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Income Taxes
 12 Months Ended
Dec. 28, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income before income taxes consisted of the following: 
Fiscal Year
(in thousands)202420232022
U.S. operations$32,767 $(2,940)$103,902 
Foreign operations16,667 50,019 20,396 
Income before income taxes$49,434 $47,079 $124,298 
Components of income tax expense (benefit) are summarized as follows:
Fiscal Year
(in thousands)202420232022
Current:
U.S. - federal$21,749 $8,280 $354 
U.S. - state5,579 6,232 3,279 
Foreign24,360 14,838 15,401 
Deferred:
U.S. - federal(18,733)(19,480)16,934 
U.S. - state(4,476)(13,156)4,074 
Foreign(8,075)(2,750)(464)
Income tax expense (benefit)$20,404 $(6,036)$39,578 
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 28, 2024 and December 30, 2023:
(in thousands)December 28, 2024December 30, 2023
Deferred tax assets:
Lease liability$147,676 $129,486 
Deferred interest20,366 16,116 
Deferred payroll14,148 13,062 
Unrealized foreign exchange loss8,940 4,033 
Sec. 267 deferred basis8,466 8,493 
Insurance reserves5,141 4,935 
Partnership tax deferral4,601 — 
Capitalized research and development4,413 2,894 
Net operating loss carryforwards1,281 1,142 
Other6,430 3,653 
Deferred tax assets, exclusive of valuation allowance221,462 183,814 
Less: valuation allowance10,263 5,927 
Deferred tax assets, net of valuation allowance211,199 177,887 
Deferred tax liabilities:
ROU lease asset142,245 125,937 
Trade names and trademarks28,556 28,753 
Property and equipment depreciation17,197 19,407 
Charity licensing agreements10,490 12,418 
Inventory3,397 3,116 
Leasehold interests2,386 3,856 
Unrealized foreign exchange gain113 4,405 
Partnership tax deferral— 2,037 
Other3,014 5,867 
Deferred tax liabilities207,398 205,796 
Deferred tax assets (liabilities), net$3,801 $(27,909)
As of December 28, 2024 and December 30, 2023, the Company did not have U.S. federal net operating loss carryforwards and had $11.4 million and $11.5 million, respectively, of U.S. state net operating loss carryforwards. These net operating loss carryforwards expire between 2028 and 2041. As of December 28, 2024, 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 30, 2023, the Company had $0.3 million federal foreign tax credit, no federal R&D tax credits and no other federal tax credits.
Section 382 of the Internal Revenue Code and similar state regulations, contain provisions that may limit certain tax attributes 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 maintains a valuation allowance of $6.7 million and $3.6 million related to its Canadian and Australian operations, respectively. A valuation allowance is 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)202420232022
Tax expense at statutory rate$10,381 $9,887 $26,103 
Increase (decrease) in income taxes resulting from:
Change in valuation allowance7,348 (2,996)4,068 
Section 162(m) limitation6,648 11,229 — 
Foreign rate differential3,720 2,623 — 
Withholding taxes1,619 2,279 1,687 
State taxes net of federal benefit871 4,519 5,844 
Tax impact of restructuring(1)
— (31,340)— 
Impact of foreign currency translations(619)(1)(67)
Change in tax rate(878)4 — 
Stock-based compensation(1,130)1,590 (140)
GILTI / FDII(2)
(1,493)(1,603)(1,114)
Change in uncertain tax positions(1,681)— — 
Prior year true-up(2,236)4,205 (509)
Tax credits(2,492)(3,741)(2,571)
Other346 (2,691)6,277 
Income tax expense (benefit)$20,404 $(6,036)$39,578 
(1)In October 2023 the Company underwent an internal legal entity restructuring.
(2)GILTI and FDII refer to Global Intangible Low-Taxed Income and Foreign-Derived Intangible Income, respectively.
The following table summarizes the activity related to the Company’s unrecognized tax benefits:
Fiscal Year
(in thousands)202420232022
Beginning gross unrecognized tax benefits$1,912 $1,912 $1,912 
Increase related to prior year tax position138 — — 
Decrease related to prior year tax position(1,819)— — 
Ending gross unrecognized tax benefits$231 $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. As of December 28, 2024 the operations for tax years 2021 to 2024 remain subject to examination in the US federal jurisdiction, and the operations for tax years 2020 to 2024 remain subject to examination in Canada, Australia, and most US state jurisdictions. 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 (benefit) in the Consolidated Statements of Operations and Comprehensive Income.
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 and December 28, 2024.
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 28, 2024, 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.
The Organization for Economic Cooperation and Development (“OECD”) proposed model rules to ensure a minimal level of taxation (commonly referred to as Pillar II) and the European Union member states have agreed to implement Pillar II’s proposed global corporate minimum tax rate of 15%. Many countries are actively considering, have proposed or have enacted, changes to their tax laws based upon the Pillar II proposals. To mitigate the administrative burden for multinational enterprises in complying with the OECD Global Anti-Base Erosion rules during the initial years of implementation, the OECD developed the temporary “Transitional Country-by-Country Safe Harbor.” We considered the applicable tax law changes from Pillar II implementation in the relevant countries in which we operate, and there is no material impact to our tax provision for fiscal year 2024. We will continue to evaluate the impact of these tax law changes in future reporting periods.