Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.5.0.2
Income Taxes
12 Months Ended
Sep. 24, 2016
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The provision for income tax expense (benefit) consists of the following:
 
 
Fiscal Year Ended
 
September 24,
2016
 
September 26,
2015
 
September 27,
2014
 
(in thousands)
Current:
 
 
 
 
 
Federal
$
18,592

 
$
2,301

 
$
(329
)
State
2,140

 
643

 
873

Foreign
110

 
25

 

Total
20,842

 
2,969

 
544

Deferred:
 
 
 
 
 
Federal
2,796

 
14,843

 
4,171

State
463

 
625

 
177

Foreign
(48
)
 
98

 
(847
)
Total
3,211

 
15,566

 
3,501

Total
$
24,053

 
$
18,535

 
$
4,045


A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows:
 
 
Fiscal Year Ended
 
September 24,
2016
 
September 26,
2015
 
September 27,
2014
Statutory federal income tax rate
35.0
 %
 
35.0
 %
 
35.0
 %
State income taxes, net of federal benefit
2.1

 
2.4

 
2.1

Other permanent differences
(1.6
)
 
(0.5
)
 
0.2

Adjustment of prior year accruals
(0.6
)
 
(0.5
)
 
(0.2
)
Uncertain tax positions

 

 
0.4

Credits
(1.0
)
 
(0.3
)
 
(1.6
)
Change in valuation allowances
0.5

 

 
(5.4
)
Foreign rate differential
0.1

 
(0.1
)
 
(1.3
)
Effective income tax rate (benefit)
34.5
 %
 
36.0
 %
 
29.2
 %


Deferred income taxes reflect the impact of “temporary differences” between asset and liability amounts for financial reporting purposes and such amounts as determined based on existing tax laws. The tax effect of temporary differences and carryforwards which give rise to deferred tax assets and liabilities are as follows:
 
 
September 24, 2016
 
September 26, 2015
 
Deferred
Tax
Assets
 
Deferred
Tax
Liabilities
 
Deferred
Tax
Assets
 
Deferred
Tax
Liabilities
Current:
(in thousands)
Allowance for doubtful accounts
$
7,634

 
$

 
$
7,054

 
$

Inventory write-downs
9,869

 

 
11,366

 

Prepaid expenses

 
1,188

 

 
651

Nondeductible reserves
1,632

 

 
936

 

State taxes
19

 

 

 
385

Employee benefits
10,544

 

 
9,411

 

Other
3,000

 

 
2,754

 

Total
32,698

 
1,188

 
31,521

 
1,036

Noncurrent:
 
 
 
 
 
 
 
Depreciation and amortization

 
62,778

 

 
52,415

Equity loss
5,070

 

 

 
305

State net operating loss carryforward
4,939

 

 
5,032

 

Stock based compensation
2,642

 

 
3,422

 

State credits
2,317

 

 
2,348

 

Other
2,303

 

 
2,463

 

Valuation allowance
(6,583
)
 

 
(6,205
)
 

Total
10,688

 
62,778

 
7,060

 
52,720

Total
$
43,386

 
$
63,966

 
$
38,581

 
$
53,756


The Company has state tax net operating losses of $101.8 million which expire at various times between 2016 and 2036, and foreign losses of $0.4 million, which do not expire. Pursuant to authoritative guidance, the benefit of stock options will only be recorded to stockholders’ equity when cash taxes payable are reduced.
The Company has state income tax credits of $3.6 million, which expire at various times beginning in 2016 through 2032. In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available positive and negative evidence including past operating results, future taxable income, and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance against any deferred tax assets. The Company has determined there will be insufficient future separate state taxable income for the separate parent company to realize its deferred tax assets. Therefore, valuation allowances of $6.6 million and $6.2 million (net of federal impact) at September 24, 2016 and September 26, 2015, respectively, have been provided to reduce state deferred tax assets to amounts considered recoverable.
The Company classifies uncertain tax positions as non-current income tax liabilities unless expected to be paid within one year. The Company recognizes interest and/or penalties related to income tax matters as a component of pretax income. As of September 24, 2016 and September 26, 2015, accrued interest was less than $0.1 million and no penalties were accrued related to uncertain tax positions.

The following table, which excludes interest and penalties, summarizes the activity related to the Company’s unrecognized tax benefits for fiscal years ended September 24, 2016 and September 26, 2015 (in thousands):
 
 
 
Balance as of September 27, 2014
$
87

Increases related to prior year tax positions
55

Increases related to current year tax positions
20

Decreases related to prior year tax positions

Settlements
(9
)
Decreases related to lapse of statute of limitations
(15
)
Balance as of September 26, 2015
$
138

Increases related to prior year tax positions
51

Increases related to current year tax positions
66

Decreases related to prior year tax positions

Settlements
(1
)
Decreases related to lapse of statute of limitations

Balance as of September 24, 2016
$
254


As of September 24, 2016, unrecognized income tax benefits totaled approximately $0.2 million and all of the unrecognized tax benefits would, if recognized, impact the Company’s effective income tax rate.
The Company is principally subject to taxation by the United States and various states within the United States. The Company’s tax filings in major jurisdictions are open to examination by tax authorities by the Internal Revenue Service from fiscal year ended 2013 forward and in various state taxing authorities generally from fiscal year ended 2012 forward.
The Company does not believe there will be any significant change in its unrecognized tax benefits within the next twelve months.