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Income Taxes | 12 Months Ended
--- | ---
Jan. 03, 2025
Income Tax Disclosure [Abstract] |
Income Taxes | Note 7. Income Taxes The components of the provision for income taxes are as follows:
|  | Fiscal Year Ended |
|  | January 3, 2025 |  |  | December 29, 2023 |
(In thousands) |  |  |  |  |  |
Current taxes: |  |  |  |  |  |
Federal |  | $ | (720 | ) |  | $ | — |
State |  |  | (243 | ) |  |  | — |
Total current taxes |  |  | (963 | ) |  |  | — |
Deferred taxes: |  |  |  |  |  |
Federal |  |  | — |  |  |  | — |
State |  |  | — |  |  |  | — |
Total deferred taxes |  |  | — |  |  |  | — |
Provision for income taxes |  | $ | (963 | ) |  | $ | — |
The differences between income taxes expected at the U.S. federal statutory income tax rate of 21% and the reported income tax benefit are summarized as follows:
|  | Fiscal Year Ended |
|  | January 3, 2025 |  |  | December 29, 2023 |
(In thousands) |  |  |  |  |  |
Expected income tax benefit at federal statutory rate |  | $ | (26,399 | ) |  | $ | (480 | )
State income taxes, net of federal income tax benefit |  |  | (8,031 | ) |  |  | 27 |
Return to provision true-up |  |  | 2,150 |  |  |  | 1,774 |
Permanent items |  |  | 60 |  |  |  | 562 |
Change in valuation allowance |  |  | 30,016 |  |  |  | 5,248 |
Other |  |  | (963 | ) |  |  | — |
State rate change |  |  | 2,204 |  |  |  | (7,131 | )
Reported provision for income taxes |  | $ | (963 | ) |  | $ | — |
Effective tax rate |  |  | 0.8 | % |  |  | 0 | %
Deferred income taxes represent the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred tax liabilities and assets are as follows:
|  | January 3, 2025 |  |  | December 29, 2023 |
(In thousands) |  |  |  |  |  |
Deferred tax liabilities: |  |  |  |  |  |
Depreciation and amortization |  | $ | (640 | ) |  | $ | (10,598 | )
Right-of-use asset |  |  | (6,640 | ) |  |  | (6,654 | )
Total deferred tax liabilities |  | $ | (7,280 | ) |  | $ | (17,252 | )
Deferred tax assets: |  |  |  |  |  |
Intangible assets |  | $ | 30,317 |  |  | $ | 34,457 |
Contract loss reserve |  |  | 7,854 |  |  |  | 11,143 |
Investment in partnerships |  |  | 22,770 |  |  |  | 16,453 |
Lease liability |  |  | 6,181 |  |  |  | 6,586 |
Stock compensation |  |  | 3,083 |  |  |  | 1,428 |
Accrued expenses and reserves |  |  | 7,814 |  |  |  | 5,895 |
Section 382 limitation |  |  | 45,587 |  |  |  | 39,622 |
Net operating loss carryforwards |  |  | 51,777 |  |  |  | 24,629 |
Other deferred tax assets |  |  | 2,173 |  |  |  | 715 |
Total deferred tax assets |  | $ | 177,556 |  |  | $ | 140,928 |
Net deferred tax assets before valuation allowance |  | $ | 170,276 |  |  | $ | 123,676 |
Less: Valuation allowance |  |  | (170,276 | ) |  |  | (123,676 | )
Net deferred tax assets |  | $ | — |  |  | $ | — |
As of January 3, 2025 and December 29, 2023, gross deferred tax assets were $178 million and $141 million, respectively. The Company has recorded a valuation allowance of $170 million and $124 million as of January 3, 2025 and December 29, 2023, respectively. The Company has performed an assessment of positive and negative evidence, including the nature, frequency, and severity of cumulative financial reporting losses in recent years, the future reversal of existing temporary differences, predictability of future taxable income exclusive of reversing temporary differences of the character necessary to realize the asset, relevant carryforward periods, taxable income in carry-back years if carry- back is permitted under tax law, and prudent and feasible tax planning strategies that would be implemented, if necessary, to protect against the loss of the deferred tax asset that would otherwise expire. The $46 million increase in the valuation allowance is attributed to the full valuation allowance being recorded on all increases in deferred tax assets in the current period. The Company recognizes interest and penalties related to tax matters as a component of selling, general and administrative expenses in the accompanying consolidated statements of operations. At January 3, 2025, the Company had U.S. federal and state net operating loss (“NOL”) carryforwards of $189 million and $188 million, respectively. The U.S. federal NOL carryforward does not expire and can be carried forward indefinitely, but can only offset up to 80% of taxable income in future years. The state NOL carryforwards have both indefinite and limited carryforward periods, depending on state jurisdictions, and expire beginning in 2036 through 2043. At January 3, 2025, the Company had a full valuation allowance related to the tax-effected amount of these net operating losses. The Company had no unrecognized tax benefits recorded at January 3, 2025. The Company files income tax returns in numerous tax jurisdictions, including the U.S. and multiple U.S. states. The statute of limitations generally ranges from three to five years for major jurisdictions in which the Company operates. Prior to the acquisition, Shimmick filed as a subsidiary of their parent company, AECOM. In connection with the separation, the Company entered into a tax matters agreement. Under the tax matters agreement, AECOM is generally responsible for all taxes associated with consolidated federal and state filings imposed on AECOM and its subsidiaries (including Shimmick) with respect to taxable periods ended on or prior to January 1, 2021. Also, pursuant to this agreement, AECOM is generally responsible for all taxes associated with separately filed state and local tax filings imposed on Shimmick and its subsidiaries with respect to taxable periods ended on or prior to January 1, 2021. Under these circumstances, Shimmick is only liable for tax periods filed on a standalone basis following the acquisition date.

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