XML 63 R42.htm IDEA: XBRL DOCUMENT

Income Taxes (Tables)

12 Months Ended

May 02, 2021

Schedule of Allocation of Income Tax Expense

Total income tax expense was allocated as follows:

(dollars in thousands)	2021		2020			2019
income (loss) from continuing operations	$	7,693	$	3,354		$	6,537
loss from discontinued operation		—		(68	)		(113	)
	$	7,693	$	3,286		$	6,424

Schedule of Income Tax Expense Attributable to Income from Operations

Income tax expense attributable to income from continuing operations consists of:

(dollars in thousands)	2021			2020			2019
current
federal	$	(17	)		—			(1,492	)
state		3			7			27
2017 Tax Cuts and Jobs Act		—			—			(282	)
foreign		4,151			4,248			6,144
uncertain income tax positions		(204	)		725			—
		3,933			4,980			4,397
deferred
federal		(1,933	)		(1,875	)		3,236
state		(80	)		(103	)		(96	)
2017 Tax Cuts and Jobs Act		(3,674	)		—			(268	)
undistributed earnings – foreign subsidiaries		112			(114	)		3,735
U.S. Federal & State carryforwards and credits		451			974			74
uncertain income tax positions		380			(380	)		—
foreign		(22	)		(247	)		(85	)
valuation allowance		8,526			119			(4,456	)
		3,760			(1,626	)		2,140
	$	7,693			3,354			6,537

Schedule of Income (Loss) before Income Taxes Related to Foreign and U.S. Operations

Income (loss) before income taxes from continuing operations related to our foreign and U.S. operations consists of:

(dollars in thousands)	2021			2020			2019
Foreign
China	$	10,007			8,316			9,899
Canada		4,764			(1,391	)		5,488
Haiti		817			—			—
Cayman Islands		(5	)		(6	)		280
Total Foreign		15,583			6,919			15,667
United States		(4,703	)		(14,598	)		(2,945	)
	$	10,880			(7,679	)		12,722

Summary of Differences in Income Tax Expense at Federal Income Tax Rate and Effective Income Tax Rate

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:

	2021			2020			2019
U.S. federal income tax rate		21.0	%		21.0	%		21.0	%
valuation allowance		78.4			(1.6	)		(35.0	)
write-off of U.S. foreign income tax credits		—			—			35.1
income tax effects of the 2017 Tax Cuts and Jobs Act		(33.8	)		—			(4.3	)
global intangible low taxed income tax (GILTI)		—			(19.0	)		16.9
foreign tax rate differential		10.9			(5.4	)		4.8
income tax effects of Chinese foreign exchange gains and losses		(8.4	)		(5.0	)		2.2
withholding taxes associated with foreign tax jurisdictions		7.7			(16.0	)		8.1
income tax effects of impairment of nondeductible goodwill		—			(11.3	)		—
other		(5.1	)		(6.4	)		2.6
		70.7	%		(43.7	)%		51.4	%

Schedule of Deferred Tax Assets and Liabilities

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)	2021			2020
deferred tax assets:
accounts receivable	$	362			263
inventories		2,019			2,280
compensation		3,284			1,970
liabilities and other		23			166
intangible assets and goodwill		690			856
property, plant, and equipment (1)		202			185
operating lease liability		836			671
foreign income tax credits - U.S.		783			783
loss carryforwards – U.S.		7,533			4,137
valuation allowance - U.S.		(11,674	)		(3,148	)
total deferred tax assets		4,058			8,163

deferred tax liabilities:
undistributed earnings on foreign subsidiaries		(3,521	)	(3,409	)
unrecognized tax benefits – U.S.		(380	)	—
property, plant and equipment (2)		(3,968	)	(5,008	)
right of use assets		(855	)	(690	)
other		(119	)	(81	)
total deferred tax liabilities		(8,843	)	(9,188	)
Net deferred liabilities	$	(4,785	)	(1,025	)

(1)	Pertains to the company’s operations located in China.

(2)	Pertains to the company’s operations located in the U.S. and Canada.

Summary of Valuation Allowances Against Deferred Income Taxes

Based on our assessments as of May 2, 2021, and May 3, 2020, valuation allowances against our deferred income taxes pertain to the following jurisdictions:

(dollars in thousands)	May 2, 2021		May 3, 2020
U.S. federal and state net deferred income tax assets	$	9,344		867
U.S. capital loss carryforward		2,330		2,281
	$	11,674		3,148

Summary of Change in Valuation Allowances Against Deferred Income Taxes

A summary of the change in the valuation allowances against our deferred income taxes follows:

(dollars in thousands)	2021		2020		2019
beginning balance	$	3,148		748		5,204
change in judgement of beginning of year U.S. valuation allowance (1)		6,964		—		—
change in valuation allowance associated with current year earnings		1,004		—		—
establishment of valuation allowance (2)		—		2,281		—
write-off of deferred income taxes (3)		—		—		(4,544	)
change in estimate during current year (4)		558		119		88
ending balance	$	11,674		3,148		748

(1)	Refer to the above Summary 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)	During fiscal 2019, we recorded an income tax charge of $4.5 million for the write-off of certain U.S. foreign income tax credits, and in turn, we recorded an income tax benefit of $4.5 million for the reduction in our valuation allowance.

(4)

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, and (iii) other immaterial items.

Schedule of Unrecognized Tax Benefit

The following table sets forth the change in the company’s unrecognized income tax benefit:

(dollars in thousands)	2021			2020			2019
beginning balance	$	1,269			903			844
increases from prior period tax positions		249			106			135
decreases from prior period tax positions		(74	)		(85	)		(76	)
increases from current period tax positions		—			434			—
decreases from current period tax positions		—			(89	)		—
ending balance	$	1,444			1,269			903

Summary of Income Taxes Paid (Refunded)

The following table sets forth income taxes paid (refunded) by jurisdiction:

(dollars in thousands)	2021			2020		2019
United States Federal - AMT credit refunds (1)	$	(1,510	)	$	—	$	—
United States Federal - transition tax		226			—		600
Unites States state income tax payments		—			—		60
China		2,874			3,397	$	3,543
Canada		1,408			1,598		2,491
	$	2,998		$	4,995	$	6,694

(1)

In accordance with the TCJA, corporate taxpayers were eligible to treat prior AMT credit carryforwards as refundable. Accordingly, we elected to treat our prior AMT credit carryforward balance of $1.5 million as refundable, and as a result, 50% of the $1.5 million refundable balance was expected to be received in each of our fiscal years 2021 and 2022, respectively. We received our first 50% installment totaling $746,000 during the first quarter of fiscal 2021. In accordance with the CARES Act, 100% of AMT credit carryforwards for tax years beginning in the 2019 tax year were immediately refundable. Accordingly, we

claimed credit for the remaining 50% installment of our refundable AMT credit carryforward in May 2020. We received our remaining 50% installment plus interest totaling $764,000 during the second quarter of fiscal 2021.