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Income Taxes | 12 Months Ended
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Jan. 01, 2017
Income Tax Disclosure [Abstract] |
Income Taxes |
15. | Income Taxes
The current income tax provision represents the estimated amount of income taxes paid or payable for the year, as well as changes in estimates from prior years. The deferred income tax provision represents the change in deferred tax liabilities and assets. The following table presents the significant components of the provision for income taxes:
|  | Fiscal Year |
(in thousands) |  | 2016 |  |  | 2015 |  |  | 2014 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (6,920 | ) |  | $ | 20,107 |  |  | $ | 13,153 |
State |  |  | 27 |  |  |  | 3,563 |  |  |  | 2,163 |
Total current provision (benefit) |  | $ | (6,893 | ) |  | $ | 23,670 |  |  | $ | 15,316 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 39,644 |  |  | $ | 10,638 |  |  | $ | 3,638 |
State |  |  | 3,298 |  |  |  | (230 | ) |  |  | 582 |
Total deferred provision (benefit) |  | $ | 42,942 |  |  | $ | 10,408 |  |  | $ | 4,220 |
Income tax expense |  | $ | 36,049 |  |  | $ | 34,078 |  |  | $ | 19,536 |
The Company’s effective income tax rate, as calculated by dividing income tax expense by income before income taxes, for 2016, 2015 and 2014 was 38.9%, 34.4% and 35.1%, respectively. The following table provides a reconciliation of income tax expense at the statutory federal rate to actual income tax expense.
|  | Fiscal Year |
|  | 2016 |  |  | 2015 |  |  | 2014 |
(in thousands) |  | Income tax expense |  |  | % pre-tax income |  |  | Income tax expense |  |  | % pre-tax income |  |  | Income tax expense |  |  | % pre-tax income |
Statutory expense |  | $ | 32,449 |  |  |  | 35.0 | % |  | $ | 34,692 |  |  |  | 35.0 | % |  | $ | 19,474 |  |  |  | 35.0 | %
State income taxes, net of federal benefit |  |  | 3,243 |  |  |  | 3.5 |  |  |  | 3,496 |  |  |  | 3.5 |  |  |  | 2,133 |  |  |  | 3.8 |
Noncontrolling interest – Piedmont |  |  | (2,406 | ) |  |  | (2.6 | ) |  |  | (2,261 | ) |  |  | (2.3 | ) |  |  | (1,835 | ) |  |  | (3.3 | )
Adjustment for uncertain tax positions |  |  | (43 | ) |  |  | - |  |  |  | 51 |  |  |  | 0.1 |  |  |  | 30 |  |  |  | 0.1 |
Adjustment for state tax legislation |  |  | (625 | ) |  |  | (0.7 | ) |  |  | (1,145 | ) |  |  | (1.2 | ) |  |  | - |  |  |  | - |
Valuation allowance change |  |  | (689 | ) |  |  | (0.7 | ) |  |  | (1,332 | ) |  |  | (1.3 | ) |  |  | 1,203 |  |  |  | 2.2 |
Bargain purchase gain |  |  | - |  |  |  | - |  |  |  | (704 | ) |  |  | (0.7 | ) |  |  | - |  |  |  | - |
Capital loss carryover |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (854 | ) |  |  | (1.5 | )
Manufacturing deduction benefit |  |  | (56 | ) |  |  | (0.1 | ) |  |  | (1,330 | ) |  |  | (1.3 | ) |  |  | (1,470 | ) |  |  | (2.6 | )
Meals and entertainment |  |  | 1,879 |  |  |  | 2.0 |  |  |  | 1,666 |  |  |  | 1.7 |  |  |  | 1,204 |  |  |  | 2.2 |
Other, net |  |  | 2,297 |  |  |  | 2.5 |  |  |  | 945 |  |  |  | 0.9 |  |  |  | (349 | ) |  |  | (0.8 | )
Income tax expense |  | $ | 36,049 |  |  |  | 38.9 | % |  | $ | 34,078 |  |  |  | 34.4 | % |  | $ | 19,536 |  |  |  | 35.1 | %
The Company’s effective tax rate, as calculated by dividing income tax expense by income before income taxes less net income attributable to noncontrolling interest, for 2016, 2015 and 2014 was 41.8%, 36.6% and 38.4%, respectively. During 2015, a state legislation target threshold was met that caused a reduction to the corporate tax rate in that state to 4.0% from 5.0%, effective January 1, 2016. This reduction in the state corporate tax rate decreased the Company’s income tax expense by approximately $1.1 million in 2015 due to the impact on the Company’s net deferred tax liabilities and valuation allowance. During 2016, the Company revalued its existing net deferred tax liabilities for the effects on the state corporate tax rate applied to deferred taxes which resulted from the 2016 Expansion Transactions. The net impact of this revaluation was an increase to the recorded income tax expense of $0.8 million. Also during 2016, a state tax legislation target was met that caused a reduction to the corporate tax rate in that state to 3.0% from 4.0%, effective January 1, 2017. This reduction in the state corporate tax rate resulted in a decrease to the Company’s recorded income tax expense of $0.6 million due to the Company revaluing its net deferred tax liabilities. The impact of these two revaluations was a net increase to the recorded income tax expense of $0.2 million in 2016. The gain on the exchange of franchise territory and the sale of BYB did not have a significant impact on the effective income tax rate for 2015. The Company records liabilities for uncertain tax positions related to certain income tax positions. These liabilities reflect the Company’s best estimate of the ultimate income tax liability based on currently known facts and information. Material changes in facts or information, as well as the expiration of statute and/or settlements with individual tax jurisdictions, may result in material adjustments to these estimates in the future. The Company recognizes potential interest and penalties related to uncertain tax positions in income tax expense. During 2016, 2015 and 2014, the interest and penalties related to uncertain tax positions recognized in income tax expense were not material. In addition, the amount of interest and penalties accrued at January 1, 2017 and January 3, 2016 were not material. As of January 1, 2017 and January 3, 2016, the Company had $2.9 million of uncertain tax positions, including accrued interest, all of which would affect the Company’s effective tax rate if recognized. While it is expected the amount of uncertain tax positions may change in the next 12 months, the Company does not expect such change would have a significant impact on the consolidated financial statements. The Company reduced its liability for uncertain tax positions in 2016, 2015 and 2014, primarily as a result of the expiration of applicable statutes of limitation. These reductions resulted in corresponding decreases to income tax expense. A reconciliation of uncertain tax positions, excluding accrued interest, is as follows:
|  | Fiscal Year |
(in thousands) |  | 2016 |  |  | 2015 |  |  | 2014 |
Gross uncertain tax positions at the beginning of the year |  | $ | 2,633 |  |  | $ | 2,620 |  |  | $ | 2,630 |
Increase as a result of tax positions taken during a prior period |  |  | - |  |  |  | - |  |  |  | - |
Decrease as a result of tax positions taken during a prior period |  |  | - |  |  |  | - |  |  |  | - |
Increase as a result of tax positions taken in the current period |  |  | 687 |  |  |  | 547 |  |  |  | 498 |
Reduction as a result of the expiration of the applicable statute of limitations |  |  | (641 | ) |  |  | (534 | ) |  |  | (508 | )
Gross uncertain tax positions at the end of the year |  | $ | 2,679 |  |  | $ | 2,633 |  |  | $ | 2,620 |
Deferred income taxes are recorded based upon temporary differences between the financial statement and tax bases of assets and liabilities and available net operating loss and tax credit carryforwards. Temporary differences and carryforwards that comprised deferred income tax assets and liabilities were as follows:
(in thousands) |  | January 1, 2017 |  |  | January 3, 2016 |
Acquisition related contingent consideration |  | $ | 97,573 |  |  | $ | 52,306 |
Deferred compensation |  |  | 44,185 |  |  |  | 44,402 |
Postretirement benefits |  |  | 32,656 |  |  |  | 27,086 |
Accrued liabilities |  |  | 21,666 |  |  |  | 21,853 |
Pension (nonunion) |  |  | 17,381 |  |  |  | 18,257 |
Transactional costs |  |  | 7,155 |  |  |  | 5,879 |
Capital lease agreements |  |  | 5,817 |  |  |  | 6,105 |
Charitable contribution carryover |  |  | 4,409 |  |  |  | - |
Pension (union) |  |  | 3,162 |  |  |  | 3,290 |
Net operating loss carryforwards |  |  | 2,148 |  |  |  | 3,121 |
Other |  |  | 111 |  |  |  | - |
Deferred income tax assets |  | $ | 236,263 |  |  |  | 182,299 |
Less: Valuation allowance for deferred tax assets |  |  | 1,618 |  |  |  | 2,307 |
Net deferred income tax asset |  | $ | 234,645 |  |  | $ | 179,992 |
Intangible assets |  | $ | (204,661 | ) |  | $ | (169,338 | )
Depreciation |  |  | (134,872 | ) |  |  | (95,262 | )
Investment in Piedmont |  |  | (45,128 | ) |  |  | (43,109 | )
Inventory |  |  | (13,814 | ) |  |  | (9,928 | )
Prepaid expenses |  |  | (6,300 | ) |  |  | (4,615 | )
Patronage dividend |  |  | (4,724 | ) |  |  | (4,046 | )
Debt exchange premium |  |  | - |  |  |  | (204 | )
Other |  |  | - |  |  |  | (434 | )
Deferred income tax liabilities |  | $ | (409,499 | ) |  | $ | (326,936 | )
Net deferred income tax liability |  | $ | (174,854 | ) |  | $ | (146,944 | )
Valuation allowances are recognized on deferred tax assets if the Company believes it is more likely than not that some or all of the deferred tax assets will not be realized. The Company believes the majority of the deferred tax assets will be realized due to the reversal of certain significant temporary differences and anticipated future taxable income from operations. The valuation allowance of $1.6 million as of January 1, 2017 and $2.3 million as of January 3, 2016 was established primarily for certain loss carryforwards which expire in varying amounts through 2035. The reduction in the valuation allowance as of January 1, 2017, was a result of the Company’s assessment of its ability to use certain loss carryforwards. The reduction in the valuation allowance as of January 3, 2016, was a result of the Company’s assessment of its ability to use certain loss carryforwards primarily related to the sale of BYB. As of January 1, 2017, the Company had $1.6 million of federal net operating losses and $39.8 million of state net operating losses available to reduce future income taxes. The federal net operating losses would expire in varying amounts through 2032. The state net operating losses would expire in varying amounts through 2035. Prior tax years beginning in year 2002 remain open to examination by the Internal Revenue Service, and various tax years beginning in year 1998 remain open to examination by certain state tax jurisdictions due to loss carryforwards. The Company’s deferred income tax assets and liabilities are subject to adjustment in future periods based on the Company’s ongoing evaluations of such deferred assets and liabilities and new information available to the Company.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
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