Income Taxes

12 Months Ended

Apr. 29, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income before income taxes consists of the following:

	Fiscal Year Ended
	(52 weeks)		(53 weeks)		(52 weeks)
(Amounts in thousands)	4/29/2023		4/30/2022		4/24/2021
United States	$	177,940	$	164,432	$	124,547
Foreign	27,849		41,059		21,366
Total	$	205,789	$	205,491	$	145,913

Income tax expense (benefit) consists of the following components:

	Fiscal Year Ended
	(52 weeks)		(53 weeks)		(52 weeks)
(Amounts in thousands)	4/29/2023		4/30/2022		4/24/2021
Federal
Current	$	31,945	$	30,793	$	18,327
Deferred	4,960		2,303		6,771
State
Current	10,345		9,191		6,475
Deferred	1,537		1,060		2,339
Foreign
Current	7,237		11,632		4,451
Deferred	(2,176)		(1,816)		21
Total income tax expense	$	53,848	$	53,163	$	38,384

Our effective tax rate differs from the U.S. federal income tax rate for the following reasons:

	Fiscal Year Ended
	(52 weeks)		(53 weeks)		(52 weeks)
(% of income before income taxes)	4/29/2023		4/30/2022		4/24/2021
Statutory tax rate	21.0	%	21.0	%	21.0	%
Increase (reduction) in income taxes resulting from:
State income taxes, net of federal benefit	4.5	%	3.9	%	4.3	%
Losses/(gains) on corporate owned life insurance	0.2	%	—	%	(1.2)	%
Fair value adjustment of contingent consideration liability	(0.1)	%	(0.3)	%	2.0	%
Miscellaneous items	0.6	%	1.3	%	0.2	%
Effective tax rate	26.2	%	25.9	%	26.3	%

For our Canada and Mexico foreign operating units, we permanently reinvest the earnings and consequently do not record a deferred tax liability relative to the undistributed earnings. We have reinvested approximately $61.0 million of the earnings. After enactment of the Tax Cuts and Jobs Act in 2017, the potential deferred tax attributable to these earnings would be approximately $2.6 million, primarily related to foreign withholding taxes and state income taxes. The Company is not permanently reinvested on undistributed earnings for its Thailand and United Kingdom foreign operating units and has provided for deferred tax attributable to those earnings of approximately $1.2 million in fiscal 2023.

The primary components of our deferred tax assets and (liabilities) were as follows:

(Amounts in thousands)	4/29/2023		4/30/2022
Assets
Leases	$	110,993	$	108,108
Deferred and other compensation	19,475		21,309
State income tax—net operating losses, credits and other	5,126		5,795
Warranty	7,213		6,402
Inventory	—		2,274
Workers' compensation	1,817		2,292
Bad debt	1,475		1,216
Employee benefits	2,159		2,170
Federal net operating losses, credits	530		908
Other	2,198		81
Valuation allowance	(3,468)		(3,517)
Total deferred tax assets	147,518		147,038
Liabilities
Right of use lease assets	(104,067)		(102,978)
Property, plant and equipment	(19,936)		(20,412)
Inventory	(1,802)		—
Goodwill and other intangibles	(14,128)		(11,914)
Tax on undistributed foreign earnings	(1,152)		(1,102)
Net deferred tax assets	$	6,433	$	10,632

The deferred tax assets associated with loss carry forwards and the related expiration dates are as follows:

(Amounts in thousands)	Amount		Expiration
Federal net operating losses	$	530	Fiscal 2039
Various U.S. state net operating losses (excluding federal tax effect)	2,074		Fiscal 2024 - 2038
Foreign capital losses	147		Indefinite
Foreign net operating losses	131		Indefinite

We evaluate our deferred taxes to determine if a valuation allowance is required. Accounting standards require that we assess whether a valuation allowance should be established based on the consideration of all available evidence using a "more likely than not" standard with significant weight being given to evidence that can be objectively verified.

The evaluation of the amount of net deferred tax assets expected to be realized necessarily involves forecasting the amount of taxable income that will be generated in future years. We have forecasted future results using estimates management believes to be reasonable. We based these estimates on objective evidence such as expected trends resulting from certain leading economic indicators. Based upon our net deferred tax asset position at April 29, 2023, we estimate that approximately $13.6 million of future taxable income would need to be generated to fully recover our net deferred tax assets. The realization of deferred income tax assets is dependent on future events and actual results may vary from management's forecasts due to economic volatility and uncertainty along with unpredictable complexities in the global supply chain. Such variances could result in adjustments to the valuation allowance on deferred tax assets in future periods, and such adjustments could be material to the financial statements.

A summary of the valuation allowance by jurisdiction is as follows:

(Amounts in thousands)	4/29/2023		4/30/2022		Change
U.S. Federal	$	1,822	$	1,460	$	362
U.S. State	1,496		1,907		(411)
Foreign	150		150		—
Total	$	3,468	$	3,517	$	(49)

The remaining valuation allowance of $3.5 million is primarily related to certain U.S. federal, state and foreign deferred tax assets. The U.S. federal deferred taxes are primarily due to limitations on the realization of deferred taxes related to executive compensation. The U.S. state deferred taxes are primarily related to state net operating losses.

As of April 29, 2023, we had a gross unrecognized tax benefit of $1.1 million related to uncertain tax positions in various jurisdictions. A reconciliation of the beginning and ending balance of these unrecognized tax benefits is as follows:

	Fiscal Year Ended
	(52 weeks)		(53 weeks)		(52 weeks)
(Amounts in thousands)	4/29/2023		4/30/2022		4/24/2021
Balance at the beginning of the period	$	1,037	$	1,069	$	1,030
Additions:
Positions taken during the current year	109		121		176
Positions taken during the prior year	83		10		35
Reductions:
Positions taken during the prior year	—		(23)		(19)
Decreases related to settlements with taxing authorities	—		—		—
Reductions resulting from the lapse of the statute of limitations	(145)		(140)		(153)
Balance at the end of the period	$	1,084	$	1,037	$	1,069

We recognize interest and penalties associated with uncertain tax positions in income tax expense. We had approximately $0.4 million accrued for interest and penalties as of April 29, 2023 and April 30, 2022.

If recognized, $0.9 million of the total $1.1 million of unrecognized tax benefits would decrease our effective tax rate. We do not expect that the net liability for uncertain income tax positions will significantly change within the next 12 months. The remaining balance will be settled or released as tax audits are effectively settled, statutes of limitation expire, or other new information becomes available.

Our U.S. federal income tax returns for fiscal years 2020 and subsequent are still subject to audit. In addition, we conduct business in various states. The major states in which we conduct business are subject to audit for fiscal years 2019 and subsequent. Our foreign operations are subject to audit for fiscal years 2013 and subsequent.

Cash paid for taxes (net of refunds received) during the fiscal years ended April 29, 2023, April 30, 2022, and April 24, 2021, was $69.9 million, $38.6 million, and $40.5 million, respectively.