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Note I - Income Taxes | 12 Months Ended
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Sep. 26, 2020
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | NOTE I – INCOME TAXES Income tax expense (benefit) is as follows:
|  | Fiscal year ended |
|  | September 26, |  |  | September 28, |  |  | September 29, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
|  | (in thousands) |
Current |  |  |  |  |  |  |  |  |  |  |  |
U.S. Federal |  | $ | 1,992 |  |  | $ | 14,078 |  |  | $ | 16,591 |
Foreign |  |  | 193 |  |  |  | 2,111 |  |  |  | 2,512 |
State |  |  | (1,517 | ) |  |  | 5,971 |  |  |  | 5,836 |
Total current expense |  |  | 668 |  |  |  | 22,160 |  |  |  | 24,939 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
U.S. Federal |  | $ | 3,139 |  |  | $ | 6,285 |  |  | $ | (14,613 | )
Foreign |  |  | (536 | ) |  |  | 849 |  |  |  | 514 |
State |  |  | (110 | ) |  |  | 2,464 |  |  |  | 3,716 |
Total deferred expense (benefit) |  |  | 2,493 |  |  |  | 9,598 |  |  |  | (10,383 | )
Total expense |  | $ | 3,161 |  |  | $ | 31,758 |  |  | $ | 14,556 |
The provisions for income taxes differ from the amounts computed by applying the statutory federal income tax rate of 21% for the fiscal years ended 2020 and 2019 and approximately 24.5% for the fiscal year ended September 29, 2018 to earnings before income taxes for the following reasons:
|  | Fiscal year ended |
|  | September 26, |  |  | September 28, |  |  | September 29, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
|  |  |  |  |  | (in thousands) |  |  |  |  |
Income taxes at federal statutory rates |  | $ | 4,508 |  |  | $ | 26,581 |  |  | $ | 28,947 |
Increase (decrease) in taxes resulting from: |  |  |  |  |  |  |  |  |  |  |  |
State income taxes, net of federal income tax benefit |  |  | (1,285 | ) |  |  | 6,664 |  |  |  | 7,212 |
Domestic production activities deduction |  |  | - |  |  |  | - |  |  |  | (1,470 | )
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 |  |  | - |  |  |  | (885 | ) |  |  | 1,200 |
Increase in gross unrecognized tax benefits |  |  | - |  |  |  | 20 |  |  |  | 20 |
Share based compensation |  |  | (183 | ) |  |  | (777 | ) |  |  | (696 | )
Non deductible employee compensation |  |  | - |  |  |  | 490 |  |  |  | 514 |
Other, net |  |  | 121 |  |  |  | (335 | ) |  |  | 735 |
Income tax expense |  | $ | 3,161 |  |  | $ | 31,758 |  |  | $ | 14,556 |
Net earnings for the year ended September 29, 2018 benefited from a $20.7 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 which was partially offset by a $1.2 million provision for the one time repatriation tax, both of which resulted from the Tax Cuts and Jobs Act enacted in December 2017. Net earnings for the year were also impacted 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 was 27.7% in the year ended September 29, 2018. Net earnings in the year ended September 28, 2019 benefitted by a reduction of $885,000 in tax as the provision for the one-time repatriation tax was reduced as the amount recorded in 2018 was an estimate. Excluding the reduction in the provision for the one-time repatriation tax, our effective tax rate was 25.8% in 2019. Net earnings for the 2020 year benefited from a reduction in income tax expense related to state taxes of approximately $2.2 million. Excluding this benefit, our effective tax rate in our fiscal 2020 year was 25.0%. Deferred tax assets and liabilities consist of the following:
|  | September 26, |  |  | September 28, |
|  | 2020 |  |  | 2019 |
|  | (in thousands) |
Deferred tax assets |  |  |  |  |  |  |  |
Vacation accrual |  | $ | 1,460 |  |  | $ | 1,281 |
Capital loss carry forwards |  |  | 161 |  |  |  | 1,038 |
Unrealized gains/losses |  |  | 345 |  |  |  | - |
Insurance accrual |  |  | 3,060 |  |  |  | 2,454 |
Operating lease liabilities |  |  | 16,368 |  |  |  | - |
Deferred income |  |  | 105 |  |  |  | 485 |
Allowances |  |  | 2,863 |  |  |  | 1,554 |
Inventory capitalization |  |  | 1,058 |  |  |  | 994 |
Share-based compensation |  |  | 1,637 |  |  |  | 1,607 |
Net Operating Loss |  |  | 697 |  |  |  | 776 |
Plant shutdown impairment costs |  |  | 1,721 |  |  |  | - |
Foreign tax credit |  |  | 404 |  |  |  | - |
Total deferred tax assets |  |  | 29,879 |  |  |  | 10,189 |
Valuation allowance |  |  | (506 | ) |  |  | (1,038 | )
Total deferred tax assets, net |  |  | 29,373 |  |  |  | 9,151 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Amortization of goodwill and other intangible assets |  |  | 29,587 |  |  |  | 27,267 |
Depreciation of property and equipment |  |  | 48,303 |  |  |  | 43,804 |
Operating lease right-of-use assets |  |  | 15,605 |  |  |  | - |
Accounting method change 481 (a) |  |  | 291 |  |  |  | - |
Total deferred tax liabilities |  |  | 93,786 |  |  |  | 71,071 |
Total deferred tax liabilities, net |  | $ | 64,413 |  |  | $ | 61,920 |
As of September 26, 2020, we have federal and state capital loss carry forwards of approximately $2,046,000 primarily from the sale of marketable securities in fiscal year 2016 and unrealized losses incurred in fiscal years 2019 and 2020. These carry forwards will begin to expire in 2021. 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 26, 2020, we have a federal net operating loss carry forward of approximately $3.3 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. As a result of the Tax Act, we changed our assertion with respect to foreign earnings. We are no longer permanently reinvested in earnings of our foreign subsidiaries for any year. However, due to the impact of the Tax Act and the deemed repatriation of positive accumulated earnings and profits from our foreign subsidiaries in 2017, which resulted in a Sec. 965 liability of $315,000 for our fiscal year ended September 2018, no additional U.S. federal income taxes are anticipated if our undistributed earnings in our Mexican and Canadian subsidiaries were repatriated to the U.S. However, if such funds were repatriated, a portion of the funds remitted may be subject to applicable state income taxes and non-U.S. income and withholding taxes. The amount of unrecognized deferred income tax liabilities related to potential state income tax and foreign withholding taxes is immaterial. The Tax Act was enacted on December 22, 2017 and introduced significant changes to U.S. income tax law. Effective in 2018, the Tax Act reduced the U.S. statutory tax rate from 35% to 21%. We have updated any provisional amounts related to the Tax Act and accounting for this is now final.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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