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Note I - Income Taxes

12 Months Ended

Sep. 27, 2014

NOTE I – INCOME TAXES

Income tax expense (benefit) is as follows:

	Fiscal year ended
	September 27,			September 28,			September 29,
	2014			2013			2012
	(in thousands)
Current
U.S. Federal	$	31,506		$	26,492		$	21,573
Foreign		2,008			2,289			1,408
State		6,693			7,560			5,416
Total current expense		40,207			36,341			28,397

Deferred
U.S. Federal	$	(217	)	$	64		$	3,124
Foreign		(58	)		(10	)		(14	)
State		(540	)		14			661
Total deferred (benefit) expense		(815	)		68			3,771
Total expense	$	39,392		$	36,409		$	32,168

The 2014 deferred tax benefit does not equal the change in net deferred tax liabilities as a result of deferred taxes recorded in connection with the PHILLY SWIRL acquisition described more fully in Note B.

The provisions for income taxes differ from the amounts computed by applying the statutory federal income tax rate of approximately 35% to earnings before income taxes for the following reasons:

	Fiscal year ended
	September 27,			September 28,			September 29,
	2014			2013			2012
	(in thousands)

Income taxes at federal statutory rates	$	38,922		$	35,277		$	30,200
Increase (decrease)in taxes resulting from:
State income taxes, net of federal income tax benefit		4,281			4,346			3,777
Domestic production activities deduction		(2,100	)		(1,540	)		(1,553	)
Reduction of gross unrecognized tax benefits		(161	)		(346	)		(307	)
Other, net		(1,550	)		(1,328	)		51
Income tax expense	$	39,392		$	36,409		$	32,168

Deferred tax assets and liabilities consist of the following:

	September 27,		September 28,
	2014		2013
	(in thousands)
Deferred tax assets
Vacation accrual	$	1,456	$	1,445
Insurance accrual		3,383		3,306
Deferred income		53		32
Allowances		1,895		2,348
Inventory capitalization		745		709
Share-based compensation		1,216		1,023
Net Operating Loss		1,956		-
Total deferred tax assets		10,704		8,863

Deferred tax liabilities
Amortization of goodwill and other intangible assets		24,528		20,283
Depreciation of property and equipment		26,865		29,261
Total deferred tax liabilities		51,393		49,544
Total deferred tax liabilities, net	$	40,689	$	40,681

As of September 27, 2014, we have federal net operating loss carry forwards of approximately $5 million from the PHILLY SWIRL acquisition. These carry forwards are subject to an annual limitation under Code Section 382 of approximately $378,000 and will expire in 2033. We have determined there are no limitations to the total use of this asset and accordingly, have not recorded a valuation allowance for this deferred tax asset.

We have undistributed earnings of our Mexican and Canadian subsidiaries that are considered to be indefinitely reinvested and accordingly no provision for US federal and state income taxes has been provided thereon.

- 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.

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