Note 10 - Income Taxes

12 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(10) Income Taxes

The components of the provision for income taxes are as follows:

	Year Ended
	October 2,			October 3,			September 28,
(Dollars in thousands)	2021			2020			2019
Provision for income taxes:
Current:
Federal	$	17,904		$	5,056		$	(126	)
State		1,707			529			185
		19,611			5,585			59
Deferred:
Federal		(180	)		(288	)		1,649
State		62			(136	)		149
		(118	)		(424	)		1,798
Income taxes	$	19,493		$	5,161		$	1,857
Effective income tax rate		22.6	%		21.4	%		24.9	%

The reconciliation between income taxes computed at the federal statutory rate and the provision for income taxes is as follows:

	Year Ended
(Dollars in thousands)	October 2, 2021					October 3, 2020					September 28, 2019
Provision for income taxes at federal statutory rate	$	18,082		21.0	%	$	5,076		21.0	%	$	1,566		21.0	%
State income taxes, net of federal tax benefit		1,544		1.8			319		1.3			297		4.0
Stock-based compensation		(253	)	(0.3	)		128		0.5			90		1.2
Valuation allowance		(134	)	(0.2	)		(50	)	(0.2	)		24		0.3
Net operating loss carryback - CARES Act		-		-			(223	)	(0.9	)		-		-
Federal tax return true-up		-		-			-		-			(142	)	(1.9	)
Other, net		254		0.3			(89	)	(0.3	)		22		0.3
Provision for income taxes	$	19,493		22.6	%	$	5,161		21.4	%	$	1,857		24.9	%

The components of deferred tax assets and liabilities are as follows:

	October 2,			October 3,
(In thousands)	2021			2020
Deferred tax assets:
Defined benefit plans	$	2,921		$	2,727
Accrued expenses and asset reserves		2,280			1,885
Stock-based compensation		1,204			1,328
Operating lease liability		387			568
State net operating loss carryforwards and tax credits		54			92
Valuation allowance		(73	)		(207	)
Deferred tax assets		6,773			6,393
Deferred tax liabilities:
Plant and equipment		(10,901	)		(10,766	)
Prepaid insurance		(1,374	)		(1,217	)
Right of use assets		(385	)		(566	)
Goodwill		(409	)		(412	)
Deferred tax liabilities		(13,069	)		(12,961	)
Net deferred tax liability	$	(6,296	)	$	(6,568	)

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law. The CARES Act includes several changes impacting business, including, but not limited to, enhanced business interest deductibility, net operating loss ("NOL") carryback provisions, payroll tax deferral provisions and employee retention tax credits. We recorded a $223,000 tax benefit in 2020 resulting from the NOL carryback provisions of the CARES Act.

As of October 2, 2021 and October 3, 2020, we recorded deferred tax liabilities (net of valuation allowances) of $6.3 million and $6.6 million, respectively, in other liabilities on our consolidated balance sheet. We have $2.1 million of state NOLs that begin to expire in 2031, but principally expire between 2031 and 2036.

The realization of our deferred tax assets is entirely dependent upon our ability to generate future taxable income in applicable jurisdictions. GAAP requires that we periodically assess the need to establish a reserve against our deferred tax assets to the extent we no longer believe it is more likely than not that they will be fully realized. As of October 2, 2021, we recorded a valuation allowance of $73,000 pertaining to various state NOLs that were not expected to be utilized. The valuation allowance is subject to periodic review and adjustment based on changes in facts and circumstances and would be reduced should we utilize the state NOLs and tax credits against which an allowance had previously been provided or determine that such utilization was more likely than not. The $134,000 decrease in the valuation allowance during 2021 is primarily due to the utilization of state NOLs for which an allowance had been recorded together with a reduction in state apportionment rates.

As of October 2, 2021, we had no material, known tax exposures that required the establishment of contingency reserves for uncertain tax positions.

We classify interest and penalties related to unrecognized tax benefits as part of income tax expense. There were no interest and penalties related to unrecognized tax benefits incurred during 2021, 2020 and 2019.

We file U.S. federal income tax returns as well as state and local income tax returns in various jurisdictions. Federal and various state tax returns filed subsequent to 2016 remain subject to examination.