Income Taxes

6 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

9.Income Taxes

The determination of the Company’s overall effective tax rate requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. The effective tax rate reflects the income earned and taxed in various federal, state, and foreign jurisdictions. Tax law changes, increases and decreases in temporary and permanent differences between book and tax items, tax credits, and the Company’s change in income in each jurisdiction all affect the overall effective tax rate. It is the Company’s practice to recognize interest and penalties related to uncertain tax positions in income tax expense.

The Company’s effective tax rate was 26.1% for the three months ended December 31, 2022 and 26.5% for the three months ended January 1, 2022. The Company's effective tax rate was 26.2% for the six months ended December 31, 2022 and 22.6% for the six months ended January 1, 2022. The effective tax rate varies from the 21% statutory rate primarily due to state taxes, federal credits, and other permanent items. The excess tax benefit of exercised and vested stock awards is treated as a discrete item. The effective tax rate for periods ended December 31, 2022, differed from the prior year periods primarily due to the relative size of stock-based compensation and other discrete permanent items as a percentage of book income.

As of December 31, 2022 and July 2, 2022, the Company had net deferred tax assets of $218.4 million and $204.9 million, respectively, and deferred tax liabilities of $646.6 million and $629.2 million, respectively. As of both December 31, 2022 and July 2, 2022, the Company had established a valuation allowance of $2.6 million, net of federal benefit, against deferred tax assets related to certain net operating losses which are not likely to be realized due to limitations on utilization. There was no change in the valuation allowance as of December 31, 2022. The Company believes that it is more likely than not that the remaining deferred tax assets will be realized.