Income Taxes

12 Months Ended

Apr. 27, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income before taxes were as follows:

	Fiscal Year Ended
	April 27, 2024		April 29, 2023		April 30, 2022
Income before taxes
United States	$	211,350	$	233,416	$	225,195
International	31,703		36,745		41,059
Total	$	243,053	$	270,161	$	266,254

Significant components of income tax expense were as follows:

	Fiscal Year Ended
	April 27, 2024		April 29, 2023		April 30, 2022
Current:
Federal	$	51,263	$	46,982	$	46,964
Foreign	8,201		8,280		11,968
State	11,593		10,294		10,326
Total current expense	71,057		65,556		69,258
Deferred:
Federal	(13,403)		(4,217)		(3,918)
Foreign	2,045		2,601		(217)
State	(2,165)		(377)		(583)
Total deferred benefit	(13,523)		(1,993)		(4,718)
Income tax expense	$	57,534	$	63,563	$	64,540

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 27, 2024		April 29, 2023
Deferred tax assets:
Employee compensation and benefits	$	7,674	$	7,519
Inventory related items	7,645		8,228
Foreign intangibles and goodwill	11,767		11,420
Foreign tax credit	7,003		7,003
Lease liability	29,587		19,808
Accrued charitable contributions	427		902
Capitalized research and experimentation costs	12,020		5,172
Other accrued liabilities	6,498		7,744
Other	8,329		7,270
Gross deferred tax assets	90,950		75,066
Less: Valuation allowance	(18,620)		(18,276)
Total net deferred tax assets	72,330		56,790
Deferred tax liabilities
LIFO reserve	(29,593)		(26,010)
Amortizable intangibles	(36,923)		(45,042)
Goodwill	(18,098)		(17,094)
Property, plant, equipment	(32,457)		(36,488)
Lease right-of-use assets	(29,048)		(19,361)
Investments	(26,662)		(26,959)
Other	(4,070)		(3,557)
Total deferred tax liabilities	(176,851)		(174,511)
Deferred net long-term income tax liability	$	(104,521)	$	(117,721)

At April 27, 2024, we had a U.S. foreign tax credit asset that will expire in two years. In addition, we have foreign 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 $18,620 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.

Income tax expense 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 27, 2024		April 29, 2023		April 30, 2022
Tax at U.S. statutory rate	$	51,038	$	56,732	$	55,912
State tax provision, net of federal benefit	7,630		8,416		9,176
Effect of foreign taxes	3,612		2,853		3,199
ESOP	(1,895)		(2,049)		(2,121)
Other permanent differences	1,308		2,481		944
Other	(4,159)		(4,870)		(2,570)
Income tax expense	$	57,534	$	63,563	$	64,540

We have accounted for the uncertainty in income taxes recognized in the financial statements in accordance with ASC Topic 740. 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 27, 2024 and April 29, 2023, Patterson’s gross unrecognized tax benefits were $8,049 and $8,291, respectively. If determined to be unnecessary, these amounts (net of deferred tax assets of $1,690 and $1,741, 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 27, 2024		April 29, 2023
Balance at beginning of period	$	8,291	$	9,898
Additions for tax positions related to the current year	1,156		1,158
Additions for tax positions of prior years	128		142
Reductions for tax positions of prior years	(12)		(1,400)
Statute expirations	(1,514)		(1,507)
Settlements	—		—
Balance at end of period	$	8,049	$	8,291

We also recognize both interest and penalties with respect to unrecognized tax benefits as a component of income tax expense. As of April 27, 2024 and April 29, 2023, we had recorded $1,756 and $1,617, 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 27, 2024, we recorded as part of tax expense $365 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. The IRS has either examined or waived examination for all periods up to and including our fiscal year ended April 25, 2020. 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.