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Income Taxes
9 Months Ended
Nov. 25, 2016
Income Tax Disclosure [Abstract]  
Income Taxes

Note 16 – Income Taxes

The Corporation’s provision for income taxes in interim periods is computed by applying its estimated annual effective tax rate against income before income tax expense for the period. In addition, non-recurring or discrete items are recorded during the period in which they occur. The magnitude of the impact that discrete items have on the Corporation’s quarterly effective tax rate is dependent on the level of income in the period and the amount of such discrete adjustments. The effective tax rate was 26.0% and 31.7% for the three and nine months ended November 25, 2016, respectively, and 31.5% and 31.7% for the three and nine months ended November 27, 2015, respectively. The lower than U.S. statutory rate for the three month and nine month periods ended November 25, 2016 is primarily related to the carryback of a foreign tax credit, the domestic production activities deduction, tax treatment of corporate-owned life insurance, and lower tax rates in foreign jurisdictions, partially offset by federal provision to return adjustments, and state income tax rates on U.S. income, net of federal benefit. The lower than U.S. statutory tax rate in the prior year three and nine month periods is primarily related to the release of a $4.3 million unrecognized tax benefit due to the issuance of regulations that clarified the law and the expiration of a statute of limitations, as well as the impact of lower tax rates in foreign jurisdictions, domestic production activities deduction, the tax treatment of corporate-owned life insurance, and federal provision to return items.

 

As reported in its Annual Report on Form 10-K for the year ended February 29, 2016, a previously nonmarketable investment established a readily determinable fair value as the result of the investment’s successfully completed initial public offering. Therefore, the Corporation began recording adjustments to mark-to-market the value of such investment. Consequently, a decrease in the Corporation’s deferred tax assets in the amount of $8.8 million and $16.4 million was recognized in other comprehensive income for the nine month periods ended November 25, 2016 and November 27, 2015, respectively.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes,” which simplifies the presentation of deferred income taxes. This ASU requires that deferred tax assets and liabilities be classified as non-current in a statement of financial position. The Corporation early adopted ASU 2015-17 during the fourth quarter of 2016 on a prospective basis. Adoption of ASU 2015-17 resulted in a reclassification of the Corporation’s net current deferred tax asset to the net non-current deferred tax asset in the Corporation’s Consolidated Statement of Financial Position as of February 29, 2016. No prior periods were retrospectively adjusted.

As of November 25, 2016, the Corporation had unrecognized tax benefits of $16.1 million that, if recognized, would have a favorable effect on the Corporation’s income tax expense of $14.4 million. It is reasonably possible that the Corporation’s unrecognized tax positions as of November 25, 2016 could decrease $0.4 million during the next twelve months due to the expiration of the statute of limitations.

The Corporation recognizes interest and penalties accrued on unrecognized tax benefits and refundable income taxes as a component of income tax expense. During the nine months ended November 25, 2016, the Corporation recognized a de minimis net expense for interest and penalties on unrecognized tax benefits and refundable income taxes. As of November 25, 2016, the total amount of gross accrued interest and penalties related to unrecognized tax benefits less refundable income taxes was a net payable of $1.6 million.

With few exceptions, the Corporation is subject to examination in the U.S. and various state and local jurisdictions for tax years 2010 to the present. The Corporation is also subject to tax examination in various international tax jurisdictions including Canada, the United Kingdom, Australia, Italy, Mexico and New Zealand for tax years 2011 to the present.