Income Taxes

6 Months Ended

Nov. 27, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company's process for determining the provision for income taxes for the three and six months ended November 27, 2021 involved using an estimated annual effective tax rate which was based on expected annual income and statutory tax rates across the various jurisdictions in which it operates. The effective tax rates were 77.6% and 23.5%, respectively, for the three month periods ended November 27, 2021 and November 28, 2020. The year over year change in the effective tax rate for the three months ended November 27, 2021 resulted from an adjustment due to a pre-tax book loss reported for the quarter coupled with an overall forecasted pre-tax book loss for the year resulting from restructuring costs in connection with the Knoll acquisition and increased margin pressure from global supply chain disruptions and labor shortages. The same quarter of the prior year had no comparable impacts. For the three months ended November 27, 2021, the effective tax rate is higher than the United States federal statutory rate due to the impact of applying the estimated annual effective tax rate to the year to date pre-tax loss. For the three months ended November 28, 2020, the effective tax rate was higher than the United States federal statutory rate due to United States state income taxes and the mix of earnings in tax jurisdictions that had rates that were higher than the United States federal statutory rate.

The effective tax rates were 18.8% and 22.6%, respectively, for the six months ended November 27, 2021 and November 28, 2020. The year over year decrease in the effective rate for the six months ended November 27, 2021 resulted from an overall

pre-tax book loss reported for the six months coupled with non-deductible discrete compensation and acquisition costs in connection with the Knoll acquisition. The same six months in the prior year had no comparable impacts from the acquisition. For the six months ended November 27, 2021, the effective tax rate is lower than the United States federal statutory rate due to the impact of applying the estimated annual effective tax rate to the year to date pre-tax loss, which includes an adjustment impacted by non-deductible Knoll acquisition related costs. For the six months ended November 28, 2020, the effective tax rate was higher than the United States federal statutory rate mainly due to United States state income taxes and the mix of earnings in tax jurisdictions that had rates that were higher than the United States federal statutory rate.

The Company recognizes interest and penalties related to uncertain tax benefits through income tax expense in its Condensed Consolidated Statements of Comprehensive Income. Interest and penalties recognized in the Company's Condensed Consolidated Statements of Comprehensive Income were negligible for the three and six months ended November 27, 2021 and November 28, 2020.

The Company's recorded liability for potential interest and penalties related to uncertain tax benefits was:

(In millions)	November 27, 2021		May 29, 2021
Liability for interest and penalties	$	1.0	$	0.9
Liability for uncertain tax positions, current	$	2.7	$	2.1

The Company is subject to periodic audits by domestic and foreign tax authorities. Currently, the Company is undergoing routine periodic audits in both domestic and foreign tax jurisdictions. It is reasonably possible that the amounts of unrecognized tax benefits could change in the next twelve months because of the audits. Tax payments related to these audits, if any, are not expected to be material to the Company's Condensed Consolidated Statements of Comprehensive Income.

For the majority of tax jurisdictions, the Company is no longer subject to state, local, or non-United States income tax examinations by tax authorities for fiscal years before 2018.