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Income Taxes
 12 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

12. INCOME TAXES:

Income before income tax provision consisted of the following components for the fiscal years ended September 30,

 

 

 

2022

 

 

2023

 

 

2024

 

 

 

(Amounts in thousands)

 

Income before income tax provision:

 

 

 

 

 

 

 

 

 

United States

 

$

254,052

 

 

$

130,535

 

 

$

42,218

 

Other

 

 

7,869

 

 

 

16,900

 

 

 

12,113

 

Total

 

$

261,921

 

 

$

147,435

 

 

$

54,331

 

 

The components of our provision from income taxes consisted of the following for the fiscal years ended September 30,

 

 

2022

 

 

2023

 

 

2024

 

 

 

(Amounts in thousands)

 

Current provision:

 

 

 

 

 

 

 

 

 

Federal

 

$

49,380

 

 

$

9,315

 

 

$

6,074

 

Foreign

 

 

1,739

 

 

 

3,204

 

 

 

2,888

 

State

 

 

11,004

 

 

 

2,307

 

 

 

2,644

 

Total current provision

 

$

62,123

 

 

$

14,826

 

 

$

11,606

 

Deferred provision:

 

 

 

 

 

 

 

 

 

Federal

 

$

1,650

 

 

$

18,723

 

 

$

5,733

 

Foreign

 

 

—

 

 

 

—

 

 

 

(3,238

)

State

 

 

159

 

 

 

4,408

 

 

 

1,492

 

Total deferred provision

 

 

1,809

 

 

 

23,131

 

 

 

3,987

 

Total income tax provision

 

$

63,932

 

 

$

37,957

 

 

$

15,593

 

 

Below is a reconciliation of the statutory federal income tax rate to our effective tax rate for the fiscal years ended September 30,

 

 

2022

 

 

2023

 

 

2024

 

Federal tax provision

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

State taxes, net of federal benefit

 

 

3.4

%

 

 

3.6

%

 

 

3.0

%

Stock-based compensation

 

 

(0.6

)%

 

 

(0.2

)%

 

 

4.2

%

Foreign rate differential

 

 

—

 

 

 

0.2

%

 

 

(2.0

)%

US tax on foreign earnings

 

 

—

 

 

 

1.4

%

 

 

1.5

%

Equity investment

 

 

—

 

 

 

(0.9

)%

 

 

—

 

Other

 

 

0.6

%

 

 

0.6

%

 

 

1.0

%

Effective tax rate

 

 

24.4

%

 

 

25.7

%

 

 

28.7

%

 

The impact of stock-based compensation on the effective tax rate is driven by changes in our stock price from when equity awards are granted as compared to when the awards vest and non-deductible awards.

Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. The tax effects of these temporary differences representing the components of deferred tax assets as of September 30,

 

 

2023

 

 

2024

 

 

 

(Amounts in thousands)

 

Deferred tax assets:

 

 

 

 

 

 

Inventories

 

$

1,010

 

 

$

2,994

 

Operating lease liabilities

 

 

31,103

 

 

 

31,280

 

Accrued expenses

 

 

1,069

 

 

 

2,214

 

Stock-based compensation

 

 

5,508

 

 

 

5,756

 

Interest deductions

 

 

2,413

 

 

 

520

 

US tax effect of foreign taxes

 

 

4,908

 

 

 

3,999

 

Tax loss carryforwards

 

 

2,919

 

 

 

3,315

 

Other

 

 

1,826

 

 

 

2,724

 

Valuation allowance

 

 

(556

)

 

 

—

 

Total long-term deferred tax assets

 

$

50,200

 

 

$

52,802

 

Deferred tax liabilities:

 

 

 

 

 

 

Depreciation and amortization

 

 

(69,904

)

 

 

(72,133

)

Operating lease right-of-use assets

 

 

(31,392

)

 

 

(33,225

)

Equity method investments

 

 

(3,835

)

 

 

(3,531

)

Other

 

 

(1,996

)

 

 

(4,230

)

Total long-term deferred tax liabilities

 

$

(107,127

)

 

$

(113,119

)

Net deferred tax liabilities

 

$

(56,927

)

 

$

(60,317

)

Pursuant to ASC 740, we must consider all positive and negative evidence regarding the realization of deferred tax assets. ASC 740 provides four possible sources of taxable income to realize deferred tax assets: 1) taxable income in prior carryback years, 2) reversals of existing deferred tax liabilities, 3) tax planning strategies and 4) projected future taxable income. As of September 30, 2024, we have no available taxable income in prior carryback years and have not identified prudent and feasible tax planning strategies. Therefore, the recoverability of our deferred tax assets is dependent upon the reversal of existing deferred tax liabilities and generating future taxable income. It is more likely than not that we will generate sufficient taxable income to realize the deferred tax asset not offset by reversing deferred tax liabilities.

As of September 30, 2024, the Company has NOL carryforwards of approximately $4.5 million and $9.1 million for state and foreign income tax purposes, respectively, which resulted in a deferred tax asset of $3.3 million, and expire at various dates beginning in 2025.

Significant judgment is required in evaluating our uncertain tax positions. Although we believe our tax return positions are sustainable, we recognize tax benefits from uncertain tax positions in the consolidated financial statements only when it is more likely than not that the positions will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits and a consideration of the relevant taxing authority’s administrative practices and precedents. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as the related net interest and penalties.

As of September 30, 2023 and 2024, we had approximately $5.8 million and $4.1 million, respectively of gross unrecognized tax benefits. The reconciliation of the total amount recorded for unrecognized tax benefits at the beginning and end of the fiscal years ended September 30, 2023 and 2024 is as follows:

 

 

 

2023

 

 

2024

 

 

 

(Amounts in thousands)

 

Unrecognized tax benefits at the beginning of the year

 

$

—

 

 

$

5,833

 

Increases in tax positions for prior years

 

 

5,837

 

 

 

—

 

Decreases in tax positions for prior years

 

 

(4

)

 

 

(1,748

)

Unrecognized tax benefits at the end of the year

 

$

5,833

 

 

$

4,085

 

 

Consistent with our prior practices, we recognize interest and penalties related to uncertain tax positions as a component of income tax expense. As of September 30, 2023 and 2024, interest and penalties represented approximately $1.4 million of the gross unrecognized tax benefits.

We are subject to tax by federal, state, and foreign taxing authorities. Until the respective statutes of limitations expire, we are subject to income tax audits in the jurisdictions in which we operate. We are no longer subject to U.S. federal tax assessments for fiscal years prior to 2021, we are not subject to assessments prior to the 2018 fiscal year for the majority of the State jurisdictions and we are not subject to assessments prior to the 2019 calendar year for the majority of the foreign jurisdictions.