Income Taxes

12 Months Ended

Dec. 26, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Reconciliations between the effective tax rate on income from continuing operations before income taxes and the federal statutory rate are presented below.

	December 26, 2021			December 27, 2020			December 29, 2019
(In thousands)	Amount		% of Pre-tax	Amount		% of Pre-tax	Amount		% of Pre-tax
Tax at federal statutory rate	$	61,005	21.0	$	24,241	21.0	$	34,537	21.0
State and local taxes, net	16,378		5.6	3,873		3.4	5,303		3.2
Increase/(decrease) in uncertain tax positions	2,782		1.0	(2,509)		(2.2)	(2,427)		(1.5)
(Gain) on company-owned life insurance	(712)		(0.2)	(635)		(0.6)	(1,662)		(1.0)
Nondeductible expense	593		0.2	800		0.7	1,938		1.2
Nondeductible executive compensation	4,140		1.4	1,271		1.1	(355)		(0.2)
Stock-based awards benefit	(5,461)		(1.9)	(7,251)		(6.3)	(6,184)		(3.8)
Deduction for foreign-derived intangible income	(2,972)		(1.0)	(686)		(0.6)	(2,625)		(1.6)
Research and experimentation credit	(5,571)		(1.9)	(3,892)		(3.4)	(5,672)		(3.4)
Other, net	348		0.1	(617)		(0.5)	1,641		1.0
Income tax expense	$	70,530	24.3	$	14,595	12.6	$	24,494	14.9

The increase in the Company's effective tax rate in 2021 compared with 2020 is primarily due to the rate impact of higher earnings in 2021 and lower benefits from stock-based compensation in 2021.

The components of income tax expense as shown in our Consolidated Statements of Operations were as follows:

(In thousands)	December 26, 2021		December 27, 2020		December 29, 2019
Current tax expense/(benefit)
Federal	$	55,110	$	21,414	$	16,283
Foreign	1,042		905		823
State and local	20,736		7,453		3,146
Total current tax expense	76,888		29,772		20,252
Deferred tax expense/(benefit)
Federal	(5,651)		(9,249)		5,588
State and local	(707)		(5,928)		(1,346)
Total deferred tax expense	(6,358)		(15,177)		4,242
Income tax expense	$	70,530	$	14,595	$	24,494

State tax operating loss carryforwards totaled $0.8 million as of December 26, 2021, and $1.3 million as of December 27, 2020. Such loss carryforwards expire in accordance with provisions of applicable tax laws and have remaining lives up to 16 years.

The components of the net deferred tax assets and liabilities recognized in our Consolidated Balance Sheets were as follows:

(In thousands)	December 26, 2021		December 27, 2020
Deferred tax assets
Retirement, postemployment and deferred compensation plans	$	86,886	$	103,433
Accruals for other employee benefits, compensation, insurance and other	34,999		25,899
Net operating losses	1,018		1,510
Operating lease liabilities	19,663		16,648
Other	31,379		32,664
Gross deferred tax assets	$	173,945	$	180,154
Valuation allowance	(261)		(293)
Net deferred tax assets	$	173,684	$	179,861
Deferred tax liabilities
Property, plant and equipment	$	38,855	$	41,832
Intangible assets	7,738		7,652
Operating lease right-of-use assets	16,960		14,196
Other	14,331		16,663
Gross deferred tax liabilities	$	77,884	$	80,343
Net deferred tax asset	$	95,800	$	99,518

We assess whether a valuation allowance should be established against deferred tax assets based on the consideration of both positive and negative evidence using a “more likely than not” standard. In making such judgments, significant weight is given to evidence that can be objectively verified. We evaluated our deferred tax assets for recoverability using a consistent approach that considers our three-year historical cumulative income/(loss), including an assessment of the degree to which any such losses were due to items that are unusual in nature (i.e., impairments of nondeductible goodwill and intangible assets).

We had a valuation allowance totaling $0.3 million as of December 26, 2021, and December 27, 2020, for deferred tax assets primarily associated with net operating losses of a U.S. subsidiary, as we determined these assets were not realizable on a more-likely-than-not basis.

We had an income tax payable of $8.2 million as of December 26, 2021, compared with an income tax receivable of $3.3 million as of December 27, 2020.

Income tax benefits related to the exercise or vesting of equity awards reduced current taxes payable by $11.5 million, $13.1 million and $11.9 million in 2021, 2020 and 2019, respectively.

As of December 26, 2021, and December 27, 2020, Accumulated other comprehensive loss, net of income taxes in our Consolidated Balance Sheets and for the years then ended in our Consolidated Statements of Changes in Stockholders’ Equity was net of deferred tax assets of approximately $150 million and $160 million, respectively.

A reconciliation of unrecognized tax benefits is as follows:

(In thousands)	December 26, 2021		December 27, 2020		December 29, 2019
Balance at beginning of year	$	6,737	$	10,309	$	11,629
Gross additions to tax positions taken during the current year	1,389		1,130		1,184
Gross additions to tax positions taken during the prior year	2,458		133		711
Gross reductions to tax positions taken during the prior year	(150)		(93)		(76)
Reductions from settlements with taxing authorities	(3,534)		(3,814)		(2,637)
Reductions from lapse of applicable statutes of limitations	(1,009)		(928)		(502)
Balance at end of year	$	5,891	$	6,737	$	10,309

The total amount of unrecognized tax benefits that would, if recognized, affect the effective income tax rate was approximately $5 million and $6 million as of December 26, 2021, and December 27, 2020, respectively.

In 2021 and 2020, we recorded a $4.8 million and a $5.4 million income tax benefit, respectively, due to a reduction in the Company’s reserve for uncertain tax positions.

We also recognize accrued interest expense and penalties related to the unrecognized tax benefits within income tax expense or benefit. The total amount of accrued interest and penalties was approximately $1 million as of both December 26, 2021, and December 27, 2020. The total amount of accrued interest and penalties was a net benefit of less than $0.1 million in 2021, a net benefit of $0.7 million in 2020 and a net benefit of $0.6 million in 2019.

With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to 2013. Management believes that our accrual for tax liabilities is adequate for all open audit years. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events.

It is reasonably possible that certain income tax examinations may be concluded, or statutes of limitation may lapse, during the next 12 months, which could result in a decrease in unrecognized tax benefits of $3.2 million that would, if recognized, impact the effective tax rate.