Income Taxes

12 Months Ended

Apr. 27, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Note 11. Income Taxes

Income tax provision

The U.S. and foreign components of pre-tax (loss) income and income tax (benefit) expense are as follows:

	Fiscal Year Ended
(in millions)	April 27, 2024			April 29, 2023			April 30, 2022
Pre-tax (loss) income:
U.S.	$	(199.4	)	$	(3.6	)	$	31.2
Foreign		71.3			93.7			87.3
Total pre-tax (loss) income	$	(128.1	)	$	90.1		$	118.5
Income tax (benefit) expense:
Current:
U.S. (federal and state)	$	0.1		$	0.1		$	5.2
Foreign		16.6			16.9			13.5
Total current expense		16.7			17.0			18.7
Deferred:
U.S. (federal and state)		(17.9	)		(5.7	)		0.2
Foreign		(3.6	)		1.7			(2.6	)
Total deferred benefit		(21.5	)		(4.0	)		(2.4	)
Total income tax (benefit) expense	$	(4.8	)	$	13.0		$	16.3

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

	Fiscal Year Ended
(in millions)	April 27, 2024			April 29, 2023			April 30, 2022
Income tax at statutory rate	$	(26.9	)	$	18.9		$	24.9
Effect of:
State income taxes, net of federal benefit		(1.0	)		—			0.6
Reorganization of a foreign owned subsidiary		—			(7.3	)		—
Goodwill impairment		22.7			—			—
Redemption of life insurance		1.2			—			—
Acquisition costs		0.1			1.4			—
Withholding taxes		3.2			3.4			2.5
Non-deductible compensation		0.3			1.6			2.1
Foreign tax differential		(5.1	)		(11.6	)		(8.1	)
U.S. tax on foreign income		3.5			2.9			(1.7	)
Foreign investment tax credit		0.1			5.0			—
Research and development		(1.5	)		(1.5	)		(2.6	)
Change in tax reserve		—			(0.6	)		(0.1	)
Change in valuation allowance		(1.0	)		—			(2.0	)
Tax rate change, foreign		—			0.2			0.1
Other, net		(0.4	)		0.6			0.6
Income tax (benefit) expense	$	(4.8	)	$	13.0		$	16.3
Effective income tax rate		3.7	%		14.4	%		13.8	%

In fiscal 2024, the effective income tax rate was favorably impacted by pre-tax losses in operations, the amount of income earned in foreign jurisdictions with lower tax rates of $5.1 million and research and development expenditures of $1.5 million. These are offset by non-deductible goodwill impairment of $22.7 million, withholding taxes of $3.2 million, and U.S. tax on foreign income of $3.5 million of which global intangible low-tax income is the main component.

In fiscal 2023, the effective income tax rate was favorably impacted by the amount of income earned in foreign jurisdictions with lower tax rates. In addition, the Company received a benefit of approximately $7.3 million related to the reorganization of a foreign owned subsidiary. These benefits were partially offset by a reduction in foreign investment tax credits of $5.0 million and non-deductible acquisition costs of $1.4 million.

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.

Deferred income taxes and valuation allowances

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

(in millions)	April 27, 2024			April 29, 2023
Deferred tax liabilities:
Fixed assets	$	—		$	(2.7	)
Amortization		(56.5	)		(55.4	)
Foreign tax		(3.2	)		(4.5	)
Lease assets		(5.8	)		(6.8	)
Derivative financial instruments		(0.2	)		(0.6	)
Unrealized foreign exchange gain/loss		(0.5	)		—
Deferred tax liabilities, gross		(66.2	)		(70.0	)
Deferred tax assets:
Deferred compensation and stock award amortization		9.0			7.9
Fixed assets		1.3			—
Inventory		5.9			5.1
Lease liabilities		5.9			6.8
Foreign investment tax credit		24.4			25.2
Research expenditures		6.3			2.4
Net operating loss carryforwards		13.2			13.5
Foreign tax credits		1.7			1.2
Unrealized foreign exchange gain/loss		—			0.8
Interest carryforwards		7.9			2.5
Other		2.4			3.2
Deferred tax assets, gross		78.0			68.6
Less valuation allowance		(5.8	)		(6.8	)
Deferred tax assets, net of valuation allowance		72.2			61.8
Net deferred tax asset (liability)	$	6.0		$	(8.2	)
Balance sheet classification:
Long-term asset	$	34.7		$	33.6
Long-term liability		(28.7	)		(41.8	)
Net deferred tax asset (liability)	$	6.0		$	(8.2	)

The Company recorded a net deferred tax asset for U.S. and foreign income taxes of $6.0 million as of April 27, 2024 and a net deferred tax liability of $8.2 million April 29, 2023, respectively. 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 $5.8 million related to federal, state, and foreign net operating loss carryovers and other credits and determined that these deferred tax assets are more likely than not to be realized.

As of April 27, 2024, the Company had available $32.8 million of federal, $61.1 million of state and $0.5 million of foreign gross operating loss carryforwards with a valuation allowance of $23.1 million for federal, $12.2 million for state and $0.0 million for foreign. The U.S. federal net operating loss carryforwards will substantially start to expire in 2027 and beyond. The state net operating loss carryforwards will substantially start to expire in 2036 and beyond. Total unused credits are $26.1 million as of April 27, 2024, 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 of $318.9 million to be indefinitely reinvested. 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 $4.4 million and $4.5 million as of April 27, 2024 and April 29, 2023, 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 $0.4 million and $0.2 million at April 27, 2024 and April 29, 2023, respectively.

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

(in millions)	April 27, 2024			April 29, 2023
Balance at beginning of period	$	4.5		$	5.1
Increases for positions related to the current year		0.2			0.3
Lapsing of statutes of limitations		(0.3	)		(0.9	)
Balance at end of period	$	4.4		$	4.5

At April 27, 2024, the expected change to the total amount of unrecognized tax benefits in the next twelve months is approximately $3.8 million due to potential expiration of statute of limitations.

The U.S. federal statute of limitations remains open for fiscal years ended on or after 2021 and for state tax purposes on or after fiscal year 2015. 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 2017 and subsequent periods remain open and subject to examination by taxing authorities.