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Income Taxes | 3 Months Ended
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Aug. 30, 2025
Income Tax Disclosure [Abstract] |
Income Taxes | 7. INCOME TAXES We recorded an income tax provision of $0.4 million and $0.1 million for the first three months of fiscal 2026 and the first three months of fiscal 2025, respectively. The effective income tax rate during the first three months of fiscal 2026 was a tax provision of 18.1% as compared to a tax provision of 9.0% during the first three months of fiscal 2025. The difference in rate during the first three months of fiscal 2026 as compared to the first three months of fiscal 2025 reflects changes in our geographical distribution of income (loss). The 18.1% effective income tax rate differs from the federal statutory rate of 21% as a result of our geographical distribution of income (loss) and the utilization of the U.S. research and development credit. 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 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. 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 as of August 30, 2025 and May 31, 2025. The Company recorded a $0.3 million uncertain tax position as of August 30, 2025 as compared to $0.3 million as of May 31, 2025. 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 August 30, 2025 and May 31, 2025. The Company maintains a valuation allowance representing the portion of the deferred tax asset that management does not believe is more likely than not to be realized. The valuation allowance was $2.9 million as of August 30, 2025 and $2.8 million as of May 31, 2025. The valuation allowance relates to state NOLs ($1.7 million) and deferred tax assets in foreign jurisdictions where historical taxable losses have been incurred ($1.2 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. We have considered the impact of the One Big Beautiful Bill Act ("OBBBA") on the Company’s annual effective tax rate. The impact of OBBBA on the annual effective tax rate includes the reduction in the research and development credit from the Section 280c election. These changes did not have a significant impact to the annual effective tax rate. However, the enactment of the OBBBA introduced several significant tax law modifications that, while not affecting the annual effective tax rate, do have other implications for the Company. The OBBBA makes permanent key elements of the 2017 Tax Cuts and Jobs Act, including 100% bonus depreciation and domestic research cost expensing pursuant to IRC §174 for fiscal years beginning after December 31, 2024. The Company is currently evaluating the future impact of OBBA on its financial position and these changes are anticipated to have an impact on the results of operations and cash flows.

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