Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.24.3
Income Taxes
 12 Months Ended
Sep. 28, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

Note 12—Income Taxes

The provision for income taxes consists of the following (in thousands):

 

 

 

Year Ended

 

 

 

September 28, 2024

 

 

September 30, 2023

 

 

October 1, 2022

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

5,517

 

 

$

13,425

 

 

$

37,886

 

State

 

 

1,154

 

 

 

2,404

 

 

 

8,736

 

Total Current

 

 

6,671

 

 

 

15,829

 

 

 

46,622

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

2,879

 

 

 

(5,608

)

 

 

2,556

 

State

 

 

551

 

 

 

(722

)

 

 

(90

)

Total Deferred

 

 

3,430

 

 

 

(6,330

)

 

 

2,466

 

Total income tax provision

 

$

10,101

 

 

$

9,499

 

 

$

49,088

 

A reconciliation of the provision for income taxes to the amount computed at the federal statutory rate is as follows (in thousands):

 

 

 

Year Ended

 

 

 

September 28, 2024

 

 

September 30, 2023

 

 

October 1, 2022

 

Federal income tax at statutory rate

 

$

(2,788

)

 

$

7,716

 

 

$

43,705

 

Equity-based compensation

 

 

1,430

 

 

 

129

 

 

 

(1,025

)

Section 162(m) limitation

 

 

651

 

 

 

520

 

 

 

805

 

Permanent differences

 

 

87

 

 

 

82

 

 

 

96

 

Change in valuation allowance

 

 

11,177

 

 

 

—

 

 

 

—

 

State taxes, net of federal benefit

 

 

(82

)

 

 

1,109

 

 

 

6,734

 

Credits

 

 

(318

)

 

 

—

 

 

 

—

 

Other

 

 

(56

)

 

 

(57

)

 

 

(1,227

)

Total income tax provision

 

$

10,101

 

 

$

9,499

 

 

$

49,088

 

Our effective income tax rate for fiscal 2024 was -76.1% as compared to 25.9% in fiscal 2023.

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are summarized below (in thousands):

 

 

 

September 28, 2024

 

 

September 30, 2023

 

Deferred tax assets:

 

 

 

 

 

 

Compensation accruals

 

$

2,063

 

 

$

1,878

 

Inventories

 

 

4,564

 

 

 

1,237

 

Lease liabilities

 

 

67,046

 

 

 

64,619

 

Equity-based compensation

 

 

1,996

 

 

 

2,503

 

Reserves and other accruals

 

 

6,590

 

 

 

2,696

 

Interest limitation

 

 

14,858

 

 

 

7,615

 

Capitalized research expenditures

 

 

1,646

 

 

 

2,017

 

Total deferred tax assets

 

 

98,763

 

 

 

82,565

 

Deferred tax liabilities:

 

 

 

 

 

 

Property, plant, and equipment

 

 

(4,649

)

 

 

(4,387

)

Intangibles

 

 

(8,299

)

 

 

(6,109

)

Lease assets

 

 

(65,646

)

 

 

(61,835

)

Deferred financing cost

 

 

(218

)

 

 

(253

)

Other

 

 

(4,606

)

 

 

(2,383

)

Total deferred tax liabilities

 

 

(83,418

)

 

 

(74,967

)

Valuation allowance

 

 

(11,177

)

 

 

—

 

Deferred tax assets (liabilities), net

 

$

4,168

 

 

$

7,598

 

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. The interest expense limitations passed in the Tax Cuts and Jobs Act created a deferred tax asset to the extent current year interest expense is not deductible. In determining the need for a valuation allowance we consider both the positive and negative evidence including our ability to forecast future operating results, historical tax losses and our ability to utilize DTAs within the requisite carryforward periods. In September 2024, management applied judgment and concluded that it is more-likely-than-not a portion of our deferred tax assets will not be realized due to certain limitations and recorded a valuation allowance of $11.2 million.. As of September 28, 2024, and September 30, 2023, we recorded a valuation allowance of $11.2 million and zero, respectively.

We are subject to United States federal and state taxes in the normal course of business and our income tax returns are subject to examination by the relevant tax authorities. We are no longer subject to United States federal examinations by taxing authorities for calendar years before 2021 and no longer subject to state examinations for calendar years before 2020.

 

Our liability for unrecognized tax benefits is as follows (in thousands):

 

 

 

September 28, 2024

 

 

September 30, 2023

 

Balance at beginning of period

 

$

—

 

 

$

—

 

Gross increases - tax positions in prior period

 

 

—

 

 

 

—

 

Gross increases - tax positions in current period

 

 

392

 

 

 

—

 

Balance at end of period

 

$

392

 

 

$

—

 

The total amount of gross unrecognized tax benefits was $0.3 million as of September 28, 2024.

We recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense. No material amounts were recognized during any of the periods presented. We do not expect a significant decrease in our liability for unrecognized tax benefits in the next 12 months.

In August 2022, the Inflation Reduction Act of 2022 was signed into law and contains provision effective January 1, 2023 which were not material to the Company’s income tax provision.