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Income Taxes
12 Months Ended
Dec. 30, 2017
Income Taxes [Abstract]  
Income Taxes

Note 8  Income Taxes

The provision (benefit) for income taxes consists of:



 

 

 

 

 

 



 

 

 

 

 

 

(dollars in thousands)

 

2017

 

2016

 

2015

Current:

 

 

 

 

 

 

Federal

$  

10,630 

$  

25,908 

$  

29,888 

State

 

1,972 

 

5,888 

 

3,325 

Deferred:

 

 

 

 

 

 

Federal

 

(34,659)

 

6,020 

 

(188)

State

 

2,666 

 

(317)

 

(24)



(19,391)

37,499 

$

33,001 



The reconciliation of income taxes computed at the federal statutory rate 35% in 2017, 2016 and 2015 respectively.

Ending deferred tax liability has been computed at the federal statutory rate of 21% due to the Tax Reform.



 

 

 

 

 

 



 

 

 

 

 

 

(dollars in thousands)

 

2017

 

2016

 

2015

Income taxes at federal statutory rate

$

27,658 

$

43,631 

$

32,316 

State income taxes, net of federal income tax benefit

 

1,306 

 

2,413 

 

1,112 

Deferred tax on gain on bargain purchase

 

 -

 

(8,358)

 

 -

Nondeductible employee-related expenses

 

1,828 

 

 -

 

 -

2017 tax reform

 

(49,336)

 

 -

 

 -

Other

 

(847)

 

(187)

 

(427)

Provision for income taxes (effective tax rate (24.5)%,  30.1% and 35.7%, respectively)

$

(19,391)

$

37,499 

$

33,001 



The effective income tax rate was (24.5)%, 30.1% and 35.7% in 2017, 2016 and 2015, respectively.  On December 22, 2017, the U.S. Government enacted the Tax Cuts and Jobs Act (the ”Tax Reform”).  The Tax Reform significantly impacted the Company’s effective income tax rate by reducing the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018 and allowing immediate expensing of qualified assets placed into service after September 27, 2017.  Other elements of the Tax Reform have minor impacts, however the above mentioned decreased deferred income tax by $49.3 million.  The effective income tax rate decreased in 2016 due to the impact of the bargain purchase gain on the 38 locations being included in the overall gain calculation and not in income tax expense.  The effective tax rate excluding the bargain purchase gain was 37.2%



Cash paid for federal income taxes was $12.0 million,  $27.3 million and $28.0 million in 2017,  2016 and 2015 respectively.    Cash paid for state income taxes was $1.0 million, $3.7 million and $2.2 million in 2017,  2016 and 2015 respectively.



The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 30, 2017 and December 31, 2016, are:



 

 

 

 



 

 

 

 

(dollars in thousands)

 

2017

 

2016

Deferred tax assets:

 

 

 

 

Accounts receivable

$

542 

$

586 

Compensated absences

 

848 

 

1,076 

Employment incentives

 

388 

 

9,826 

Employee benefit plans

 

5,581 

 

9,243 

General liability insurance

 

2,991 

 

4,359 

Postretirement benefit obligations

 

5,365 

 

6,484 

Net operating loss carryforwards

 

7,745 

 

5,600 

Other

 

4,373 

 

2,224 

Total deferred tax assets

 

27,833 

 

39,398 

Deferred tax liabilities:

 

 

 

 

Inventories

 

(8,026)

 

(7,619)

Unrealized gains on marketable securities

 

(2,310)

 

(3,382)

Nondeductible accruals and other

 

(5,160)

 

(7,517)

Depreciation

 

(99,759)

 

(140,325)

Total deferred tax liabilities

 

(115,255)

 

(158,843)

Net deferred tax liability

$

(87,422)

$

(119,445)



Note 8  Income Taxes (continued)

The following table summarizes the activity related to the Company’s unrecognized tax benefits:





 

 

 

 



 

 

 

 

(dollars in thousands)

 

2017

 

2016

Unrecognized tax benefits at beginning of year

$

3,124 

$

1,264 

Increases based on tax positions related to the current year

 

1,567 

 

1,563 

Additions for tax positions of prior year

 

 -

 

297 

Reductions for tax positions of prior years

 

 -

 

 -

Settlements

 

 -

 

 -

Expiration of the statute of limitations for assessment of taxes

 

 -

 

 -

Unrecognized tax benefits at end of year

$

4,691 

$

3,124 



The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $1,567,000 in 2017, $1,860,000 in 2016 and $1,264,000 in 2015.

The Company’s U.S. Federal income tax filings have been examined by the Internal Revenue Service through 2008.  The Company or one of its subsidiaries files tax returns in various states.  The tax years subject to examination in Pennsylvania, where the majority of the Company's revenues are generated, are 2014 to 2017

The Company has net operating loss carryforwards of $98.1 million available for state income tax purposes.  The net operating losses will begin to expire starting in 2027.  The Company expects to fully utilize these net operating loss carryforwards.