Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.2.2
Income Taxes
 12 Months Ended
Oct. 01, 2022
Income Tax Disclosure [Abstract]  
Income Taxes

Note 12—Income Taxes

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

 

 

Year Ended

 

 

 

October 1, 2022

 

 

October 2, 2021

 

 

October 1, 2020

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

37,886

 

 

$

25,914

 

 

$

8,188

 

State

 

 

8,736

 

 

 

7,733

 

 

 

2,262

 

Total Current

 

 

46,622

 

 

 

33,647

 

 

 

10,450

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

2,556

 

 

 

2,633

 

 

 

(5,844

)

State

 

 

(90

)

 

 

215

 

 

 

(1,979

)

Total Deferred

 

 

2,466

 

 

 

2,848

 

 

 

(7,823

)

Total income tax provision

 

$

49,088

 

 

$

36,495

 

 

$

2,627

 

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 1, 2022

 

 

October 2, 2021

 

 

October 3, 2020

 

Federal income tax at statutory rate

 

$

43,705

 

 

$

34,257

 

 

$

12,851

 

Equity-based compensation

 

 

(1,025

)

 

 

(2,360

)

 

 

375

 

Section 162(m) limitation

 

 

805

 

 

 

2,826

 

 

 

—

 

Permanent differences

 

 

96

 

 

 

564

 

 

 

89

 

Change in valuation allowance

 

 

—

 

 

 

(5,425

)

 

 

(11,373

)

State taxes, net of federal benefit

 

 

6,734

 

 

 

7,072

 

 

 

2,503

 

Other

 

 

(1,227

)

 

 

(439

)

 

 

(1,818

)

Total income tax provision

 

$

49,088

 

 

$

36,495

 

 

$

2,627

 

Our effective income tax rate for fiscal 2022 was 23.6% as compared to 22.4% in fiscal 2021.

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

 

 

October 1, 2022

 

 

October 2, 2021

 

Deferred tax assets:

 

 

 

 

 

 

Compensation accruals

 

$

4,067

 

 

$

5,674

 

Inventories

 

 

3,496

 

 

 

—

 

Lease liabilities

 

 

58,710

 

 

 

54,489

 

Equity-based compensation

 

 

2,151

 

 

 

1,646

 

Reserves and other accruals

 

 

1,059

 

 

 

1,138

 

Total deferred tax assets

 

 

69,483

 

 

 

62,947

 

Deferred tax liabilities:

 

 

 

 

 

 

Property, plant, and equipment

 

 

(4,066

)

 

 

(1,392

)

Intangibles

 

 

(4,302

)

 

 

(3,849

)

Lease assets

 

 

(57,798

)

 

 

(52,264

)

Deferred financing cost

 

 

(310

)

 

 

(399

)

Other

 

 

(1,739

)

 

 

(1,309

)

Total deferred tax liabilities

 

 

(68,215

)

 

 

(59,213

)

Deferred tax assets (liabilities), net

 

$

1,268

 

 

$

3,734

 

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 $5.4 million valuation allowance was removed during the first quarter of fiscal 2021 as the realization of the CARES Act deferred tax asset was deemed probable 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.

In August 2022, the Inflation Reduction Act of 2022 was signed into law containing provisions effective January 1, 2023, including a 15% corporate minimum tax and a 1% excise tax on stock repurchases and several tax incentives to promote clean energy. The Company is evaluating the impact on future periods and at this time the Company does not expect it to have a material impact on its consolidated financial statements.