Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of the income tax provision (benefit) are as follows:

	For the Year Ended
(in thousands)	December 31, 2022		December 25, 2021		December 26, 2020
Current:
Federal	$	31,683	$	43,374	$	33,698
State	7,141		5,755		4,276
Foreign	1,708		1,075		491
	40,532		50,204		38,465
Deferred:
Federal	(4,003)		(9,609)		(8,475)
State	(1,022)		(1,368)		(893)
Foreign	(855)		(993)		(231)
	(5,880)		(11,970)		(9,599)
Total	$	34,652	$	38,234	$	28,866

The following is a reconciliation of income taxes at the statutory tax rate to the Company's effective tax rate:

	For the Year Ended
	December 31, 2022		December 25, 2021		December 26, 2020
Federal taxes at statutory rate	21.0	%	21.0	%	21.0	%
State taxes, net of federal tax benefit	2.7		2.1		2.0
Research and development tax credit	(0.7)		(0.4)		(0.6)
Federal permanent items	(0.2)		—		(0.2)
Effect of foreign operations	—		(0.2)		0.1
Other	(0.6)		—		(1.0)
Effective tax rate	22.2	%	22.5	%	21.3	%

At December 31, 2022, we had $3.9 million of unrecognized tax benefits, all of which would affect our effective tax rate if recognized.

The following table summarizes the change in unrecognized tax benefits for the three years ended December 31, 2022:

	For the Year Ended
(in thousands)	December 31, 2022		December 25, 2021		December 26, 2020
Balance at beginning of year	$	1,204	$	1,060	$	2,301
Reductions due to lapses in statutes of limitations	(139)		—		—
Reductions due to tax positions settled	—		—		(1,308)
Additions related to positions taken during a prior period	2,136		—		—
Reductions due to reversals of prior year positions	—		(30)		(202)
Additions based on tax positions taken during the current period	655		174		269
Balance at end of year	3,856		1,204		1,060

We recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2022, accrued interest and penalties related to unrecognized tax benefits were immaterial. The Company does not anticipate material changes in the amount of unrecognized income tax benefits over the next year.

Deferred income taxes result from timing differences in the recognition of revenue and expense between tax and financial statement purposes. The sources of temporary differences are as follows:

(in thousands)	December 31, 2022		December 25, 2021
Assets:
Inventories	$	13,662	$	13,689
Accounts receivable	20,446		18,589
Operating lease liability	24,904		14,526
Accrued expenses	12,526		7,515
Net operating losses	1,285		1,892
Foreign tax credits	469		469
State tax credits	403		819
Capital loss carryforward	481		467
Total deferred tax assets	74,176		57,966
Valuation allowance	(1,377)		(1,837)
Net deferred tax assets	72,799		56,129
Liabilities:
Depreciation	18,132		14,541
Goodwill and intangible assets	41,693		45,522
Operating lease right of use asset	23,924		13,733
Other	876		309
Gross deferred tax liabilities	84,625		74,105
Net deferred tax (liabilities) assets	$	(11,826)	$	(17,976)

A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, the Company assesses all positive and negative evidence. This evidence includes, but is not limited to, prior earnings history, expected future earnings, carryback and carryforward periods and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of the deferred tax asset. Management has determined it was necessary to establish a valuation allowance against the foreign tax credits, various state tax credits and a capital loss carryforward.

Based on our history of taxable income and our projection of future earnings, we believe that it is more likely than not that sufficient taxable income will be generated in the foreseeable future to realize the remaining net deferred tax assets.

During 2022, we reduced the valuation allowance against the deferred tax assets noted above by $0.5 million.

As of December 31, 2022, the Company has tax-effected net operating loss carryforwards of $1.0 million and $0.2 million for U.S. federal and state jurisdictions, respectively. Tax-effected federal net operating losses of $0.1 million begin to expire in 2036. The remaining federal net operating losses do not expire. The state net operating loss carryforwards expire in various years starting in 2037.

We file income tax returns in the United States, Canada, China, India, and Mexico. The statute of limitations for tax years before 2017 is closed for U.S. federal income tax purposes. The statute of limitations for tax years before 2018 is closed for the states in which we file. The statute of limitations for tax years before 2019 is closed for income tax purposes in Canada, China, and India. The statute of limitations for tax years before 2017 is closed for income tax purposes in Mexico.