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Note G - Income Taxes
 12 Months Ended
Sep. 27, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE G – INCOME TAXES

 

Income tax expense (benefit) is as follows:

 

   

Fiscal year ended

  
   

September 27,

    

September 28,

    

September 30,

  
   

2025

    

2024

    

2023

  
   

(in thousands)

  
                         

Current

                        

U.S. Federal

   $ 12,440     $ 17,532     $ 6,447  

Foreign

     3,293       1,983       6,149  

State

     2,412       6,447       4,349  

Total current expense

     18,145       25,962       16,945  
                         
                         

Deferred

                        

U.S. Federal

   $ 3,453     $ 5,028     $ 12,134  

Foreign

     113       238       232  

State

     (877 )     1,168       (703 )

Total deferred expense (benefit)

     2,689       6,434       11,663  

Total expense

   $ 20,834     $ 32,396     $ 28,608  

 

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 2025, 2024 and 2023 to earnings before income taxes for the following reasons:

 

   

Fiscal year ended

  
   

September 27,

    

September 28,

    

September 30,

  
   

2025

    

2024

    

2023

  
   

(in thousands)

  
                         

Income taxes at federal statutory rates

   $ 18,150     $ 24,979     $ 22,578  

Increase (decrease) in taxes resulting from:

                        

State income taxes, net of federal income tax benefit

     2,716       6,261       2,732  

Tax effect in jurisdictions where rates differ from statutory rate

     841       1,195       1,837  

Other, net

     (873 )     (39 )     1,461  

Income tax expense

   $ 20,834     $ 32,396     $ 28,608  

 

Our effective tax rate in fiscal 2025 was 24.1%. Our effective tax rate in our fiscal 2024 year was 27.2% and our effective tax rate in fiscal 2023 was 26.6%.

 

Deferred tax assets and liabilities consist of the following:

 

   

Fiscal year ended

  
   

September 27,

    

September 28,

  
   

2025

    

2024

  
   

(in thousands)

  
                 

Deferred tax assets:

                

Vacation accrual

   $ 1,075     $ 1,037  

Capital loss carry forwards

     221       229  

Unrealized gains/losses

     286       298  

Accrued insurance liability

     2,961       4,071  

Operating lease liabilities

     40,337       42,542  

Deferred income

     17       30  

Allowances

     2,752       2,805  

Inventory capitalization

     691       1,850  

Share-based compensation

     2,348       1,960  

Net operating loss

     1,301       2,112  

Bonus accrual

     1,796       2,497  

Foreign tax credit

     160       185  

Total deferred tax assets

     53,945       59,616  

Valuation allowance

     (507 )     (527 )

Total deferred tax assets, net

     53,438       59,089  
                 

Deferred tax liabilities:

                

Amortization of goodwill and other intangible assets

     39,716       38,842  

Depreciation of property, plant and equipment

     67,680       67,073  

Right-of-use assets

     37,745       40,563  

Accounting method change 481(a)

     -       435  

Total deferred tax liabilities

     145,141       146,913  

Total deferred tax liabilities, net

   $ 91,703     $ 87,824  

 

 

As of September 27, 2025, we have a federal net operating loss carry forward of approximately $1.4 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. 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. Additionally, as of September 27, 2025, we have federal and state capital loss carryforwards of approximately $0.8 million primarily from the sale of marketable securities in fiscal year 2017 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. 

 

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.

 

On July 4, 2025, the United States government enacted into law the One Big Beautiful Act (the “OBBBA”). The OBBBA includes a broad range of tax reform provisions affecting businesses. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The legislation did not have a material impact on fiscal 2025 effective rate or consolidated financial statements. We will continue to review the OBBBA tax provisions to assess impacts to our consolidated financial statements.