XML 38 R23.htm IDEA: XBRL DOCUMENT v3.24.1.u1
Income Taxes
 12 Months Ended
Mar. 02, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Earnings before income taxes consisted of the following:
(In thousands)202420232022
United States$133,185 $126,859 $70,039 
International(3,932)(10,238)(56,170)
Earnings before income taxes$129,253 $116,621 $13,869 
The components of income tax expense for each of the last three fiscal years are as follows:
(In thousands)202420232022
Current
Federal$32,900 $9,621 $13,806 
State and local6,172 7,670 4,823 
International286 231 39 
Total current39,358 17,522 18,668 
Deferred
Federal(8,361)(5,120)(1,528)
State and local(1,387)(2,487)(4,270)
International— 422 (2,158)
Total deferred(9,748)(7,185)(7,956)
Total non-current tax (benefit) expense30 2,177 (329)
Total income tax expense$29,640 $12,514 $10,383 

Income tax payments, net of refunds, were $33.0 million, $27.4 million and $8.2 million in fiscal 2024, 2023 and 2022, respectively.

The following table provides a reconciliation of the statutory federal income tax rate to our consolidated effective tax rates:
202420232022
Statutory federal income tax rate21.0 %21.0 %21.0 %
State and local income taxes, net of federal tax benefit2.4 3.5 16.4 
Foreign tax rate differential(0.2)(0.2)(15.4)
Valuation allowance1.0 (4.7)63.2 
Nontaxable gain (loss) on life insurance policies— 0.2 1.2 
Deduction for foreign derived intangible income(0.3)(0.2)(2.6)
Research & development tax credit(1.3)(1.5)(9.4)
§162(m) Executive Compensation Limitation0.8 0.8 3.5 
Tax benefit of share based awards(0.6)(0.8)(5.2)
Worthless stock deduction— (6.0)— 
Other, net0.1 (1.4)2.2 
Consolidated effective income tax rate22.9 %10.7 %74.9 %

The effective tax rate for fiscal 2024 increased 12.2 percentage points from fiscal 2023, primarily due to the impact of discrete items in fiscal 2023.
Deferred tax assets and deferred tax liabilities at March 2, 2024 and February 25, 2023 were:

(In thousands)20242023
Deferred tax assets
Accrued expenses$4,565 $1,862 
Deferred compensation11,138 9,666 
Section 174 capitalized costs12,450 12,222 
Goodwill and other intangibles2,342 4,316 
Liability for unrecognized tax benefits2,122 1,884 
Unearned income7,467 11,007 
Operating lease liabilities13,064 13,639 
Net operating losses and tax credits12,332 11,459 
Other4,773 3,656 
Total deferred tax assets70,253 69,711 
Less: valuation allowance(10,803)(9,048)
Deferred tax assets, net of valuation allowance59,450 60,663 
Deferred tax liabilities
Depreciation20,510 21,965 
Operating lease, right-of-use assets11,955 12,660 
Bad debt8,291 8,262 
Prepaid expenses2,131 2,467 
Other2,520 3,546 
Total deferred tax liabilities45,407 48,900 
Net deferred tax assets (liabilities)$14,043 $11,763 

The Company has state and foreign net operating loss carryforwards with a tax effect of $12.3 million. A valuation allowance of $9.0 million has been established for these net operating loss carryforwards due to the uncertainty of the use of the tax benefits in future periods.
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing Deferred Tax Assets. This has resulted in valuation allowances being recorded against Deferred Tax Assets in prior years in Brazil, Canada and various states.

The Company files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions, Canada, Brazil and other international jurisdictions. The Company is no longer subject to U.S. federal tax examinations or state and local tax examinations for years prior to fiscal 2021. The Company is not currently under U.S. federal examination for years subsequent to fiscal 2020, and there is very limited audit activity of the Company’s income tax returns in U.S. state jurisdictions or international jurisdictions.

The Company considers the earnings of its non-U.S. subsidiaries to be indefinitely invested outside of the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and specific plans for reinvestment of those subsidiary earnings. Should the Company decide to repatriate the foreign earnings, it would need to adjust the income tax provision in the period it was determined that the earnings will no longer be indefinitely invested outside the U.S.

If we were to prevail on all unrecognized tax benefits recorded, $3.3 million, $3.8 million and $1.7 million for fiscal 2024, 2023 and 2022, respectively, would benefit the effective tax rate. Also included in the balance of unrecognized tax benefits for fiscal 2024, 2023 and 2022 are $1.8 million, $1.5 million, and $1.7 million, respectively, of tax benefits that, if recognized, would result in decreases to deferred taxes.

Penalties and interest related to unrecognized tax benefits are recorded in income tax expense. For fiscal 2024, 2023 and 2022, we accrued penalties and interest related to unrecognized tax benefits of $0.6 million, $0.4 million, and $0.3 million, respectively.
The following table provides a reconciliation of the total amounts of gross unrecognized tax benefits:
(In thousands)202420232022
Gross unrecognized tax benefits at beginning of year$5,312 $3,321 $3,755 
Gross increases in tax positions for prior years91 2,298 108 
Gross decreases in tax positions for prior years(65)(255)(145)
Gross increases based on tax positions related to the current year579 291 420 
Gross decreases based on tax positions related to the current year— (27)— 
Settlements(354)— (147)
Statute of limitations expiration(510)(316)(670)
Gross unrecognized tax benefits at end of year$5,053 $5,312 $3,321 

In December 2021, the OECD issued model rules for a new global minimum tax framework (“Pillar Two”), and various governments around the world have issued, or are in the process of issuing, legislation to implement these rules. The Company is within the scope of the OECD Pillar Two model rules and is assessing the impact thereof. As of March 4, 2024, we believe the implementation of these rules will not have a material impact on our financial results.