INCOME TAXES

6 Months Ended

Mar. 29, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES:

The Company’s operations were included in Aramark’s U.S. federal and state tax returns for taxable periods through the Company’s Separation from Aramark on September 30, 2023. With respect to such taxable periods, income taxes on the Company’s financial statements were calculated on a separate tax return basis. Beginning after the Separation, the Company is filing tax returns separate from Aramark, and its deferred taxes and effective tax rates may differ from those of the historical periods.

The Company's effective tax rate was 28.5% and 25.6% for the three months ended March 29, 2024 and March 31, 2023, respectively. For the six months ended March 29, 2024 and March 31, 2023, the Company's effective tax rate was 27.5% and 25.3%, respectively. The Company’s effective tax rate for the six months ended March 29, 2024 was higher than the U.S. statutory rate primarily due to state taxes, permanent book/tax differences, and international operations in jurisdictions with higher income tax rates. For the six months ended March 31, 2023, the Company’s effective tax rate was higher than the U.S. statutory rate primarily due to state taxes and international operations in jurisdictions with higher income tax rates.

In connection with the Separation, the Company's net deferred tax liabilities decreased by $8.5 million, primarily related to shared-based compensation, inventoriable costs and tax attributes that were not part of the Company while consolidated with Aramark.

The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was approximately $0.2 million as of March 29, 2024 and $4.4 million as of September 29, 2023. Our unrecognized benefits with respect to our uncertain tax positions decreased by $4.2 million as these remained the obligation of Aramark under the Tax Matters Agreement. The amount of accrued interest and penalties payable related to unrecognized tax benefits was less than $0.1 million as of March 29, 2024.

It is reasonably possible that the amount of unrecognized benefits with respect to certain of our unrecognized tax positions will increase or decrease within the next 12 months. At this time, we estimate that the amount of gross unrecognized tax positions will not decrease within the next 12 months.