Income Taxes

9 Months Ended

Sep. 24, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

	THIRTEEN WEEKS ENDED						THIRTY-NINE WEEKS ENDED
(dollars in thousands)	SEPTEMBER 24, 2023			SEPTEMBER 25, 2022			SEPTEMBER 24, 2023			SEPTEMBER 25, 2022
Income before income taxes	$	6,661		$	1,375		$	30,570		$	12,335
Income tax expense	$	(1,243)		$	(1,329)		$	(7,833)		$	(4,942)
Effective income tax rate	18.7		%	96.7		%	25.6		%	40.1		%

The change in the effective income tax rates for the thirteen and thirty-nine weeks ended September 24, 2023 as compared to the same periods in the prior year was primarily due to (i) the change in the valuation allowance for federal deferred tax assets, (ii) the decrease in the valuation allowance for state net operating loss carryforwards, (iii) the benefit of tax credits for FICA taxes on certain employees’ tips, (iv) impacts of executive stock-based compensation and (v) non-deductible costs associated with sales of the Company’s common stock by funds managed by Advent through secondary public offerings.

The effective income tax rates for the thirteen and thirty-nine weeks ended September 24, 2023 and September 25, 2022 were different than the blended federal and state statutory rate primarily due to (i) the change in the valuation allowance for federal deferred tax assets, (ii) the decrease in the valuation allowance for state net operating loss carryforwards, (iii) the benefit of tax credits for FICA taxes on certain employees’ tips, (iv) impacts of executive stock-based compensation and (v) non-deductible costs associated with sales of the Company’s common stock by funds managed by Advent through secondary public offerings.

Valuation allowance

Management evaluates quarterly whether the resulting deferred tax assets are realizable given the Company’s earnings history. Based on the available evidence, the Company does not meet the more likely than not standard related to the realization of a portion of the deferred tax assets as of September 24, 2023. Accordingly, the Company has established a valuation allowance on the portion of deferred tax assets deemed not realizable, including state charitable contribution carryovers, various state loss carryforwards and various federal tax credit carryforwards.

Management continues to monitor and evaluate the rationale for recording a valuation allowance for deferred tax assets. As the Company’s future taxable earnings increase and deferred tax assets are utilized, it is possible that a portion of the valuation allowance will no longer be needed. Release of any portion of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense in the period of the release. The timing and amount of any release related to future taxable income is currently indeterminable. During the thirty-nine weeks ended September 24, 2023, a release of the valuation allowance related to certain state loss carryforwards decreased income tax expense by approximately $1.0 million.