Income Taxes

12 Months Ended

Dec. 25, 2021

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The provision (benefit) for income taxes on income (loss) from continuing operations consists of the following:

	2021		2020 (As Adjusted)
Current
Federal	$	141	$	(912)
State	136		109
Total current	277		(803)
Deferred
Federal	(139)		(277)
State	(33)		(66)
Total deferred	(172)		(343)
Income tax provision (benefit)	$	105	$	(1,146)

Differences between the provision (benefit) for income taxes and the amount computed by applying the statutory federal income tax rate to income (loss) from continuing operations before taxes are summarized as follows:

	2021			2020 (As Adjusted)
Federal statutory rate	21		%	21		%
Statutory rate applied to income (loss) from continuing operations before taxes	$	1,104		$	(2,296)
Plus state income taxes, net of federal tax effect	81			34
Total statutory provision (benefit)	1,185			(2,262)
Effect of differences:
Nondeductible meals and entertainment	1			30
Executive compensation limitation	37			—
Federal tax credits	(227)			(279)
Reserve for uncertain tax positions	7			7
Change in valuation allowance	(857)			1,236
Stock-based compensation	(18)			141
Other items	(23)			(19)
Income tax provision (benefit)	$	105		$	(1,146)

During the fourth quarter of 2017, the Company recorded a full valuation allowance against its deferred tax assets, which remains in effect as of December 25, 2021. The Company intends to maintain this position until there is sufficient evidence to support the reversal of all or some portion of these allowances. The Company also has certain assets with indefinite lives for which the basis is different for book and tax. In accordance with ASC 740-10-30-18, the deferred tax liability related to these intangible assets cannot be used to offset deferred tax assets when determining the amount of the valuation allowance for deferred tax assets which are not more-likely-than-not to be realized. The result is that the Company is in a net deferred tax liability position of $91 at December 25, 2021 and December 26, 2020, respectively, which is recorded in other long-term liabilities in the Company's Consolidated Balance Sheets.

The income tax provision for the twelve months ended December 25, 2021 was $105 compared with an income tax benefit of $1,146 for the twelve months ended December 26, 2020. Due to its full valuation allowance against its deferred tax balances, the Company is only able to recognize refundable credits, a small amount of state taxes, and benefits for both the reduction of certain indefinite lived assets not covered by the Company's valuation allowance and the recognition of stranded tax effects within other comprehensive income (loss) related to the termination of certain derivative contracts in the tax benefit for 2020 and 2021. In 2021, the Company adopted ASU 2019-12 which impacts the accounting for income taxes. One of the items in the new accounting standard is a removal of the exception to the incremental approach for intraperiod tax allocation in the event of a loss from continuing operations and income from other financial statement components. In 2020, the Company had a loss from

continuing operations and income from discontinued operations. Because the Company did not early adopt ASU 2019-12 for the 2020 reporting year, the income from discontinued operations was considered a source of taxable income to realize a partial tax benefit for the loss generated by continuing operations. As such, the 2020 financial statements reflect tax expense in discontinued operations and a tax benefit in continuing operations. Applying the change on a prospective basis, this did not occur in 2021 and as such created a difference in the effective tax rate for continuing operations between 2020 and 2021.

Significant components of the Company's deferred tax assets and liabilities are as follows:

	2021		2020 (As Adjusted)
Deferred tax assets:
Inventories	$	2,316	$	2,061
Retirement benefits	824		1,126
State net operating losses	3,033		3,305
Federal net operating losses	—		556
State tax credit carryforwards	1,669		1,688
Federal tax credit carryforwards	4,136		4,413
Allowances for bad debts, claims and discounts	1,779		1,874
Other	3,958		4,595
Total deferred tax assets	17,715		19,618
Valuation allowance	(12,851)		(14,202)
Net deferred tax assets	4,864		5,416
Deferred tax liabilities:
Property, plant and equipment	4,955		5,507
Total deferred tax liabilities	4,955		5,507
Net deferred tax liability	$	(91)	$	(91)

At December 25, 2021, $3,033 of deferred tax assets related to approximately $58,180 of state net operating loss carryforwards. In addition, $4,136 of federal tax credit carryforwards and $1,669 of state tax credit carryforwards were available to the Company. The federal tax credit carryforwards will expire between 2029 and 2042. The federal net operating loss carryforwards generated in 2018 have no expiration. The state net operating loss carryforwards and the state tax credit carryforwards will expire between 2021 and 2041. A valuation allowance of $12,851 is recorded to reflect the estimated amount of deferred tax assets that may not be realized during the carryforward periods. At December 25, 2021, the Company is in a net deferred tax liability position of $91 which is included in other long-term liabilities in the Company's Consolidated Balance Sheets.

Tax Uncertainties

The Company accounts for uncertainty in income tax positions according to FASB guidance relating to uncertain tax positions. Unrecognized tax benefits were $494 at December 25, 2021 and $487 at December 26, 2020. Such benefits, if recognized, would affect the Company's effective tax rate. There were no significant interest or penalties accrued as of December 25, 2021 or December 26, 2020.

The following is a summary of the change in the Company's unrecognized tax benefits:

	2021		2020
Balance at beginning of year	$	487	$	480
Additions based on tax positions taken during a current period	7		7
Balance at end of year	$	494	$	487

The Company and its subsidiaries are subject to United States federal income taxes, as well as income taxes in a number of state jurisdictions. The tax years subsequent to 2017 remain open to examination for U.S. federal income taxes. The majority of state jurisdictions remain open for tax years subsequent to 2017. A few state jurisdictions remain open to examination for tax years subsequent to 2016.