Income Taxes

6 Months Ended

Dec. 02, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company's process for determining the provision for income taxes for the three and six months ended December 2, 2023 involved using an estimated annual effective tax rate which was based on expected annual income and statutory tax rates across the various jurisdictions in which it operates. The effective tax rates were 21.4% and 19.8%, respectively, for the three month periods ended December 2, 2023 and December 3, 2022. The year over year change in the effective tax rate for the three months ended December 2, 2023 resulted from the same quarter of the prior year having more favorable tax credit impacts in the United States than the current year quarter. For the three months ended December 2, 2023, the effective tax rate is slightly higher than the United States federal statutory rate due to United States state income taxes and the mix of earnings in tax jurisdictions that had rates that were higher than the United States federal statutory rate coupled with less favorable foreign tax credit impacts from the recapture of an overall domestic loss carryover. For the three months ended December 3, 2022, the effective tax rate was lower than the United States federal statutory rate due to the favorable impact of increased foreign tax credits in the United States resulting from the recapture of prior year overall domestic loss.

The effective tax rates were 22.4% and 19.2%, respectively, for the six months ended December 2, 2023 and December 3, 2022. The year over year increase in the effective rate for the six months ended December 2, 2023 resulted from the same six months in the prior year having more favorable foreign tax credit impacts in the United States than the current six months. For the six months ended December 2, 2023, the effective tax rate is higher than the United States federal statutory rate due to United States state income taxes and the mix of earnings in tax jurisdictions that had rates that were higher than the United States federal statutory rate coupled with less favorable foreign tax credit impacts from the recapture of an overall domestic loss carryover. For the six months ended December 3, 2022, the effective tax rate was lower than the United States federal statutory rate due to the favorable impact of increased foreign tax credits in the United States resulting from the recapture of prior year overall domestic loss.

The Company recognizes interest and penalties related to uncertain tax benefits through Income tax expense in its Condensed Consolidated Statements of Comprehensive Income. Interest and penalties recognized in the Company's Condensed Consolidated Statements of Comprehensive Income were negligible for the three and six months ended December 2, 2023 and December 3, 2022.

The Company's recorded liability for potential interest and penalties related to uncertain tax benefits was:

(In millions)	December 2, 2023		June 3, 2023
Liability for interest and penalties	$	0.9	$	0.7
Liability for uncertain tax positions, current	$	1.6	$	1.6

The Company is subject to periodic audits by domestic and foreign tax authorities. Currently, the Company is undergoing routine periodic audits in both domestic and foreign tax jurisdictions. It is reasonably possible that the amounts of unrecognized tax benefits could change in the next twelve months because of the audits. Tax payments related to these audits, if any, are not expected to be material to the Company's Condensed Consolidated Statements of Comprehensive Income.

For the majority of tax jurisdictions, the Company is no longer subject to state, local, or non-United States income tax examinations by tax authorities for fiscal years before 2020.