XML 58 R22.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 30, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income before income taxes consisted of the following: 
Fiscal Year
(in thousands)202320222021
U.S. operations$(2,940)$103,902 $86,828 
Foreign operations50,019 20,396 (8,963)
Income before income taxes$47,079 $124,298 $77,865 
Components of income tax (benefit) expense are summarized as follows:
Fiscal Year
(in thousands)202320222021
Current:
U.S. - federal$8,280 $354 $(21)
U.S. - state6,232 3,279 4,661 
Foreign14,838 15,401 11,701 
Deferred:
U.S. - federal(19,480)16,934 (7,257)
U.S. - state(13,156)4,074 (7,223)
Foreign(2,750)(464)(7,390)
Income tax (benefit) expense$(6,036)$39,578 $(5,529)
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows for the consolidated taxable entities at December 30, 2023 and December 31, 2022:
(in thousands)December 30, 2023December 31, 2022
Deferred tax assets:
Net operating loss carryforwards$1,142 $2,197 
Lease liability129,486 106,270 
Insurance reserves4,935 4,235 
Employment tax credits— 3,208 
Deferred interest16,116 17,392 
Deferred payroll13,062 6,572 
Sec. 267 Deferred Basis8,493 8,776 
Unrealized foreign exchange loss4,033 6,957 
Other6,547 7,143 
Deferred tax assets, exclusive of valuation allowance183,814 162,750 
Less: valuation allowance5,927 8,923 
Deferred tax assets, net177,887 153,827 
Deferred tax liabilities:
Property and equipment depreciation and amortization19,407 16,636 
Leasehold interests3,856 3,930 
Charity licensing agreements12,418 11,695 
Trade names and trademarks28,753 23,902 
Partnership tax deferral2,037 5,075 
ROU asset125,937 103,297 
Unrealized foreign exchange gain4,405 4,909 
Partnership basis— 41,985 
Inventory3,116 — 
Other5,867 5,539 
Deferred tax liabilities205,796 216,968 
Deferred tax liabilities, net$27,909 $63,141 
As of December 30, 2023 and December 31, 2022, the Company did not have U.S. federal net operating loss carryforwards and had $10.0 million and $24.6 million, respectively, of U.S. state net operating loss carryforwards. These net operating loss carryforwards expire between 2024 and 2041. As of December 30, 2023, the Company had $0.3 million of federal foreign tax credit, no federal R&D credits and no other federal tax credits. As of December 31, 2022, the Company had no federal foreign tax credit, no federal R&D tax credits and $3.2 million of other federal tax credits that expire between 2039 and 2042.
Section 382 of the Internal Revenue Code and similar state regulations, contain provisions that may limit the NOL carryforwards available to be used to offset income in any given year upon the occurrence of certain events, including changes in the ownership within the meaning of Section 382. The Company reduced its tax attributes (NOLs and tax credits) and generated a limitation on utilization of such attributes resulting from the restructuring of its equity in March 2019 and the purchase by the Ares Funds of all of the Company’s outstanding equity in April 2021.
The Company maintains a valuation allowance of $2.7 million and $3.2 million related to its Canadian and Australian operations, respectively. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are more-likely-than-not expected to be realized. Management evaluates and weighs all available positive and negative evidence such as historic results, projected future taxable income, future reversals of existing deferred tax liabilities, as well as prudent and feasible tax-planning strategies. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are utilizable, we believe it is more likely than not that the Company will realize the net benefits of its deferred tax assets, other than the deferred tax assets related to the unrealized foreign exchange
loss in Canada and deferred tax assets in Australia for which a valuation allowance has been maintained due to uncertainties relating to their realization..
The differences between income taxes expected by applying the 21% U.S. federal statutory tax rate and the amount of income taxes provided for are as follows:
Fiscal Year
(in thousands)202320222021
Tax expense at statutory rate$9,887 $26,103 $16,352 
Increase (decrease) in income taxes resulting from:
State taxes net of federal benefit4,519 5,844 8,828 
Tax impact of restructuring(1)
(31,340)— 24,779 
GILTI/FDII(1,603)(1,114)2,438 
Foreign rate differential2,623 — — 
Change in valuation allowance(2,996)4,068 (59,527)
Canada Revenue Agency Settlement— — 973 
Other5,386 7,248 4,868 
Section 162(m) limitation11,229 — — 
Tax Credits(3,741)(2,571)(4,240)
Income tax (benefit) expense$(6,036)$39,578 $(5,529)
________________________________________
(1)In October 2023 the Company underwent an internal legal entity restructuring and in April 2021 the Company restructured its debt.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:
Fiscal Year
(in thousands)202320222021
Beginning gross unrecognized tax benefits$1,912 $1,912 $1,545 
Increase related to prior year tax position— — 367 
Ending gross unrecognized tax benefits$1,912 $1,912 $1,912 
In the normal course of business, the Company is subject to examination by taxing authorities in the countries in which it operates. The Company is currently under audit by several taxing jurisdictions, federal and state. Although the outcome of tax audits is always uncertain, the Company has assessed the probable outcomes and potential exposure and believes that it has provided adequate amounts of tax, interest and penalties for any adjustments that may arise from these open tax years. The Company’s continuing practice is to recognize interest and penalties related to income tax matters in income tax expense in the Consolidated Statements of Operations and Comprehensive Income.
On December 9, 2020, the Company signed a settlement agreement with Canada Revenue Agency to resolve certain income and nonresident withholding tax disputes with respect to tax years 2012–2019. Pursuant to the settlement, the Company had accrued tax and interest of CAD $28.1 million as of January 1, 2022, of which CAD $26.2 million was paid in fiscal year 2021 and CAD $1.9 million was paid in fiscal year 2022.
In October 2023, the Company went through an internal legal entity restructuring. As a result of the restructuring, the Company’s deferred tax liability on the outside basis difference in these partnerships was reduced from $42.0 million as of December 31, 2022, to zero as of December 30, 2023.
As of December 30, 2023, the Company adjusted its deferred tax assets and liabilities to account for the basis differences related to the assets it received in the distribution noted above, including Internal Revenue Code Section 732 basis adjustments to the distributed property. Deferred taxes are not recorded for the distributed non-deductible goodwill. As of December 30, 2023, the Company recognized a deferred tax benefit of $31.3 million for the reduction of the partnership outside basis difference deferred tax liability, combined with any deferred tax assets and deferred tax liabilities recognized on the distributed property.
As of December 30, 2023, the Company had not recognized a deferred tax liability on the excess of the amount for financial reporting over the tax basis in the stock of certain foreign subsidiaries that is essentially
permanent in duration. This amount becomes taxable upon a repatriation of assets from the subsidiaries or a disposal of the subsidiaries. It is not practicable to determine the amount of the related unrecognized deferred income tax liability.