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Note I - Income Taxes | 12 Months Ended
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Sep. 29, 2018
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | NOTE I – INCOME TAXES Income tax expense (benefit) is as follows:
|  | Fiscal year ended |
|  | September 29, |  |  | September 30, |  |  | September 24, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
|  | (in thousands) |
Current |  |  |  |  |  |  |  |  |  |  |  |
U.S. Federal |  | $ | 16,591 |  |  | $ | 27,142 |  |  | $ | 25,126 |
Foreign |  |  | 2,512 |  |  |  | 2,770 |  |  |  | 2,433 |
State |  |  | 5,836 |  |  |  | 5,227 |  |  |  | 5,622 |
Total current expense |  |  | 24,939 |  |  |  | 35,139 |  |  |  | 33,181 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
U.S. Federal |  | $ | (14,613 | ) |  | $ | 6,857 |  |  | $ | 6,444 |
Foreign |  |  | 514 |  |  |  | (422 | ) |  |  | (145 | )
State |  |  | 3,716 |  |  |  | 1,452 |  |  |  | 1,364 |
Total deferred benefit |  |  | (10,383 | ) |  |  | 7,887 |  |  |  | 7,663 |
Total expense |  | $ | 14,556 |  |  | $ | 43,026 |  |  | $ | 40,844 |
The change in deferred taxes for the year ended September 30, 2017 does not equal deferred tax expense in the amount of $6,632,000 as a result of purchase accounting related to the Hill & Valley acquisition. The provisions for income taxes differ from the amounts computed by applying the statutory federal income tax rate of approximately 35% for the fiscal years ended September 30, 2017 and September 24, 2016 and 24 1/2% for the fiscal year ended September 29, 2018 to earnings before income taxes for the following reasons:
|  | Fiscal year ended |
|  | September 29, |  |  | September 30, |  |  | September 24, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
|  | (in thousands) |
Income taxes at federal statutory rates |  | $ | 28,947 |  |  | $ | 42,770 |  |  | $ | 40,887 |
Increase (decrease)in taxes resulting from: |  |  |  |  |  |  |  |  |  |  |  |
State income taxes, net of federal income tax benefit |  |  | 7,212 |  |  |  | 4,341 |  |  |  | 4,541 |
Domestic production activities deduction |  |  | (1,470 | ) |  |  | (1,820 | ) |  |  | (2,100 | )
Impact of rate change due to Tax Cuts and Jobs Act |  |  | (20,670 | ) |  |  | - |  |  |  | - |
Impact of rate differential-current and deferred |  |  | (1,236 | ) |  |  | - |  |  |  | - |
One-time repatriation tax |  |  | 1,200 |  |  |  | - |  |  |  | - |
Increase in gross unrecognized tax benefits |  |  | 20 |  |  |  | 20 |  |  |  | 20 |
Share based compensation |  |  | (696 | ) |  |  | (1,923 | ) |  |  | (1,109 | )
Non deductible employee compensation |  |  | 514 |  |  |  | - |  |  |  | - |
Other, net |  |  | 735 |  |  |  | (362 | ) |  |  | (1,395 | )
Income tax expense |  | $ | 14,556 |  |  | $ | 43,026 |  |  | $ | 40,844 |
Net earnings for the year ended September 29, 2018 benefited from an approximately $21 million gain on the remeasurement of deferred tax liabilities and a $8.8 million reduction in income taxes related primarily to the lower corporate tax rate enacted under the Tax Cuts and Jobs Act in December 2017. Net earnings for the year were impacted by a $1.2 million provision for the one -time repatriation tax required under the new federal tax law and by a $1.4 million expense on the remeasurement of deferred tax liabilities due to changes in New Jersey tax regulations effective July 2018. Excluding the deferred tax gain, the deferred tax expense and the one -time repatriation tax, our effective tax rate decreased to 27.80% from 35.2% in the prior year reflecting the reduction in the federal statutory rate to 21% from 35% on January 1, 2018. Last year’s effective tax rate benefited from an unusually high tax benefit on share based compensation of $3,061,000 which compares to this year’s tax benefit of $1,935,000. Deferred tax assets and liabilities consist of the following:
|  | September 29, |  |  | September 30, |
|  | 2018 |  |  | 2017 |
|  | (in thousands) |
Deferred tax assets |  |  |  |  |  |  |  |
Vacation accrual |  | $ | 1,254 |  |  | $ | 1,740 |
Capital loss carry forwards |  |  | 960 |  |  |  | 1,668 |
Insurance accrual |  |  | 2,480 |  |  |  | 3,225 |
Deferred income |  |  | 638 |  |  |  | 927 |
Allowances |  |  | 1,585 |  |  |  | 1,991 |
Inventory capitalization |  |  | 1,051 |  |  |  | 1,235 |
Share-based compensation |  |  | 1,368 |  |  |  | 1,607 |
Net Operating Loss |  |  | 856 |  |  |  | 1,559 |
Total deferred tax assets |  |  | 10,192 |  |  |  | 13,952 |
Valuation allowance |  |  | (960 | ) |  |  | (1,668 | )
Total deferred tax assets, net |  |  | 9,232 |  |  |  | 12,284 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Amortization of goodwill and other intangible assets |  |  | 25,565 |  |  |  | 35,043 |
Depreciation of property and equipment |  |  | 35,989 |  |  |  | 39,946 |
Total deferred tax liabilities |  |  | 61,554 |  |  |  | 74,989 |
Total deferred tax liabilities, net |  | $ | 52,322 |  |  | $ | 62,705 |
As of September 29, 2018, we have federal and state capital loss carry forwards of approximately $4.2 million primarily from the sale of marketable securities in fiscal years 2015 and 2016. These carry forwards will begin to expire in 2020. Except for current year usage, we have no foreseeable capital gains that would allow us to use this asset. Accordingly, we have recorded a valuation allowance for the full amount of this deferred tax asset. As of September 29, 2018, we have a federal net operating loss carry forward of approximately $4 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 tax 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 our current plans do not demonstrate a need to repatriate them to fund our United states operations. However, if such funds were repatriated, a portion of the funds remitted may be subject to applicable non-U.S. income and withholding taxes. Due to the impact of the Tax Act and the deemed repatriation provisional amount of $1.2 million recorded to the financial statements, no additional U.S. taxes are anticipated on our undistributed earnings in our Mexican and Canadian subsidiaries.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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