Income Taxes

12 Months Ended

Jan. 01, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 21. Income Taxes

The company’s provision for income tax expense (benefit) consists of the following for Fiscal 2021, 2020, and 2019 (amounts in thousands):

	Fiscal 2021			Fiscal 2020			Fiscal 2019
Current Taxes:
Federal	$	46,018		$	64,113		$	23,397
State		11,790			15,434			5,539
		57,808			79,547			28,936
Deferred Taxes:
Federal		6,946			(26,112	)		17,335
State		(169	)		(5,042	)		1,274
		6,777			(31,154	)		18,609
Income tax expense	$	64,585		$	48,393		$	47,545

Fiscal 2020 deferred income taxes included the impact of the termination of Plan No.1.  See Footnote 20, Postretirement Plans, for a description of the termination of Plan No. 1.

Income tax expense (benefit) differs from the amount computed by applying the applicable U.S. federal income tax rate of 21% because of the effect of the following items for Fiscal 2021, 2020 and 2019 (amounts in thousands):

	Fiscal 2021			Fiscal 2020			Fiscal 2019
Tax at U.S. federal income tax rate	$	56,862		$	42,149		$	44,538
State income taxes, net of federal income tax benefit		9,181			8,209			5,384
Net share-based payments (windfalls)		(104	)		(80	)		(828	)
Other		(1,354	)		(1,885	)		(1,549	)
Income tax expense	$	64,585		$	48,393		$	47,545

In Fiscal 2021, 2020 and 2019, the most significant difference in the effective rate and the statutory rate was state income taxes.

Deferred tax assets (liabilities) are comprised of the following (amounts in thousands):

	January 1, 2022			January 2, 2021
Self-insurance	$	5,502		$	4,806
Compensation and employee benefits		8,816			7,698
Deferred income		4,948			5,988
Loss and credit carryforwards		12,990			13,026
Equity-based compensation		6,797			3,977
Legal accrual		6,514			2,867
Deferred payroll tax under CARES act		4,100			7,525
Pension and postretirement benefits		1,722			2,390
Financing and operating lease right-of-use liabilities		77,422			88,816
Other		6,642			7,028
Valuation allowance		(1,030	)		(1,030	)
Deferred tax assets		134,423			143,091
Depreciation		(71,041	)		(69,056	)
Intangibles		(114,882	)		(109,824	)
Financing and operating lease right-of-use assets		(75,233	)		(85,720	)
Hedging		(2,015	)		(4,357	)
Other		(5,009	)		(2,393	)
Deferred tax liabilities		(268,180	)		(271,350	)
Net deferred tax liability	$	(133,757	)	$	(128,259	)

The company has a deferred tax asset of $2.8 million related to a federal net operating loss carryforward which we expect to fully utilize before expiration. Additionally, the company and various subsidiaries have a net deferred tax asset of $4.8 million related to state net operating loss carryforwards, and $5.4 million for credit carryforwards with expiration dates through Fiscal 2041. The utilization of a portion of these state carryforwards could be limited in the future; therefore, a valuation allowance has been recorded. Should the company determine at a later date that certain of these losses which have been reserved for may be utilized, a benefit may be recognized in the Consolidated Statements of Income. Likewise, should the company determine at a later date that certain of these net operating losses for which a deferred tax asset has been recorded may not be utilized, a charge to the Consolidated Statements of Income may be necessary.  See Note 2, Summary of Significant Accounting Policies, for the deferred tax asset valuation allowance analysis.

There are no unrecognized gross tax benefits as of January 1, 2022.  These amounts would be presented exclusive of interest accrued and recorded in other long-term liabilities on the Consolidated Balance Sheets.

The company accrues interest expense and penalties related to income tax liabilities as a component of income before taxes. No accrual of penalties is reflected on the company’s balance sheet as the company believes the accrual of penalties is not necessary based upon the merits of its income tax positions. The company had no accrued interest balance at January 1, 2022 and January 2, 2021.

The company defines the federal jurisdiction as well as various state jurisdictions as “major” jurisdictions. The company is no longer subject to federal examinations for years prior to 2018, and with limited exceptions, for years prior to 2017 in state jurisdictions.

The following is a reconciliation of the total amounts of unrecognized tax benefits for Fiscal 2021, 2020, and 2019 (amounts in thousands):

	Fiscal 2021		Fiscal 2020			Fiscal 2019
Unrecognized tax benefit at beginning of fiscal year	$	—	$	306		$	750
Lapses of statutes of limitations		—		(306	)		(444	)
Unrecognized tax benefit at end of fiscal year	$	—	$	—		$	306

At this time, we do not anticipate significant changes to the amount of gross unrecognized tax benefits over the next twelve months.