Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.10.0.1
Income Taxes
12 Months Ended
Sep. 29, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The provision for income tax expense (benefit) consists of the following:
 
Fiscal Year Ended
 
September 29,
2018
 
September 30,
2017
 
September 24,
2016
 
(in thousands)
Current:
 
 
 
 
 
Federal
$
5,728

 
$
32,755

 
$
18,592

State
2,319

 
3,034

 
2,140

Foreign
91

 
121

 
110

Total
8,138

 
35,910

 
20,842

Deferred:
 
 
 
 
 
Federal
(3,676
)
 
11,227

 
2,796

State
(1,162
)
 
(1,038
)
 
463

Foreign
5

 
600

 
(48
)
Total
(4,833
)
 
10,789

 
3,211

Total
$
3,305

 
$
46,699

 
$
24,053


A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows: 
 
Fiscal Year Ended
 
September 29,
2018
 
September 30,
2017
 
September 24,
2016
Statutory federal income tax rate
24.5
 %
 
35.0
 %
 
35.0
 %
State income taxes, net of federal benefit
0.9

 
2.4

 
2.1

Other permanent differences
(0.1
)
 
0.3

 
(1.6
)
Adjustment of prior year accruals

 
(0.3
)
 
(0.6
)
Credits
(0.8
)
 
(0.6
)
 
(1.0
)
Rate change - Tax reform
(16.9
)
 

 

Stock based compensation
(5.4
)




Other
0.4

 
0.1

 
0.6

Effective income tax rate (benefit)
2.6
 %
 
36.9
 %
 
34.5
 %


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 29, 2018
 
September 30, 2017
 
Deferred
Tax
Assets
 
Deferred
Tax
Liabilities
 
Deferred
Tax
Assets
 
Deferred
Tax
Liabilities
 
(in thousands)
Allowance for doubtful accounts
$
5,613

 
$

 
$
7,790

 
$

Inventory write-downs
6,819

 

 
10,406

 

Prepaid expenses

 
1,408

 

 
1,740

Nondeductible reserves
983

 

 
1,485

 

State taxes
74

 

 
276

 

Employee benefits
5,578

 

 
10,007

 

Depreciation and amortization

 
65,983

 

 
84,059

Equity loss
2,053

 

 
4,243

 

State net operating loss carryforward
6,722

 

 
5,182

 

Stock based compensation
2,541

 

 
3,097

 

State credits
2,742

 

 
2,403

 

Other
4,240

 

 
5,768

 

Valuation allowance
(6,809
)
 

 
(6,527
)
 

Total
$
30,556

 
$
67,391

 
$
44,130

 
$
85,799


The Company has state tax net operating losses of $116.6 million, which expire at various times between 2018 and 2038, and foreign losses of $4.3 million, which do not expire.
The Company has state income tax credits of $3.5 million, which expire at various times beginning in 2018 through 2038. 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 and foreign taxable income for the separate parent company and foreign subsidiaries to realize the deferred tax assets. Therefore, valuation allowances of $6.8 million and $6.5 million (net of federal impact) at September 29, 2018 and September 30, 2017, 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 29, 2018 and September 30, 2017, 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 29, 2018 and September 30, 2017 (in thousands):  
 
 
Balance as of Balance as of September 24, 2016
$
254

Increases related to prior year tax positions
4

Increases related to current year tax positions
67

Decreases related to prior year tax positions

Settlements

Decreases related to lapse of statute of limitations

Balance as of Balance as of September 30, 2017
$
325

Increases related to prior year tax positions
138

Increases related to current year tax positions
83

Decreases related to prior year tax positions
(28
)
Settlements

Decreases related to lapse of statute of limitations

Balance as of Balance as of September 29, 2018
$
518


As of September 29, 2018, unrecognized income tax benefits totaled approximately $0.5 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 2015 forward and in various state taxing authorities generally from fiscal year ended 2014 forward.
The Company believes there is a reasonable chance that its unrecognized tax benefits will decrease by $0.1 million within the next twelve months.