Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.21.2
Income Taxes
 12 Months Ended
Oct. 02, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

Note 12—Income Taxes

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

 

 

 

Year Ended

 

 

 

October 2, 2021

 

 

October 3, 2020

 

 

September 28, 2019

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

25,914

 

 

$

8,188

 

 

$

14,072

 

State

 

 

7,733

 

 

 

2,262

 

 

 

1,537

 

Total Current

 

 

33,647

 

 

 

10,450

 

 

 

15,609

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

2,633

 

 

 

(5,844

)

 

 

(418

)

State

 

 

215

 

 

 

(1,979

)

 

 

(336

)

Total Deferred

 

 

2,848

 

 

 

(7,823

)

 

 

(754

)

Total income tax provision

 

$

36,495

 

 

$

2,627

 

 

$

14,855

 

 

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 2, 2021

 

 

October 3, 2020

 

 

September 28, 2019

 

Federal income tax at statutory rate

 

$

34,257

 

 

$

12,851

 

 

$

3,198

 

Equity-based compensation

 

 

(2,360

)

 

 

375

 

 

 

447

 

Section 162(m) limitation

 

 

2,826

 

 

 

—

 

 

 

—

 

Permanent differences

 

 

564

 

 

 

89

 

 

 

100

 

Change in valuation allowance

 

 

(5,425

)

 

 

(11,373

)

 

 

11,060

 

State taxes, net of federal benefit

 

 

7,072

 

 

 

2,503

 

 

 

54

 

Other

 

 

(439

)

 

 

(1,818

)

 

 

(4

)

Total income tax provision

 

$

36,495

 

 

$

2,627

 

 

$

14,855

 

 

Our effective rate for fiscal 2021 was 22.4% as compared to 4.3% in fiscal 2020. During the first quarter of fiscal 2021, we released a $5.4 million valuation allowance for our interest limitation carryforward as a result of our IPO and subsequent paydown of debt. During fiscal 2020, the tax provision reflects a decrease in the valuation allowance for our interest limitation carryforward due to favorable provisions of the CARES Act.

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

 

 

 

October 2, 2021

 

 

October 3, 2020

 

Deferred tax assets:

 

 

 

 

 

 

Compensation accruals

 

$

5,674

 

 

$

5,433

 

Inventory

 

 

—

 

 

 

1,053

 

Interest limitation

 

 

—

 

 

 

6,919

 

Lease liabilities

 

 

54,489

 

 

 

46,644

 

Equity-based compensation

 

 

1,646

 

 

 

—

 

Reserves and other accruals

 

 

1,138

 

 

 

354

 

Total deferred tax assets

 

 

62,947

 

 

 

60,403

 

Deferred tax liabilities:

 

 

 

 

 

 

Property, plant, and equipment

 

 

(1,392

)

 

 

(611

)

Intangibles

 

 

(3,849

)

 

 

(3,258

)

Lease assets

 

 

(52,264

)

 

 

(44,014

)

Deferred financing cost

 

 

(399

)

 

 

(512

)

Other

 

 

(1,309

)

 

 

—

 

Total deferred tax liabilities

 

 

(59,213

)

 

 

(48,395

)

Valuation allowance

 

 

 

 

 

(5,425

)

Deferred tax assets (liabilities), net

 

$

3,734

 

 

$

6,583

 

 

Valuation Allowance consists of the following (in thousands):

 

 

 

Balance at
Beginning of
Period

 

 

Additions
Charged to
Costs and
Expenses

 

 

Deductions

 

 

Balance at End
of Period

 

2021

 

$

5,425

 

 

$

—

 

 

$

(5,425

)

 

$

—

 

2020

 

$

16,798

 

 

$

—

 

 

$

(11,373

)

 

$

5,425

 

 

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 limitation passed in the CARES Act created a deferred tax asset for the fiscal year ended October 3, 2020 that we did not anticipate realizing in the immediate future; as a result, a valuation allowance was recorded. The valuation allowance was removed during the first quarter of fiscal 2021 due to the Company’s paydown of debt with proceeds from the IPO, which decreased interest expense.

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 2018 and are no longer subject to state examinations for calendar years before 2017.

We have not identified any material uncertain tax positions.