Income Taxes

9 Months Ended

Oct. 02, 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 benefit (provision) for income taxes (in thousands):

	Thirteen Weeks Ended
	October 2,			October 3,
	2022			2021
Income before benefit (provision) for income taxes	$	251		$	5,466
Benefit (provision) for income taxes		678			(1,616)
Effective tax rate		270.1	%		(29.6)	%

	Thirty-nine Weeks Ended
	October 2,			October 3,
	2022			2021
Income before provision for income taxes	$	14,149		$	15,894
Provision for income taxes		(5,178)			(5,075)
Effective tax rate		(36.6)	%		(31.9)	%

For the thirteen and thirty-nine weeks ended October 2, 2022, the Company’s effective tax rate differs from the federal income tax rate of 21% primarily due to increases in state taxes, non-deductible executive compensation, and non-deductible equity-based compensation expenses.  For the thirteen weeks ended October 2, 2022, the benefit for income taxes was the result of an accrual for a prior year amended tax return offsetting the aforementioned increases in tax.

The Company’s effective tax rate for the thirteen and thirty-nine weeks ended October 3, 2021, differs from the federal income tax rate of 21% primarily due to state taxes and non-deductible equity-based compensation expenses.