Note 4 - Income Taxes

12 Months Ended

Feb. 27, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

4. INCOME TAXES

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

	Fiscal Year
	2022		2021			2020
Current:
Federal	$	1,912	$	1,662		$	2,556
State and local		484		447			40
Foreign		4		10			383
		2,400		2,119			2,979
Deferred:
Federal		565		132			899
State and local		88		109			(12	)
Foreign		267		(267	)		-
		920		(26	)		887
	$	3,320	$	2,093		$	3,866

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

	Fiscal Year
	2022		2021			2020
Current:
Federal	$	-	$	(84	)	$	(183	)
State and local		-		(23	)		(15	)
Foreign		-		-			-
		-		(107	)		(198	)
Deferred:
Federal		-		-			-
State and local		-		-			(38	)
Foreign		-		-			-
		-		-			(38	)
	$	-	$	(107	)	$	(236	)

State income tax benefits from loss carryforwards to future years were recognized as deferred tax assets in the 2022, 2021 and 2020 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 $0, $0, and $100,216 in cash from its Singapore and French subsidiaries in the 2022, 2021 and 2020 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
	2022			2021			2020
United States	$	11,987		$	8,732		$	11,676
Foreign		(203	)		(1,447	)		2,395
Earnings before income taxes	$	11,784		$	7,285		$	14,071

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

	Fiscal Year
	2022		2021			2020
United States	$	-	$	(435	)	$	(887	)
Foreign		-		-			-
(Loss) earnings before income taxes	$	-	$	(435	)	$	(887	)

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
	2022			2021			2020
Statutory U.S. Federal tax rate		21.0	%		21.0	%		21.0	%
State and local taxes, net of		4.3	%		5.9	%		0.1	%
Federal benefit
Foreign tax rate differentials		2.7	%		0.7	%		(0.6	%)
Valuation allowance on deferred tax assets		0.0	%		0.0	%		(0.1	%)
Adjustment on tax accruals		(0.3	%)		0.0	%		(17.6	%)
ASC 740-10 change		0.5	%		0.9	%		23.5	%
Foreign tax credits		0.0	%		(0.1	%)		(2.7	%)
Subpart F		(1.0	%)		1.1	%		4.0	%
Permanent differences and other		1.0	%		(0.8	%)		(0.1	%)
		28.2	%		28.7	%		(27.5	%)

The Company had state net operating loss carryforwards of approximately $2,030 and $2,160 in the 2022 and 2021 fiscal years, respectively, and total net foreign operating loss carryforwards of approximately $7,790 and $7,798 in the 2022 and 2021 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 2023 through 2039.

The Company had available Kansas tax credits of $0 at the end of both the 2022 and 2021 fiscal years. Kansas credits of $191 were utilized in 2020 and a corresponding tax benefit was recognized.  The Company had Arizona tax credits of $991 in both the 2022 and 2021 fiscal years, for which no benefit has been provided.

The deferred tax asset valuation allowance of $3,587 as of February 27, 2022 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 2022 fiscal year, the valuation allowance did not change. 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 February 27, 2022 and February 28, 2021 were as follows:

	February 27,			February 28,
	2022			2021
Deferred tax assets:
Net operating loss carryforwards	$	2,598		$	2,602
Tax credits carryforward		991			991
Stock options		977			1,235
Other, net		174			774
		4,740			5,602
Valuation allowance on deferred tax assets		(3,587	)		(3,587	)
Total deferred tax assets, net of valuation allowance		1,153			2,015
Deferred tax liabilities:
Depreciation		(2,492	)		(2,045	)
Undistributed earnings		(2	)		(4	)
Other		(556	)		(702	)
Total deferred tax liabilities		(3,050	)		(2,751	)
Net deferred tax asset (liability)	$	(1,897	)	$	(736	)

At February 27, 2022 and February 28, 2021, the Company had gross unrecognized tax benefits and related interest of $4,537 and $4,452, respectively, included in other liabilities.  If any portion of the unrecognized tax benefits at February 27, 2022 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
	February 27,			February 28,			March 1,
	2022			2021			2020
Balance, beginning of year	$	4,117		$	4,164		$	937
Tax positions - Discontinued Ops in prior period		-			(47	)		-
Gross decreases - tax positions in prior period		(39	)		-			(32	)
Gross increases - current period tax positions		-			-			3,259
Audit settlements		-			-			-
Balance, end of year	$	4,078		$	4,117		$	4,164

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 12 months.

A list of open tax years by major jurisdiction follows:

U.S. Federal	2020	-	2022
California	2018	-	2022
New York	2020	-	2022
Kansas	2018	-	2022
France	2018	-	2022
Singapore	2017	-	2022

The Company had approximately $460 and $335 of accrued interest and penalties as of February 27, 2022 and February 28, 2021, 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 no ongoing examinations of its Federal returns. The audit of the New York state tax returns for the 2018 and 2019 fiscal years has been completed.