarter of fiscal 2025 we increased the valuation allowance on the state net operating losses by $0.6 million resulting in a total valuation allowance against state net operating losses of $1.7 million. We have historically determined that undistributed earnings of our foreign subsidiaries, to the extent of cash available, will be repatriated to the U.S. The deferred tax liability on the outside basis difference is now primarily withholding tax on future dividend distributions. There was no deferred tax liability related to undistributed earnings of our foreign subsidiaries in fiscal 2025 and less than $0.1 million in fiscal 2024. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to support a more likely than not assertion that its deferred tax assets will be realized. A significant component of objective evidence evaluated was the cumulative income or loss incurred in each jurisdiction over the three-year period ended May 31, 2025. We considered other positive evidence in determining the need for a valuation allowance in the U.S. including the subpart F and GILTI inclusions of our foreign earnings, the changes in our business performance in recent years and the utilization of federal NOLs. The weight of this positive evidence is sufficient to outweigh other negative evidence in evaluating our need for a valuation allowance in the U.S. federal jurisdiction. As a result of the positive evidence outweighing the negative evidence for the year ended May 31, 2025, no additional valuation allowance on the U.S. federal deferred tax items was recorded. As of May 31, 2025, we recorded an additional $0.6 million valuation allowance on state NOLs as there was more negative evidence which limited the Company’s ability to utilize the state NOLs, including the anticipated expiration of some state NOLs prior to utilization and legislation restrictions for some states. As of May 31, 2025, a valuation allowance of $2.8 million was recorded, representing the portion of the deferred tax asset that management does not believe is more likely than not to be realized. The valuation allowance as of June 1, 2024 was $2.1 million. The valuation allowance relates to state NOLs ($1.7 million) and deferred tax assets in foreign jurisdictions where historical taxable losses have been incurred ($1.1 million). The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth. Income taxes paid/(refunded), including foreign estimated tax payments, were $1.8 million, less than $0.1 million and $4.8 million, during fiscal 2025, fiscal 2024 and fiscal 2023, respectively. In the normal course of business, we are subject to examination by taxing authorities throughout the world. Years prior to fiscal 2015 are closed for examination under the statute of limitation for U.S. federal and U.S. state. In The Netherlands, years prior to fiscal 2020 are closed for examination. We are under examination in Germany for fiscal years 2019 to 2022. During the third quarter of fiscal 2025, we received a notice from the State of Illinois for an income tax audit covering the period from June 2021 to May 2023. The Company has provided all the documentation requested and is waiting to hear from the State of Illinois office for further action. We have no other current open audits in the U.S. The Company recorded $0.3 million related to uncertain tax positions as of May 31, 2025 as compared to $0.1 million as of June 1, 2024. We record interest related to uncertain tax positions in the income tax expense line item within the Consolidated Statements of Comprehensive Income. Accrued interest was included within the related tax liability line in the Consolidated Balance Sheets. We have recorded a liability of less than $0.1 million for interest as of May 31, 2025. The following table summarizes the activity related to the unrecognized tax benefits (in thousands):
|  | Fiscal Year Ended |
|  | May 31, 2025 |  |  | June 1, 2024 |
Unrecognized tax benefits, beginning of period |  | $ | 93 |  |  | $ | — |
Reserve on R&D credits |  |  | 242 |  |  |  | 93 |
Unrecognized tax benefits, end of period |  | $ | 335 |  |  | $ | 93 |
Subsequent to year end, on July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. Key income tax-related provisions of the OBBBA relevant to the Company include the removal of mandatory capitalization of domestic research and development expenditures, permanent extension of bonus depreciation and revisions to international tax regimes. The Company is evaluating the financial implications of the OBBBA and will begin reflecting its effects in its first quarter of fiscal 2026. The Company estimates that the legislation will not have a material impact on its effective income tax rate in future periods relative to prior periods.

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