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Income Taxes
 12 Months Ended
Apr. 24, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income (loss) before taxes were as follows:
Fiscal Year Ended
April 24,
2021		April 25,
2020		April 27,
2019
Income (loss) before taxes
United States$166,251 $(594,431)$76,035 
International33,680 4,024 30,193 
Total$199,931 $(590,407)$106,228 
Significant components of income tax expense (benefit) were as follows:
Fiscal Year Ended
April 24,
2021		April 25,
2020		April 27,
2019
Current:
Federal$36,836 $18,300 $(19)
Foreign9,975 7,501 9,207 
State8,771 4,959 3,402 
Total current expense55,582 30,760 12,590 
Deferred:
Federal(7,529)(25,918)9,709 
Foreign(362)164 (53)
State(2,869)(6,046)1,106 
Total deferred (benefit) expense (10,760)(31,800)10,762 
Income tax expense (benefit)$44,822 $(1,040)$23,352 
U.S. Tax Reform
On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was enacted into law. The Tax Act significantly revises the future ongoing U.S. federal corporate income tax by, among other things, lowering the U.S. federal corporate tax rate, implementing a territorial tax system, imposing a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and created new taxes on foreign sourced earnings.
During the fiscal year ended April 27, 2019, we completed our accounting for the previously recorded provisional impacts of the Tax Act and recorded additional remeasurement benefit of $2,355 on U.S. deferred tax assets and liabilities and a reduction to the transition tax cost of $331.
While we have completed our accounting for the impacts of the Tax Act, changes in interpretation of the Tax Act, analysis of proposed and final regulations as they are issued, current and additional guidance from the Internal Revenue Service and/or state legislative actions as well as potential changes in accounting standards surrounding income taxes and the Tax Act may result in further, potentially material, changes to these completed computations.
On March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (CARES) Act” was signed into law. The CARES Act, among other things, includes provisions relating to refundable employment tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. These benefits did not materially impact the Company’s effective tax rate for the fiscal years ended April 24, 2021 or April 25, 2020. On December 27, 2020, the Consolidated Appropriations Act was signed into law. The act extended numerous non-income tax benefits from the CARES Act. We are continuing to evaluate these tax related provisions as additional guidance from the Internal Revenue Service and/or state tax authorities becomes available.
Deferred tax assets and liabilities are included in other non-current assets and deferred income taxes on the consolidated balance sheets. Significant components of our deferred tax assets (liabilities) were as follows:
April 24,
2021		April 25,
2020
Deferred tax assets:
Capital accumulation plan$1,051 $2,541 
Inventory related items12,250 10,354 
Bad debt allowance1,416 1,857 
Stock-based compensation expense7,036 7,486 
Interest rate swap1,261 1,580 
Foreign tax credit7,112 7,248 
Lease liability16,153 16,572 
Other242 2,945 
Gross deferred tax assets46,521 50,583 
Less: Valuation allowance(15,960)(14,886)
Total net deferred tax assets30,561 35,697 
Deferred tax liabilities
LIFO reserve(25,913)(32,630)
Amortizable intangibles(61,023)(69,254)
Goodwill(13,902)(11,848)
Property and equipment, net(37,967)(39,999)
Operating lease right-of-use assets, net(15,547)(16,195)
Total deferred tax liabilities(154,352)(169,926)
Deferred net long-term income tax liability$(123,791)$(134,229)
At April 24, 2021, we had a U.S. foreign tax credit asset that will expire in five years. In addition, we have deferred tax assets which would give rise to tax capital losses if triggered in the future. These losses can only be used against capital gain income. At this time, we believe that it is more likely than not that the foreign tax credit and potential capital loss carryforward attributes totaling $15,960 will not be fully utilized prior to expiration. As a result, a full valuation allowance has been established against these assets.
With regard to unremitted earnings of foreign subsidiaries generated after December 31, 2017, we do not currently provide for U.S. taxes since we intend to reinvest such undistributed earnings indefinitely outside of the United States. We continue to apply ASC 740 based on the provisions of the tax law that were in effect immediately prior to the enactment of the new law.
Income tax expense (benefit) varies from the amount computed using the U.S. statutory rate. The reasons for this difference and the related tax effects are shown below.
Fiscal Year Ended
April 24,
2021		April 25,
2020		April 27,
2019
Tax at U.S. statutory rate$41,984 $(123,987)$22,306 
State tax provision, net of federal benefit5,400 (466)3,492 
Effect of foreign taxes2,594 7,277 2,728 
Goodwill impairment— 107,999 — 
Legal settlement— 11,088 — 
ESOP(2,286)(2,393)(2,465)
Other permanent differences808 1,533 1,074 
Tax reform— — (2,686)
Other(3,678)(2,091)(1,097)
Income tax expense (benefit)$44,822 $(1,040)$23,352 
We have accounted for the uncertainty in income taxes recognized in the financial statements in accordance with ASC Topic 740, “Income Taxes”. This standard clarifies the separate identification and reporting of estimated amounts that could be assessed upon audit. The potential assessments are considered unrecognized tax benefits, because, if it is ultimately determined they are unnecessary, the reversal of these previously recorded amounts will result in a beneficial impact to our financial statements.
As of April 24, 2021 and April 25, 2020, Patterson’s gross unrecognized tax benefits were $10,866 and $11,740, respectively. If determined to be unnecessary, these amounts (net of deferred tax assets of $2,055 and $2,113, respectively, related to the tax deductibility of the gross liabilities) would decrease our effective tax rate. The gross unrecognized tax benefits are included in other non-current liabilities on the consolidated balance sheets.
A summary of the changes in the gross amounts of unrecognized tax benefits is shown below.
April 24,
2021		April 25,
2020
Balance at beginning of period$11,740 $13,035 
Additions for tax positions related to the current year1,264 1,182 
Additions for tax positions of prior years20 218 
Reductions for tax positions of prior years(220)(37)
Statute expirations(1,938)(2,289)
Settlements— (369)
Balance at end of period$10,866 $11,740 
We also recognize both interest and penalties with respect to unrecognized tax benefits as a component of income tax expense. As of April 24, 2021 and April 25, 2020, we had recorded $2,026 and $1,968, respectively, for interest and penalties. These amounts are also included in other non-current liabilities on the consolidated balance sheets. These amounts, net of related deferred tax assets, if determined to be unnecessary, would decrease our effective tax rate. During the year ended April 24, 2021, we recorded as part of tax expense $218 related to an increase in our estimated liability for interest and penalties.
Patterson files income tax returns, including returns for our subsidiaries, with federal, state, local and foreign jurisdictions. During fiscal 2021, the Internal Revenue Service (“IRS”) concluded an audit of fiscal year ended April 28, 2018. The IRS has either examined or waived examination for all periods up to and including our fiscal year ended April 28, 2018. In addition to the IRS, periodically, state, local and foreign income tax returns are examined by various taxing authorities. We do not believe that the outcome of these various examinations will have a material adverse impact on our financial statements.