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Note H - Income Taxes
 12 Months Ended
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.