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Note H - Income Taxes | 12 Months Ended
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Sep. 28, 2024
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | NOTE H – INCOME TAXES Income tax expense is as follows:
|  | Fiscal year ended |
|  | September 28, |  |  | September 30, |  |  | September 24, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
|  | (in thousands) |
Current |  |  |  |  |  |  |  |  |  |  |  |
U.S. Federal |  | $ | 17,532 |  |  | $ | 6,447 |  |  | $ | (374 | )
Foreign |  |  | 1,983 |  |  |  | 6,149 |  |  |  | 2,854 |
State |  |  | 6,447 |  |  |  | 4,349 |  |  |  | 3,210 |
Total current expense |  |  | 25,962 |  |  |  | 16,945 |  |  |  | 5,690 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
U.S. Federal |  | $ | 5,028 |  |  | $ | 12,134 |  |  | $ | 10,834 |
Foreign |  |  | 238 |  |  |  | 232 |  |  |  | (394 | )
State |  |  | 1,168 |  |  |  | (703 | ) |  |  | (1,611 | )
Total deferred expense |  |  | 6,434 |  |  |  | 11,663 |  |  |  | 8,829 |
Total expense |  | $ | 32,396 |  |  | $ | 28,608 |  |  | $ | 14,519 |
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 2024, 2023 and 2022 to earnings before income taxes for the following reasons:
|  | Fiscal year ended |
|  | September 28, |  |  | September 30, |  |  | September 24, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
|  | (in thousands) |
Income taxes at federal statutory rates |  | $ | 24,979 |  |  | $ | 22,578 |  |  | $ | 12,968 |
Increase (decrease) in taxes resulting from: |  |  |  |  |  |  |  |  |  |  |  |
State income taxes, net of federal income tax benefit |  |  | 6,261 |  |  |  | 2,732 |  |  |  | 1,261 |
Share-based compensation |  |  | (233 | ) |  |  | 62 |  |  |  | 162 |
Tax effect in jurisdictions where rates differ from state |  |  | 1,195 |  |  |  | 1,837 |  |  |  | 424 |
Other, net |  |  | 194 |  |  |  | 1,399 |  |  |  | (296 | )
Income tax expense |  | $ | 32,396 |  |  | $ | 28,608 |  |  | $ | 14,519 |
Our effective tax rate in fiscal 2024 was 27.2%. Our effective tax rate in our fiscal 2023 year was 26.6% and our effective tax rate in fiscal 2022 was 23.5%. Deferred tax assets and liabilities consist of the following:
|  | Fiscal year ended |
|  | September 28, |  |  | September 30, |
|  | 2024 |  |  | 2023 |
|  | (in thousands) |
Deferred tax assets: |  |  |  |  |  |  |  |
Vacation accrual |  | $ | 1,037 |  |  | $ | 1,215 |
Capital loss carry forwards |  |  | 229 |  |  |  | 224 |
Unrealized gains/losses |  |  | 298 |  |  |  | 451 |
Accrued insurance liability |  |  | 4,071 |  |  |  | 3,511 |
Operating lease liabilities |  |  | 42,542 |  |  |  | 23,996 |
Deferred income |  |  | 30 |  |  |  | 44 |
Allowances |  |  | 2,805 |  |  |  | 2,879 |
Inventory capitalization |  |  | 1,850 |  |  |  | 1,702 |
Share-based compensation |  |  | 1,960 |  |  |  | 1,960 |
Net operating loss |  |  | 2,112 |  |  |  | 940 |
Bonus accrual |  |  | 2,497 |  |  |  | 2,282 |
Foreign tax credit |  |  | 185 |  |  |  | 250 |
Total deferred tax assets |  |  | 59,616 |  |  |  | 39,454 |
Valuation allowance |  |  | (527 | ) |  |  | (675 | )
Total deferred tax assets, net |  |  | 59,089 |  |  |  | 38,779 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Amortization of goodwill and other intangible assets |  |  | 38,842 |  |  |  | 35,363 |
Depreciation of property, plant and equipment |  |  | 67,073 |  |  |  | 61,185 |
Right-of-use assets |  |  | 40,563 |  |  |  | 22,688 |
Accounting method change 481(a) |  |  | 435 |  |  |  | 853 |
Total deferred tax liabilities |  |  | 146,913 |  |  |  | 120,089 |
Total deferred tax liabilities, net |  | $ | 87,824 |  |  | $ | 81,310 |
As of September 28, 2024, we have a federal net operating loss carry forward of approximately $1.8 million from the PHILLY SWIRL acquisition. These carry forwards are subject to an annual limitation under Code Section 382 of approximately $0.4 million and will expire in 2033. Additionally, as of September 28, 2024, we have state net operating loss carry forwards of approximately $1.7 million. These state operating losses begin to expire in 2034. We have determined there are no limitations to the total use of these tax assets and, accordingly, have not recorded a valuation allowance for these deferred tax assets. We have undistributed earnings of our Mexican and Canadian subsidiaries. We are no longer permanently reinvested in earnings of our foreign subsidiaries for any year. No material amount of additional U.S. federal income taxes is anticipated if our undistributed earnings in our Mexican and Canadian subsidiaries were repatriated to the U.S. However, if such funds were repatriated, it would not be a material amount, as a substantial amount, if not all of the earnings, are expected to be used in the respective foreign jurisdiction for business operations. The portion of funds that may be repatriated may be subject to a minimal amount of applicable federal and state income taxes and non-U.S. income and withholding taxes. The amount of unrecognized deferred income tax liabilities related to potential federal and state income taxes and foreign withholding taxes is immaterial. We have closely monitored the development of Pillar Two – Global Minimum Tax – introduced by the Organization for Economic Co-operation and Development (“OECD”) and the impact on the Company’s effective tax rate. While we do not currently estimate a material impact on our consolidated financial statements, we will continue to monitor the impact as countries implement legislation and the OECD provides additional guidance. On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA made several changes to the U.S. tax code effective after December 31, 2022, including, but not limited to, a 15% minimum tax on large corporations with average annual financial statement income of more than $1 billion for a three tax-year period and a 1% excise tax on public company stock buybacks, which will be accounted for in treasury stock. We do not expect these changes to have a material impact on our provision for income taxes or financial statements.

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