Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

v3.25.3
Income Taxes
 12 Months Ended
Oct. 04, 2025
Income Tax Disclosure [Abstract]  
Income Taxes

Note 11—Income Taxes

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

 

 

 

Year Ended

 

 

 

October 4, 2025

 

 

September 28, 2024

 

 

September 30, 2023

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

684

 

 

$

5,517

 

 

$

13,425

 

State

 

 

(943

)

 

 

1,154

 

 

 

2,404

 

Total Current

 

 

(259

)

 

 

6,671

 

 

 

15,829

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

1,119

 

 

 

2,879

 

 

 

(5,608

)

State

 

 

3,336

 

 

 

551

 

 

 

(722

)

Total Deferred

 

 

4,455

 

 

 

3,430

 

 

 

(6,330

)

Total income tax provision

 

$

4,196

 

 

$

10,101

 

 

$

9,499

 

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

 

 

 

Year Ended

 

 

 

October 4, 2025

 

 

September 28, 2024

 

 

September 30, 2023

 

Federal income tax at statutory rate

 

$

(48,883

)

 

$

(2,788

)

 

$

7,716

 

Equity-based compensation

 

 

1,409

 

 

 

1,430

 

 

 

129

 

Section 162(m) limitation

 

 

193

 

 

 

651

 

 

 

520

 

Goodwill impairment

 

 

13,421

 

 

 

—

 

 

 

—

 

Permanent differences

 

 

92

 

 

 

87

 

 

 

82

 

Change in valuation allowance

 

 

44,998

 

 

 

11,177

 

 

 

—

 

State taxes, net of federal benefit

 

 

(6,949

)

 

 

(82

)

 

 

1,109

 

Credits

 

 

(264

)

 

 

(318

)

 

 

—

 

Other

 

 

179

 

 

 

(56

)

 

 

(57

)

Total income tax provision

 

$

4,196

 

 

$

10,101

 

 

$

9,499

 

Our effective income tax rate for fiscal 2025 was (1.8)% as compared to (76.1)% in fiscal 2024.

 

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

 

 

 

October 4, 2025

 

 

September 28, 2024

 

Deferred tax assets:

 

 

 

 

 

 

Compensation accruals

 

$

3,076

 

 

$

2,063

 

Inventories

 

 

4,553

 

 

 

4,564

 

Lease liabilities

 

 

64,063

 

 

 

67,046

 

Equity-based compensation

 

 

1,415

 

 

 

1,996

 

Intangibles

 

 

20,599

 

 

 

—

 

Reserves and other accruals

 

 

5,578

 

 

 

6,590

 

Interest limitation

 

 

23,621

 

 

 

14,858

 

Capitalized research expenditures

 

 

3,447

 

 

 

1,646

 

Other

 

 

778

 

 

 

—

 

Total deferred tax assets

 

 

127,130

 

 

 

98,763

 

Deferred tax liabilities:

 

 

 

 

 

 

Property, plant, and equipment

 

 

(5,268

)

 

 

(4,649

)

Intangibles

 

 

(2,050

)

 

 

(8,299

)

Lease assets

 

 

(61,496

)

 

 

(65,646

)

Deferred financing cost

 

 

(202

)

 

 

(218

)

Other

 

 

(2,226

)

 

 

(4,606

)

Total deferred tax liabilities

 

 

(71,242

)

 

 

(83,418

)

Valuation allowance

 

 

(56,175

)

 

 

(11,177

)

Deferred tax assets (liabilities), net

 

$

(287

)

 

$

4,168

 

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to realize the existing deferred tax assets. The interest expense limitation passed in the Tax Cuts and Jobs Act created a deferred tax asset for the year ended September 28, 2024, and we recorded a valuation allowance of $11.2 million. We performed an analysis of the reversal of the deferred tax assets and liabilities, considered the historical earnings and overall business environment, as well as positive and negative evidence of the realizability of deferred tax assets for the year ended October 4, 2025. Based on this analysis, we do not believe it is more likely than not that the net deferred tax assets would be realized, which resulted in a valuation allowance of $56.2 million as of October 4, 2025.

As of October 4, 2025, we had $1.9 million and $12.7 million in net operating losses for federal and state tax return purposes, respectively. The federal and certain state net operating losses can be carried forward indefinitely, while most state net operating losses will expire at various dates beginning in fiscal 2036.

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 fiscal years before 2022, and, with few exceptions, are no longer subject to state examinations for fiscal years before 2021.

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

 

 

 

October 4, 2025

 

 

September 28, 2024

 

Balance at beginning of period

 

$

392

 

 

$

—

 

Gross increases - tax positions in prior period

 

 

658

 

 

 

—

 

Gross increases - tax positions in current period

 

 

669

 

 

 

392

 

Balance at end of period

 

$

1,719

 

 

$

392

 

 

The total amount of gross unrecognized tax benefits was $1.7 million as of October 4, 2025. The portion of unrecognized tax benefits that if recognized would affect the annual effective tax rate was $1.6 million and $0.3 million as of October 4, 2025 and September 28, 2024, respectively, before consideration of the valuation allowance. The portion of unrecognized tax benefits after consideration of the valuation allowance that if recognized would affect the annual effective tax rate was $1.1 million, and $0.3 million as of October 4, 2025 and September 28, 2024, respectively.

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 increase or 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 provisions effective January 1, 2023 which were not material to the Company's income tax provision.

On July 4, 2025, the One Big Beautiful Bill Act was signed into law but did not have a material impact on our fiscal 2025 financial results. Among other provisions, this act includes permanently extending and modifying certain expiring provisions of the 2017 Tax Cuts and Jobs Act and immediate expensing of domestic research and development expenses. The benefit resulting from the reinstatement of 100% bonus depreciation on assets placed in service after January 19, 2025, has been reflected in the provision. Due to the effective dates of certain provisions in the bill, the immediate expensing of domestic research and development expenses and the return of the EBITDA threshold in the calculation of the interest limitation will not be applicable until fiscal 2026.