Income Taxes

6 Months Ended

Jul. 03, 2022

Income Taxes

Income Taxes

11.Income Taxes

Beginning in fiscal 2022, the Company’s quarterly tax provision is calculated using an estimated annual effective tax rate (“ETR”), adjusted for discrete items arising in the period. In each quarter, this estimated annual ETR is updated, and a year-to-date calculation of the provision is made. Prior to fiscal 2022, the Company’s quarterly tax provision was

calculated using a discrete approach, as allowed by FASB ASC 740, Income Taxes. The discrete method was previously applied when it was not possible to reliably estimate the annual effective tax rate.

All of the Company’s income before income taxes is from the United States. The following table presents the components of the provision for income taxes (in thousands):

	Three Months Ended
	July 3,			July 4,
	2022			2021
Income before provision for income taxes	$	10,794		$	11,640
Provision for income taxes		(4,795)			(3,296)
Effective tax rate		(44.42)	%		(28.32)	%

	Six Months Ended
	July 3,			July 4,
	2022			2021
Income before provision for income taxes	$	13,898		$	10,428
Provision for income taxes		(5,856)			(3,459)
Effective tax rate		(42.14)	%		(33.17)	%

For the three and six months ended July 3, 2022, the Company’s effective tax rate differs from the federal income tax rate of 21% primarily due to state taxes, non-deductible executive compensation, and non-deductible equity-based compensation expenses.

The Company’s effective tax rate for the three and six months ended July 4, 2021, differs from the federal income tax rate of 21% primarily due to state taxes and non-deductible equity-based compensation expenses.