Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.8
Income Taxes
12 Months Ended
Sep. 27, 2014
Income Tax Disclosure [Abstract]  
Income Taxes

13. Income Taxes

The provision for income tax expense (benefit) consists of the following:

 

     Fiscal Year Ended  
     September 27,
2014
    September 28,
2013
    September 29,
2012
 
     (in thousands)  

Current:

      

Federal.

   $ (329   $ 52      $ (1,003

State.

     873        958        603   

Foreign.

     0        0        35   
  

 

 

   

 

 

   

 

 

 

Total

     544        1,010        (365

Deferred:

      

Federal.

     4,171        (2,915     12,671   

State.

     177        (687     198   

Foreign.

     (847     0        312   
  

 

 

   

 

 

   

 

 

 

Total

     3,501        (3,602     13,181   
  

 

 

   

 

 

   

 

 

 

Total

   $ 4,045      $ (2,592   $ 12,816   
  

 

 

   

 

 

   

 

 

 

A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows:

 

     Fiscal Year Ended  
     September 27,
2014
    September 28,
2013
    September 29,
2012
 

Statutory federal income tax rate

     35.0     (35.0 )%      35.0

State income taxes, net of federal benefit

     2.1        (5.2     2.3   

Other permanent differences

     0.2        2.4        0.6   

Adjustment of prior year accruals

     (0.2     1.8        0.2   

Uncertain tax positions

     0.4        3.7        0.0   

Credits

     (1.6     (29.3     (1.2

Change in valuation allowances

     (5.4     (9.0     (0.1

Foreign rate differential

     (1.3     (3.6     (0.1
  

 

 

   

 

 

   

 

 

 

Effective income tax rate (benefit)

     29.2     (74.2 %)      36.7
  

 

 

   

 

 

   

 

 

 

 

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 27, 2014      September 28, 2013  
     Deferred
Tax
Assets
    Deferred
Tax
Liabilities
     Deferred
Tax
Assets
    Deferred
Tax
Liabilities
 

Current:

  

Allowance for doubtful accounts .

   $ 9,262      $ 0       $ 7,758      $ 0   

Inventory write-downs

     12,018        0         14,983        0   

Prepaid expenses.

     820        0         620        0   

Nondeductible reserves

     1,420        0         2,782        0   

State taxes.

     0        165         0        188   

Employee benefits

     7,816        0         6,062        0   

Other.

     3,233        0         3,012        0   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total

     34,569        165         35,218        188   
  

 

 

   

 

 

    

 

 

   

 

 

 

Noncurrent:

         

Depreciation and amortization.

     0        46,458         0        39,100   

Equity income.

     0        127         0        393   

State net operating loss carryforward

     5,167        0         4,816        0   

Stock based compensation

     5,263        0         6,061        0   

State credits

     2,352        0         2,421        0   

Other.

     7,281        0         5,349        0   

Valuation allowance

     (6,215     0         (6,968     0   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total.

     13,848        46,585         11,679        39,493   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total.

   $ 48,417      $ 46,750       $ 46,897      $ 39,681   
  

 

 

   

 

 

    

 

 

   

 

 

 

The Company has federal tax net operating losses of $6.6 million which begin to expire in 2033, state tax net operating losses of $102.6 million which expire at various times between 2014 and 2034, and foreign losses of $1.5 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. As of September 27, 2014, the portion of net operating loss carryforwards related to stock options is approximately $1.2 million, the benefit of which will be credited to additional paid-in capital when realized.

The Company has federal income tax credits of $1.4 million which expire between 2024 and 2034. The Company also has state income tax credits of $3.6 million, which expire at various times beginning in 2014 through 2030. 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 $6.2 million and $7.0 million (net of federal impact) at September 27, 2014 and September 28, 2013, 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 27, 2014 and September 28, 2013, 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 27, 2014 and September 28, 2013 (in thousands):

 

Balance as of September 29, 2012

   $ 262   

Increases related to prior year tax positions

     247   

Increases related to current year tax positions

     60   

Settlements

     (202

Decreases related to lapse of statute of limitations

     (3
  

 

 

 

Balance as of September 28, 2013

   $ 364   

Increases related to prior year tax positions

     264   

Increases related to current year tax positions

     14   

Decreases related to prior year tax positions

     (166

Settlements

     (388

Decreases related to lapse of statute of limitations

     (1
  

 

 

 

Balance as of September 27, 2014

   $ 87   
  

 

 

 

As of September 27, 2014, unrecognized income tax benefits totaled approximately $0.1 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 2011 forward and in various state taxing authorities generally from fiscal year ended 2010 forward.

The Company does not believe there will be any significant change in its unrecognized tax benefits within the next twelve months.