Income Taxes (Tables)

12 Months Ended

May 03, 2020

Income Tax Disclosure [Abstract]

Schedule of Allocation of Income Tax Expense

Total income tax expense was allocated as follows:

(dollars in thousands)	2020			2019			2018
(loss) income from continuing operations	$	3,354		$	6,537		$	5,740
loss from discontinued operations		(68	)		(113	)		—
	$	3,286		$	6,424		$	5,740

Schedule of Income Tax Expense Attributable to Income from Operations

Income tax expense attributable to income from continuing operations consists of:

(dollars in thousands)	2020			2019			2018
current
federal	$	—			(1,492	)		(1,367	)
state		7			27			9
2017 Tax Cuts and Jobs Act		—			(282	)		4,854
foreign		4,248			6,144			4,726
uncertain income tax positions		725			—			—
		4,980			4,397			8,222
deferred
federal		(1,875	)		3,236			4,295
state		(103	)		(96	)		112
2017 Tax Cuts and Jobs Act (1)		—			(268	)		(6,903	)
undistributed earnings – foreign subsidiaries		(114	)		3,735			(195	)
U.S. Federal & State carryforwards and credits		(1,307	)		74			—
uncertain income tax positions		(380	)		—			—
foreign		(247	)		(85	)		93
valuation allowance (1)		2,400			(4,456	)		116
		(1,626	)		2,140			(2,482	)
	$	3,354			6,537			5,740

(1) The income tax benefit of $6,903 recorded during fiscal 2018 included a charge of $4,550 for the establishment of a valuation allowance against U.S. foreign tax credits that were not more-likely-than not to be realized as a result of the 2017 Tax Cuts and Jobs Act. During fiscal 2019, we recorded an income tax charge of $4.5 million for the write-off of certain U.S. foreign tax credits, and in turn, we recorded an income tax benefit of $4.5 million for the reduction in our valuation allowance. The $4.5 million income charge for the write-off of certain U.S. foreign tax credits is included in the undistributed earnings – foreign subsidiaries income tax expense amount of $3,735.

Schedule of Income (Loss) before Income Taxes Related to Foreign and U.S. Operations

(Loss) income before income taxes from continuing operations related to our foreign and U.S. operations consists of:

(dollars in thousands)	2020			2019			2018
Foreign
China	$	8,316			9,899			11,036
Canada		(1,391	)		5,488			5,985
Cayman Islands		(6	)		280			339
Total Foreign		6,919			15,667			17,360
United States		(14,598	)		(2,945	)		9,523
	$	(7,679	)		12,722			26,883

Summary of Differences in Income Tax Expense at Federal Income Tax Rate and Effective Income Tax Rate

The following schedule summarizes the principal differences between the income tax expense from continuing operations at the federal income tax rate and the effective income tax rate from continuing operations reflected in the consolidated financial statements:

	2020			2019			2018
federal income tax rate		21.0	%		21.0	%		30.4	%
global intangible low taxed income tax (GILTI)		(24.4	)		16.9			—
foreign tax rate differential		(16.1	)		13.0			3.7
income tax effects of impairment of nondeductible goodwill		(11.3	)		—			—
uncertain income tax positions		(4.8	)		0.5			—
income tax effects of Chinese foreign exchange gains and losses		(5.0	)		2.2			(2.8	)
write-off of U.S. foreign income tax credits		—			35.1			—
valuation allowance		(1.6	)		(35.0	)		0.4
income tax effects of the 2017 Tax Cuts and Jobs Act		—			(4.3	)		(7.6	)
Other		(1.5	)		2.0			(2.7	)
		(43.7	)%		51.4	%		21.4	%

Schedule of Deferred Tax Assets and Liabilities

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities consist of the following:

(dollars in thousands)	2020			2019
deferred tax assets:
accounts receivable	$	263			282
Inventories		2,280			1,591
Compensation		1,970			1,973
liabilities and other		166			284
intangible assets and goodwill		856			—
property, plant, and equipment (1)		185			193
operating lease liability		671			—
foreign income tax credits - U.S.		783			1,252
loss carryforwards – U.S.		4,137			2,360
valuation allowances		(3,148	)		(748	)
total deferred tax assets		8,163			7,187

deferred tax liabilities:
undistributed earnings on foreign subsidiaries		(3,409	)	(3,523	)
unrecognized tax benefits – U.S.		—		(380	)
property, plant and equipment (2)		(5,008	)	(4,710	)
right of use asset		(690	)	—
Goodwill		—		(1,203	)
Other		(81	)	(90	)
total deferred tax liabilities		(9,188	)	(9,906	)
Net deferred liabilities	$	(1,025	)	(2,719	)

(1) Pertains to the company’s operations located in China.

(2) Pertains to the company’s operations located in the U.S. and Canada.

Summary of Valuation Allowances Against Deferred Income Taxes

Based on our assessments at May 3, 2020 and April 29, 2019, valuation allowances against our deferred income taxes pertain to the following jurisdictions:

(dollars in thousands)	May 3, 2020		April 28, 2019
U.S. capital loss carryforward	$	2,281		—
U.S. state loss carryforwards and credits		867		666
U.S. foreign income tax credits		—		82
	$	3,148		748

Summary of Change in Valuation Allowances Against Deferred Income Taxes

A summary of the change in the valuation allowances against our deferred income taxes follows:

(dollars in thousands)	2020		2019			2018
beginning balance	$	748		5,204			536
Write-off of deferred income taxes (1)		—		(4,544	)		—
establishment of valuation allowance (1) (2)		2,281		—			4,550
change in estimate (3)		119		88			118
ending balance	$	3,148		748			5,204

(1) During fiscal 2018, we recorded an income tax charge of $4.6 million for the establishment of a valuation allowance associated with U.S. foreign tax credits that we believed were not more-likely-than not to be realized based on the provisions outlined in TCJA. During fiscal 2019, we recorded an income tax charge of $4.5 million for the write-off of certain U.S. foreign tax credits, and in turn, we recorded an income tax benefit of $4.5 million for the reduction in our valuation allowance.

(2) In connection with the sale of a discontinued operation that was treated as a partnership for income tax purposes, we generated a capital loss carryforward totaling $10.9 million with a related future income tax benefit of $2.3 million. Since capital losses can only be offset by capital gains, we established a full valuation allowance on this capital loss carryforward as we do not have capital assets that would generate capital gains that would utilize this carryforward.

(3) Amounts pertain to a change in estimate of the recoverability of certain U.S. state loss carryforward balances as of the end of the respective prior fiscal year.

Schedule of Unrecognized Tax Benefit

The following table sets forth the change in the company’s unrecognized income tax benefit:

(dollars in thousands)	2020			2019			2018
beginning balance	$	903			844			12,245
increases from prior period tax positions		106			135			350
decreases from prior period tax positions (1)		(85	)		(76	)		(11,751	)
increases from current period tax positions		434			—			—
decreases from current period tax positions		(89	)		—			—
ending balance	$	1,269			903			844

(1) The $11.8 million reduction in our unrecognized income tax benefits during fiscal 2018 is mostly associated with the reduction in our U.S. Federal income tax rate pursuant to the TCJA on the effective settlement of an IRS exam.