XML 35 R15.htm IDEA: XBRL DOCUMENT v3.21.2
Note H - Income Taxes
 12 Months Ended
Sep. 25, 2021
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE H – INCOME TAXES

 

Income tax expense (benefit) is as follows:

 

  Fiscal year ended 
  

September 25,

  

September 26,

  

September 28,

 
  

2021

  

2020

  

2019

 
  (in thousands) 

Current

            

U.S. Federal

 $13,964  $1,992  $14,078 

Foreign

  860   193   2,111 

State

  6,431   (1,517)  5,971 

Total current expense

  21,255   668   22,160 
             

Deferred

            

U.S. Federal

 $(145) $3,139  $6,285 

Foreign

  (353)  (536)  849 

State

  (2,338)  (110)  2,464 

Total deferred benefit

  (2,836)  2,493   9,598 

Total expense

 $18,419  $3,161  $31,758 

 

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 2021, 2020 and 2019 to earnings before income taxes for the following reasons:

 

  

Fiscal year ended

     
  

September 25,

  

September 26,

  

September 28,

 
  

2021

  

2020

  

2019

 
  

(in thousands)

 
             

Income taxes at federal statutory rates

 $15,545  $4,508  $26,581 

Increase (decrease) in taxes resulting from:

            
             

State income taxes, net of federal income tax benefit

  3,233   (1,285)  6,664 

One-time repatriation tax

  -   -   (885)

Increase in gross unrecognized tax benefits

  -   -   20 

Share based compensation

  (124)  (183)  (777)

Non deductible employee compensation

  -   -   490 

Other, net

  (235)  121   (335)

Income tax expense

 $18,419  $3,161  $31,758 

 

 

Net earnings in the year ended September 28, 2019 benefited from 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 deferred taxes and provision to return adjustments of approximately $2.2 million. Excluding these benefits, our effective tax rate in our fiscal 2020 year was 25.0%. Our effective tax rate in our fiscal 2021 year was 24.9%.

 

Deferred tax assets and liabilities consist of the following:

 

  

September 25,

  

September 26,

 
  

2021

  

2020

 
  

(in thousands)

 

Deferred tax assets:

        

Vacation accrual

 $1,359  $1,460 

Capital loss carry forwards

  14   161 

Unrealized gains/losses

  598   345 

Insurance accrual

  3,918   3,060 

Operating lease liabilities

  16,235   16,368 

Deferred income

  30   105 

Allowances

  2,155   2,863 

Inventory capitalization

  1,108   1,058 

Share-based compensation

  1,754   1,637 

Net Operating Loss

  617   697 

Payroll Tax Accrual

  2,307   - 

Plant shutdown impairment costs

  -   1,721 

Foreign tax credit

  404   404 

Total deferred tax assets

  30,499   29,879 

Valuation allowance

  (612)  (506)

Total deferred tax assets, net

  29,887   29,373 
         

Deferred tax liabilities:

        

Amortization of goodwill and other intangible assets

  31,540   29,587 

Depreciation of property and equipment

  44,924   48,303 

Right-of-use assets

  14,773   15,605 

Accounting method change 481 (a)

  228   291 

Total deferred tax liabilities

  91,465   93,786 

Total deferred tax liabilities, net

 $61,578  $64,413 

 

As of September 25, 2021, we have federal and state capital loss carry forwards of approximately $2,209,000 primarily from the sale of marketable securities in fiscal year 2016 and unrealized losses incurred in fiscal years 2019 and 2020. These carry forwards began 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 25, 2021, we have a federal net operating loss carry forward of approximately $2.9 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.

 

The Coronavirus, Aid, Relief and Economic Security (“CARES”) Act was signed into law on March 27, 2020, which introduced and revised numerous provisions including a technical correction to qualified improvement property for assets placed in service after 2017 through 2022 to allow for immediate depreciation to be claimed on these assets and the deferral of employer’s share of certain payroll taxes. As a result of the CARES Act, we deferred $9.0 million of payroll taxes as of September 25, 2021.