XML 38 R19.htm IDEA: XBRL DOCUMENT
v3.22.2

Income Taxes | 12 Months Ended
--- | ---
May 01, 2022
Income Tax Disclosure [Abstract] |
Income Taxes |
1 2. | INCOME TAXES
Income Tax Expense and Effective Income Tax Rate Total income tax expense was allocated as follows:
(dollars in thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |
(loss) income from continuing operations |  | $ | 2,886 |  |  | $ | 7,693 |  |  | $ | 3,354 |
loss from discontinued operation |  |  | — |  |  |  | — |  |  |  | (68 | )
|  | $ | 2,886 |  |  | $ | 7,693 |  |  | $ | 3,286 |
Income tax expense attributable to (loss) income from continuing operations consists of:
(dollars in thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |
current |  |  |  |  |  |  |  |  |  |  |  |
federal |  | $ | — |  |  |  | (17 | ) |  |  | — |
state |  |  | 2 |  |  |  | 3 |  |  |  | 7 |
foreign |  |  | 2,156 |  |  |  | 4,151 |  |  |  | 4,248 |
uncertain income tax positions |  |  | 37 |  |  |  | (204 | ) |  |  | 725 |
|  |  | 2,195 |  |  |  | 3,933 |  |  |  | 4,980 |
deferred |  |  |  |  |  |  |  |  |  |  |  |
federal |  |  | 1,121 |  |  |  | (1,933 | ) |  |  | (1,875 | )
state |  |  | 47 |  |  |  | (80 | ) |  |  | (103 | )
2017 Tax Cuts and Jobs Act |  |  | — |  |  |  | (3,674 | ) |  |  | — |
undistributed earnings – foreign subsidiaries |  |  | 76 |  |  |  | 112 |  |  |  | (114 | )
U.S. Federal & State carryforwards and credits |  |  | (971 | ) |  |  | 451 |  |  |  | 974 |
uncertain income tax positions |  |  | (380 | ) |  |  | 380 |  |  |  | (380 | )
foreign |  |  | 615 |  |  |  | (22 | ) |  |  | (247 | )
valuation allowance |  |  | 183 |  |  |  | 8,526 |  |  |  | 119 |
|  |  | 691 |  |  |  | 3,760 |  |  |  | (1,626 | )
|  | $ | 2,886 |  |  |  | 7,693 |  |  |  | 3,354 |
(Loss) income before income taxes from continuing operations related to our foreign and U.S. operations consists of:
(dollars in thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |
Foreign |  |  |  |  |  |  |  |  |  |  |  |
China |  | $ | 6,998 |  |  |  | 10,007 |  |  |  | 8,316 |
Canada |  |  | 1,302 |  |  |  | 4,764 |  |  |  | (1,391 | )
Haiti |  |  | (980 | ) |  |  | 817 |  |  |  | — |
Cayman Islands |  |  | — |  |  |  | (5 | ) |  |  | (6 | )
Total Foreign |  |  | 7,320 |  |  |  | 15,583 |  |  |  | 6,919 |
United States |  |  | (7,645 | ) |  |  | (4,703 | ) |  |  | (14,598 | )
|  | $ | (325 | ) |  |  | 10,880 |  |  |  | (7,679 | )
The following schedule summarizes the principal differences between the income tax expense from continuing operations at the federal income tax rate and the effective income tax rate from continuing operations reflected in the consolidated financial statements:
|  | 2022 |  |  | 2021 |  |  | 2020 |
U.S. federal income tax rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
valuation allowance |  |  | (56.3 | ) |  |  | 78.4 |  |  |  | (1.6 | )
income tax effects of the 2017 Tax Cuts and Jobs Act |  |  | — |  |  |  | (33.8 | ) |  |  | — |
global intangible low taxed income tax (GILTI) |  |  | (540.9 | ) |  |  | — |  |  |  | (19.0 | )
foreign tax rate differential |  |  | (206.2 | ) |  |  | 10.9 |  |  |  | (5.4 | )
income tax effects of Chinese foreign exchange gains and losses |  |  | (20.6 | ) |  |  | (8.4 | ) |  |  | (5.0 | )
withholding taxes associated with foreign tax jurisdictions |  |  | (172.8 | ) |  |  | 7.7 |  |  |  | (16.0 | )
uncertain income tax positions |  |  | 105.4 |  |  |  | 1.6 |  |  |  | (4.8 | )
U.S. state income taxes |  |  | 21.5 |  |  |  | 0.3 |  |  |  | 0.4 |
stock-based compensation |  |  | (3.3 | ) |  |  | 0.3 |  |  |  | (0.3 | )
gain on bargain purchase |  |  | — |  |  |  | (1.6 | ) |  |  | — |
income tax effects of impairment of nondeductible goodwill |  |  | — |  |  |  | — |  |  |  | (11.3 | )
other (2) |  |  | (35.8 | ) |  |  | (5.7 | ) |  |  | (1.7 | )
Consolidated effective income tax rate (1) |  |  | (888.0 | )% |  |  | 70.7 | % |  |  | (43.7 | )%
(1) | Our consolidated effective income tax rates for all fiscal years presented were negatively affected by the mix of consolidated (loss) income before income taxes from continuing operations, as significant pre-tax losses have been incurred by our U.S. operations and almost all our taxable income was earned by our foreign operations located in China and Canada, which have higher income tax rates than the U.S. As a result, income tax expense incurred stems from taxable income from our foreign jurisdictions that exceeds our consolidated (loss) income before income taxes from continuing operations. Accordingly, the extent of the fluctuations in our consolidated effective income tax rates is dependent on the extent income tax expense incurred from our foreign operations compares with our consolidated (loss) income before income taxes from continuing operations that has been significantly lowered by our U.S. operations.
(2) | “Other” for all periods presented represents miscellaneous adjustments that pertain to U.S. permanent differences such as meals and entertainment and income tax provision to return adjustments.
Deferred Income Taxes - Overall The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities consist of the following:
(dollars in thousands) |  | 2022 |  |  | 2021 |
deferred tax assets: |  |  |  |  |  |  |  |
accounts receivable |  | $ | 227 |  |  |  | 362 |
inventories |  |  | 2,020 |  |  |  | 2,019 |
compensation |  |  | 2,437 |  |  |  | 3,284 |
liabilities and other |  |  | 28 |  |  |  | 23 |
intangible assets and goodwill |  |  | 536 |  |  |  | 690 |
property, plant, and equipment (1) |  |  | 199 |  |  |  | 202 |
operating lease liability |  |  | 1,297 |  |  |  | 836 |
foreign income tax credits - U.S. |  |  | 783 |  |  |  | 783 |
loss carryforwards – U.S. |  |  | 8,373 |  |  |  | 7,533 |
valuation allowance - U.S. |  |  | (11,857 | ) |  |  | (11,674 | )
total deferred tax assets |  |  | 4,043 |  |  |  | 4,058 |
deferred tax liabilities: |  |  |  |  |  |  |  |
undistributed earnings on foreign subsidiaries |  |  | (3,586 | ) |  |  | (3,521 | )
unrecognized tax benefits – U.S. |  |  | — |  |  |  | (380 | )
property, plant and equipment (2) |  |  | (4,292 | ) |  |  | (3,968 | )
right of use assets |  |  | (1,520 | ) |  |  | (855 | )
other |  |  | (121 | ) |  |  | (119 | )
total deferred tax liabilities |  |  | (9,519 | ) |  |  | (8,843 | )
Net deferred liabilities |  | $ | (5,476 | ) |  |  | (4,785 | )
(1) | Pertains to the company’s operations located in China.
(2) | Pertains to the company’s operations located in the U.S. and Canada.
As of May 1, 2022, our U.S. federal net operating loss carryforwards totaled $23.7 million, with related future income tax benefits of $5.0 million. In accordance with the 2017 Tax Cuts and Jobs Act (“TCJA”), U.S. federal net operating loss carryforwards generated in fiscal 2019 and after do not expire. As of May 1, 2022, all our unused U.S. federal net operating loss carryforwards were generated during fiscal 2019 and after, and therefore, do not expire in accordance with the TCJA. As of May 1, 2022, our U.S. state net operating loss carryforwards totaled $28.0 million, with related future income tax benefits of $1.0 million. Our U.S. state net operating loss carryforwards totaling $28.0 million have expiration dates ranging from fiscal years 2023 through 2043. Our U.S. foreign income tax credits of $783,000 have expiration dates ranging from fiscal years 2026 through 2028, which represent 10 years from when the associated earnings and profits from our foreign subsidiaries were repatriated to the U.S. GILTI Fiscal 2020 In accordance with the TJCA, GILTI became effective during fiscal 2019. Our policy to account for GILTI is to expense this tax in the period incurred. As a result, we recorded an income tax charge of $1.9 million during fiscal 2020. Fiscal 2021 Effective July 20, 2020, the U.S. Treasury Department finalized and enacted previously proposed regulations regarding the GILTI tax provisions of the TCJA. With the enactment of these final regulations, we became eligible for an exclusion from GILTI if we meet the provisions for the GILTI High-Tax exception included in these final regulations on a jurisdiction-by-jurisdiction basis. To meet the provisions of the GILTI High-Tax exception, the tested foreign entity’s effective income tax rate related to current year’s earnings must be higher than 90% of the U.S. federal income tax rate of 21% (i.e.,18.9%). In addition, the enactment of the new regulations and the provisions for the GILTI High-Tax exception were retroactive to the original enactment of the GILTI tax provision, which included our fiscal 2019 and 2020 fiscal years. Since we met the requirements for the GILTI High-Tax exception for our fiscal 2019 and 2020 fiscal years, we recorded a non-cash income tax benefit of $3.6 million resulting from the re-establishment of certain U.S. federal net operating loss carryforwards. The $3.6 million income tax benefit was recorded as a discrete event in which its full income tax effects were recorded during the first quarter of fiscal 2021. Fiscal 2022 We did not meet the GILTI High-Tax exception for the 2021 tax year regarding our foreign operations located in China. This was due primarily to significant income tax deductible foreign exchange losses that significantly lowered income tax expense associated with current year’s earnings. As a result, the current effective income tax rate was lower than the required 18.9% current effective income tax rate to meet the GILTI High-Tax exception. Consequently, we incurred a non-cash income tax charge of $1.8 million, which was fully offset by a $1.8 million non-cash income tax benefit due to a corresponding reversal of our full valuation allowance associated with our U.S. net deferred income tax assets. We do not expect to meet the GILTI High-Tax exception for the 2022 tax year regarding our operations located in Canada and Haiti. With regards to Canada, we placed several significant capital projects into service during fiscal 2022, and therefore, are eligible for a significant amount of deductible accelerated depreciation. As a result, our current year’s income tax expense is much lower than prior fiscal years, and therefore, our current effective income tax rate is expected to be lower than the required 18.9% current effective income tax rate to meet the GILTI High-Tax exception. For our operations located in Haiti, taxable income or losses are not subject to income tax, as we are in an economic zone that permits a 0% income tax rate for the first fifteen years of operations, for which we have ten years remaining. Since our operations located in Haiti are not subject to income tax, our projected current effective income tax rate of 0% will be lower than the required 18.9% current effective income tax rate to meet the GILTI High-Tax exception. Although, our operations located in Canada and Haiti did not meet the GILTI High-Tax exception, we did not incur any GILTI tax for the 2022 tax year, as the losses subject to GILTI tax from our Haitian operations exceeded the income subject to GILTI tax from our Canadian operation. Deferred Income Taxes – Valuation Allowance Assessment We evaluate the realizability of our deferred income taxes to determine if a valuation allowance is required. We assess whether a valuation allowance should be established based on the consideration of all available evidence using a “more-likely-than-not” standard with significant weight being given to evidence that can be objectively verified. Since the company operates in multiple jurisdictions, we assess the need for a valuation allowance on a jurisdiction-by-jurisdiction basis, considering the effects of local tax law. As a result of the U.S. tax law change relating to the GILTI tax provisions of the TCJA, we assessed the need for an additional valuation allowance against our U.S. net deferred income taxes as of the end of the first quarter of fiscal 2021. GILTI represented a significant source of our U.S. taxable income during fiscal 2019 and 2020 that offset our U.S. pre-tax losses during such years, and which offset was reversed because of the retroactivity of the new GILTI regulations. Consequently, due to the retroactivity of the new regulations, we experienced a recent history of cumulative U.S. taxable losses during the last two fiscal years, and we expected at the time of this assessment that our history of U.S. pre-tax losses would continue into fiscal 2021. As a result of the significant weight of this negative evidence, we believed it was more-likely-than-not that our U.S. deferred income tax assets would not be fully realizable. Accordingly, we recorded a non-cash income tax charge of $7.0 million to provide for a full valuation allowance against our U.S. net deferred income tax assets. This $7.0 million income tax charge was recorded as a discrete event in which its full income tax effects were recorded during the first quarter of fiscal 2021. As of May 1, 2022, we evaluated the realizability of our U.S. net deferred income tax assets to determine if a full valuation allowance was still required. Based on our assessment, we determined we still have a recent history of significant cumulative U.S. taxable losses, in that we experienced U.S. taxable losses during each of the last three fiscal years. In addition, we are currently expecting U.S. taxable losses to continue into fiscal 2023. As a result of the significant weight of this negative evidence, we believe it is more-likely-than-not that our U.S deferred income tax assets would not be fully realizable, and therefore we provided for a full valuation allowance against our U.S. net deferred income tax assets. Based on our assessments as of May 1, 2022, and May 2, 2021, valuation allowances against our U.S. net deferred income tax assets pertain to the following:
(dollars in thousands) |  | May 1, 2022 |  |  | May 2, 2021 |
U.S. federal and state net deferred income tax assets |  | $ | 9,527 |  |  | $ | 9,344 |
U.S. capital loss carryforward |  |  | 2,330 |  |  |  | 2,330 |
|  | $ | 11,857 |  |  | $ | 11,674 |
A summary of the change in the valuation allowances against our U.S. net deferred income tax assets follows:
(dollars in thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |
beginning balance |  | $ | 11,674 |  |  |  | 3,148 |  |  |  | 748 |
change in judgement of beginning of year U.S. valuation allowance (1) |  |  | — |  |  |  | 6,964 |  |  |  | — |
change in valuation allowance associated with current year earnings |  |  | 1,640 |  |  |  | 1,004 |  |  |  | — |
establishment of valuation allowance (2) |  |  | — |  |  |  | — |  |  |  | 2,281 |
change in estimate during current year (3) |  |  | (1,457 | ) |  |  | 558 |  |  |  | 119 |
ending balance |  | $ | 11,857 |  |  |  | 11,674 |  |  |  | 3,148 |
(1) | Refer to the above Assessment within the section titled Deferred Income Taxes – Valuation Allowance for further details regarding our assessment and conclusions reached for providing a full valuation allowance against our U.S net deferred income tax assets during the first quarter of fiscal 2021.
(2) | In connection with the sale of a discontinued operation that was treated as a partnership for income tax purposes, we generated a capital loss carryforward totaling $10.9 million with a related future income tax benefit of $2.3 million. Since capital losses can only be offset by capital gains, we established a full valuation allowance on this capital loss carryforward, as we do not have capital assets that would generate capital gains that would utilize this carryforward.
(3) | Amount represents changes in our U.S. net deferred income tax asset balances during the current year that pertain to (i) income tax provision to return adjustments, (ii) changes in estimates of our U.S. effective income tax rate that pertain to U.S. state income tax rates and apportionment percentages, (iii) recognition of uncertain income tax position due to expiration of statute of limitations, and (iv) other immaterial items.
Deferred Income Taxes – Undistributed Earnings from Foreign Subsidiaries We assess (i) whether the undistributed earnings from our foreign subsidiaries will be reinvested indefinitely or eventually distributed to our U.S. parent company, and (ii) if we are required to record a deferred income tax liability for undistributed earnings from foreign subsidiaries that will not be reinvested indefinitely. As of May 1, 2022, we assessed the liquidity requirements of our U.S. parent company and determined that our undistributed earnings and profits from our foreign subsidiaries would not be reinvested indefinitely and would be eventually distributed to our U.S. parent company. The conclusion reached from this assessment has been consistent with prior years. As a result of the TCJA, a U.S. corporation is allowed a 100% dividend received deduction for earnings and profits received from a 10% owned foreign corporation. Therefore, a deferred income tax liability will be required for unremitted withholding taxes associated with earnings and profits generated by our foreign subsidiaries that will ultimately be repatriated to the U.S. parent company. As a result, we recorded a deferred income tax liability of $3.6 million and $3.5 million as of May 1, 2022, and May 2, 2021, respectively. Uncertainty in Income Taxes An unrecognized income tax benefit for an uncertain income tax position can be recognized in the first interim period if the more-likely-than-not recognition threshold is met by the end of the reporting period, or is effectively settled through examination, or negotiation, or litigation, or if the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired. If it is determined that any of the above conditions occur regarding our uncertain income tax positions, an adjustment to our unrecognized income tax benefit will be recorded at that time. The following table sets forth the change in the company’s unrecognized income tax benefit:
(dollars in thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |
beginning balance |  | $ | 1,444 |  |  |  | 1,269 |  |  |  | 903 |
increases from prior period tax positions |  |  | 114 |  |  |  | 249 |  |  |  | 106 |
decreases from prior period tax positions |  |  | (77 | ) |  |  | (74 | ) |  |  | (85 | )
lapse of applicable statute of limitations |  |  | (380 | ) |  |  | — |  |  |  | — |
increases from current period tax positions |  |  | — |  |  |  | — |  |  |  | 434 |
decreases from current period tax positions |  |  | — |  |  |  | — |  |  |  | (89 | )
ending balance |  | $ | 1,101 |  |  |  | 1,444 |  |  |  | 1,269 |
As of May 1, 2022, we had $1.1 million of total gross unrecognized tax benefits, of which the entire $1.1 million would favorably affect the income tax rate in future periods. As of May 2, 2021, we had $1.4 million of total gross unrecognized tax benefits, of which $1.1 million would favorably affect the income tax rate in future periods. As of May 1, 2022, we had $1.1 million of total gross unrecognized tax benefits, of which the entire $1.1 million was classified as income taxes payable-long-term in the accompanying Consolidated Balance Sheets. As of May 2, 2021, we had $1.4 million of total gross unrecognized tax benefits, of which $1.1 million and $380,000 were classified as income taxes payable-long-term and noncurrent deferred income taxes, respectively, in the accompanying Consolidated Balance Sheets. We elected to classify interest and penalties as part of income tax expense. As of May 1, 2022, and May 2, 2021, the gross amount of interest and penalties due to unrecognized tax benefits was $125,000 and $165,000, respectively. Our gross unrecognized income tax benefit of $1.1 million as of May 1, 2022, relates to income tax positions for which significant change is currently not expected within the next year. This amount primarily relates to double taxation under applicable income tax treaties with foreign tax jurisdictions. United States federal and state income tax returns filed by us remain subject to examination for income tax years 2019 and subsequent. Canadian federal income tax returns filed by us remain subject to examination for income tax years 2018 and subsequent. Canadian provincial (Quebec) income tax returns filed by us remain subject to examination for income tax years 2018 and subsequent. Income tax returns associated with our operations located in China are subject to examination for income tax year 2017 and subsequent. Income Taxes Paid The following table sets forth income taxes paid (refunded) by jurisdiction:
(dollars in thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |
United States Federal - Alternative Minimum Tax (AMT) credit refunds (1) |  | $ | — |  |  | $ | (1,510 | ) |  | $ | — |
United States Federal - Transition Tax |  |  | 266 |  |  |  | 226 |  |  |  | — |
China - Income Taxes |  |  | 2,036 |  |  |  | 2,076 |  |  |  | 2,559 |
China - Withholding Taxes Associated with Earnings and Profits Distribution to U.S. Parent |  |  | 487 |  |  |  | 798 |  |  |  | 838 |
Canada - Income Taxes |  |  | 311 |  |  |  | 1,408 |  |  |  | 1,598 |
|  | $ | 3,100 |  |  | $ | 2,998 |  |  | $ | 4,995 |
(1) | In accordance with the provisions of the TCJA, we elected to treat our prior AMT credit carryforward balance of $1.5 million as refundable. We received refunds totaling $1.5 million in two separate installments totaling $746,000 and $764,000 during the first and second quarters of fiscal 2021, respectively.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration