4 .	Income Taxes

December 22, 2017,

the U.S. government enacted comprehensive tax reform commonly referred to as the Tax Cuts and Jobs Act (“TCJA” or “Tax Act”). The Tax Act made comprehensive changes to the U.S. Tax Code, including, but

not

limited to, (i) reducing the U.S. corporate tax rate from

35%

21%,

(ii) changing the rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after

December 31, 2017, (

iii) immediate expensing of certain qualified property, (iv) eliminating certain deductions, (v) repealing the corporate minimum tax, and (vi) changing the manner in which international operations are taxed in the U.S., including a mandatory

one

-time transition tax on the accumulated untaxed earnings of foreign subsidiaries of U.S. shareholders. The majority of the changes resulting from the Tax Act are effective for tax years beginning in calendar

2018.

However, U.S. GAAP requires that certain impacts of the Tax Act be recognized in the income tax provision in the period of enactment. The corporate tax rate reduction was effective on

January 1, 2018.

The Company’s Federal statutory tax rate is

21%

for the

2019

and

2020

fiscal years and a blended rate of

32.9%

for the

2018

fiscal year.

In response to the enactment of the Tax Act, the Securities and Exchange Commission issued Staff Accounting Bulletin (“SAB”)

118,

which provided guidance on accounting for the tax effects of the Tax Act. SAB

118

provided a measurement period that should

not

extend beyond

one

year from the Tax Act enactment date for companies to complete the accounting under Accounting Standards Codification (“ASC”)

740.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but able to determine a reasonable estimate, the company must record the estimate in its financial statements.

During the

2018

fiscal year, under the mandatory

one

-time transition tax provision, the Company incurred a current income tax expense of approximately

$23,139

on its untaxed foreign earnings. In accordance with the guidelines provided by the Tax Act, the Company aggregated untaxed foreign earnings and profits and utilized participation exemption deductions and foreign tax credits in arriving at a provisional transition tax liability. Companies are permitted to pay this

one

-time transition tax over an

eight

-year period.

The provisional

one

-time transition tax liability of

$21,887,

calculated after utilizing current year domestic losses, was recorded as a current income tax payable and a non-current income tax payable of

$1,751

and

$20,136,

respectively, and is payable over an

eight

-year period. The Company concurrently reversed

$44,309

of deferred tax liability previously accrued for untaxed foreign earnings and profits. The net impact was an income tax benefit of

$18,456

recorded in the continuing operations income tax (benefit) provision for fiscal

2018

in the Consolidated Statements of Operations.

In connection with the enactment of the Tax Act, the Company re-measured its U.S. deferred tax assets and liabilities based on the rates at which they are expected to be realized in future tax years. During the

fourth

quarter of the

2018

fiscal year, the Company recorded a provisional income tax provision and corresponding reduction in the net U.S. deferred tax asset of approximately

$1,963.

During the

fourth

quarter of the

2019

fiscal year, the Company finalized its accounting for the tax effects of the Tax Act with

material change to the provisional estimates recorded in the prior period.

The Tax Act establishes global intangible low-taxed income (“GILTI”) provisions that impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The Company made a policy election to treat the income tax due on the U.S. inclusion of GILTI provisions as a period expense when incurred.

The income tax provision (benefit) for continuing operations includes the following:

	Fiscal Year
	2020			2019			2018

Current:
Federal	$	2,556		$	1,776		$	22,968
State and local		40			164			51
Foreign		383			258			481
		2,979			2,198			23,500

Deferred:
Federal		899			(71	)		(41,624	)
State and local		(12	)		(362	)		(21	)
Foreign		-			26			(17	)
		887			(407	)		(41,662	)
	$	3,866		$	1,791		$	(18,162	)

The income tax provision (benefit) for discontinued operations includes the following:

	Fiscal Year
	2020			2019			2018

Current:
Federal	$	(183	)	$	11,198		$	(1,400	)
State and local		(15	)		1,455			168
Foreign		-			1,397			327
		(198	)		14,050			(905	)

Deferred:
Federal		-			686			(430	)
State and local		(38	)		564			(31	)
Foreign		-			(617	)		63
		(38	)		633			(398	)
	$	(236	)	$	14,683		$	(1,303	)

State income tax benefits from loss carryforwards to future years were recognized as deferred tax assets in the

2020,

2019

and

2018

fiscal years.

Notwithstanding the U.S. taxation of the deemed repatriated foreign earnings as a result of the transition tax, the Company intends to indefinitely invest approximately

$25

million of undistributed earnings outside of the U.S. If these future earnings are repatriated to the U.S., or if the Company determines that such earnings will be remitted in the foreseeable future, the Company

may

be required to accrue U.S. deferred taxes. In connection with sale of the Electronics Business and the enactment of the Tax Act, the Company repatriated

$100,216,

$113,600,

and

$135,300

in cash from its Singapore and French subsidiaries in the

2020,

2019

and

2018

fiscal years, respectively.

The Company’s pre-tax earnings (loss) from continuing operations in the United States and foreign locations are as follows:

	Fiscal Year
	2020		2019		2018

United States	$	11,676	$	6,661	$	(652	)
Foreign		2,395		1,436		962
Earnings before income taxes	$	14,071	$	8,097	$	310

The Company’s pre-tax earnings (loss) from discontinued operations in the United States and foreign locations are as follows:

	Fiscal Year
	2020			2019		2018

United States	$	(887	)	$	7,485	$	(7,512	)
Foreign		-			114,437		8,332
(Loss) earnings before income taxes	$	(887	)	$	121,922	$	820

The Company’s effective income tax rate differs from the statutory U.S. Federal income tax rate as a result of the following:

	Fiscal Year
	2020			2019			2018

Statutory U.S. Federal tax rate		21.0	%		21.0	%		32.9	%
State and local taxes, net of		0.1	%		1.6	%		(41.4	%)
Federal benefit
Foreign tax rate differentials		(0.6	%)		(0.8	%)		(117.6	%)
Valuation allowance on deferred tax assets		(0.1	%)		(2.8	%)		-
Adjustment on tax accruals		(17.6	%)		2.9	%		56.8	%
ASC 740-10 change		23.5	%		0.4	%		104.7	%
Foreign tax credits		(2.7	%)		(3.2	%)		(118.0	%)
U.S. Tax Reform		-			-			(5,944.2	%)
Subpart F		4.0	%		4.0	%		281.1	%
Permanent differences and other		(0.1	%)		(1.0	%)		(104.0	%)
		27.5	%		22.1	%		(5,849.7	%)

The Company had state net operating loss carryforwards of approximately

$2,515

and

$3,161

in the

2020

and

2019

fiscal years, respectively, and total net foreign operating loss carryforwards of approximately

$7,798

and

$7,862

in the

2020

and

2019

fiscal years, respectively. The Company utilized

$64

of net operating loss in the

2020

fiscal year. The Company has a valuation allowance against the remaining carryforwards. The state net operating loss carryforwards will expire in

2021

through

2039.

The Company had available Kansas tax credits of

$45

and

$236

at the end of the

2020

and

2019

fiscal years, respectively. Kansas credits of

$191

were utilized in

2020

and a corresponding tax benefit was recognized. The Company had Arizona tax credits of

$576

and

$135

in the

2020

and

2019

fiscal years, respectively, for which

benefit has been provided.

The deferred tax asset valuation allowance of

$3,175

as of

March 1, 2020

relates to foreign net operating losses and state tax credit carryforwards from continuing operations for which the Company does

not

expect to realize any tax benefit. During the

2020

fiscal year, the valuation allowance increased by

$420,

primarily related to the recognition of the Arizona tax credits. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes.

Significant components of the Company's deferred tax assets and liabilities from continuing operations as of

March 1, 2020

and

March 3, 2019

were as follows:

	March 3,			February 25,
	2020			2019

Deferred tax assets:
Net operating loss carryforwards	$	2,608		$	2,709
Tax credits carryforward		621			135
Stock options		1,120			1,206
Other, net		478			574
		4,827			4,624
Valuation allowance on deferred tax assets		(3,175	)		(2,755	)
Total deferred tax assets, net of valuation allowance		1,652			1,869
Deferred tax liabilities:
Depreciation		(1,743	)		(1,368	)
Undistributed earnings		(2	)		(333	)
Other		(699	)		(154	)
Total deferred tax liabilities		(2,444	)		(1,855	)
Net deferred tax asset (liability)	$	(792	)	$	14

March 1, 2020

and

March 3, 2019,

the Company had gross unrecognized tax benefits and related interest of

$4,356

and

$1,016,

respectively, included in other liabilities. If any portion of the unrecognized tax benefits at

March 1, 2020

were recognized, the Company’s effective tax rate would decrease.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for continuing operations is as follows:

	Unrecognized Tax Benefits
	March 1,			March 3,			February 25,
	2020			2019			2018

Balance, beginning of year	$	937		$	314		$	-
Tax positions - Discontinued Ops in prior period		-			187			-
Gross decreases - tax positions in prior period		(32	)		(256	)		-
Gross increases - current period tax positions		3,259			784			314
Audit settlements		-			(92	)		-
Balance, end of year	$	4,164		$	937		$	314

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for discontinued operations is as follows:

	Unrecognized Tax Benefits
	March 1,		March 3,			February 25,
	2020		2019			2018

Balance, beginning of year	$	-	$	187		$	1,024
Tax positions - Discontinued Ops in prior period		-		(187	)		-
Gross decreases - tax positions in prior period		-		-			(688	)
Gross increases - current period tax positions		-		-			6
Lapse of statute of limitations		-		-			(155	)
Balance, end of year	$	-	$	-		$	187

The amount of unrecognized tax benefits

may

increase or decrease in the future for various reasons, including adding or subtracting amounts for current year tax positions, expiration of statutes of limitations on open income tax years, changes in the Company’s judgment about the level of uncertainty, status of tax examinations, and legislative changes. Changes in prior period tax positions are the result of a re-evaluation of the probability of realizing the benefit of a particular tax position based on new information. It is reasonably possible that

none

of the unrecognized tax benefits will be recognized within the next

months.

A list of open tax years by major jurisdiction follows:

U.S. Federal	2018	-	2020
California	2017	-	2020
New York	2018	-	2020
France	2017	-	2020
Singapore	2016	-	2020

The Company had approximately

$193

and

$79

of accrued interest and penalties as of

March 1, 2020

and

March 3, 2019,

respectively. The Company’s policy is to include applicable interest and penalties related to unrecognized tax benefits as a component of current income tax expense.

The Company has

ongoing examinations of its Federal or state tax returns. The Internal Revenue Service completed its examination of the

2016

fiscal year tax returns in

June 2018.