Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

M. Income Taxes

Significant components of the income tax provision (benefit) are as follows:

	2022		2021			2020
	(in thousands)
Current:
Federal	$	10,453	$	(4,473	)	$	25,115
State		4,683		2,078			9,455
Total current		15,136		(2,395	)		34,570
Deferred:
Federal		8,196		(2,762	)		16,363
State		841		(2,487	)		1,337
Total deferred		9,037		(5,249	)		17,700
Total income tax provision (benefit)	$	24,173	$	(7,644	)	$	52,270

The reconciliations to statutory rates are as follows:

	2022			2021			2020
Statutory rate		21.0	%		21.0	%		21.0	%
State income taxes, net of federal benefit		4.1			11.0			4.4
Deduction relating to excess stock-based compensation		(0.9	)		(153.8	)		(4.3	)
Non-deductible meals & entertainment		0.6			5.6			0.2
Change in unrecognized tax benefits (including interest and penalty)		—			(8.7	)		—
Federal and state provision to return		(0.2	)		(7.1	)		(0.1	)
Change in valuation allowance		1.2			21.9			0.1
Other		0.6			(0.6	)		0.1
		26.4	%		(110.7	)%		21.4	%

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

	December 31, 2022			December 25, 2021
	(in thousands)
Deferred tax assets:
Lease liabilities	$	13,994		$	16,236
Inventory reserves		8,595			14,343
Stock-based compensation expense		7,441			6,713
Loss carryforwards		968			3,859
Accrued expenses		4,609			3,449
Accrued commitments for inventory at vendor locations		1,799			2,607
Tax credit carryforwards		813			1,874
Accrued destruction costs		—			1,538
Other		1,833			2,703
Total deferred tax assets		40,052			53,322
Valuation allowance		(4,600	)		(3,341	)
Total deferred tax assets, net of valuation allowance		35,452			49,981
Deferred tax liabilities:
Property, plant, and equipment		(103,561	)		(102,696	)
Right-of-use assets		(11,375	)		(14,035	)
Intangible assets amortization		(10,373	)		(15,024	)
Prepaid expenses		(6,735	)		(5,721	)
Total deferred tax liabilities		(132,044	)		(137,476	)
Net deferred tax liabilities	$	(96,592	)	$	(87,495	)

The Company’s policy is to classify interest and penalties related to income tax matters in income tax expense. Interest and penalties included in the provision for income taxes amounted to $0 in each of the fiscal years 2022, 2021, and 2020. Accrued interest and penalties amounted to $0.2 million at December 31, 2022 and December 25, 2021.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2022			2021
	(in thousands)
Balance at beginning of period	$	232		$	812
Increases related to current period tax positions		41			59
(Decreases) increases related to prior period tax positions		(30	)		36
Decreases related to lapse of statute of limitations		—			(675	)
Balance at end of period	$	243		$	232

Included in the balance of unrecognized tax benefits at December 31, 2022 and December 25, 2021 are potential net benefits of $0.2 million and $0.2 million, respectively, that would favorably impact the effective tax rate if recognized. Unrecognized tax benefits are included in accrued expenses in the accompanying consolidated balance sheets and adjusted in the period in which new information about a tax position becomes available or the final outcome differs from the amount recorded.

As of December 31, 2022, the Company’s 2019, 2020, and 2021 federal income tax returns remain subject to examination by IRS. The Company’s state income tax returns remain subject to examination for three or four years depending on the state’s statute of limitations. In addition, the Company is generally obligated to report changes in taxable income arising from federal income tax audits. The Company is not currently under any income tax audits as of December 31, 2022.

As of December 31, 2022, the Company’s deferred tax assets include a valuation allowance of $4.6 million, compared to $3.3 million at December 25, 2021. The valuation allowance as of December 31, 2022 and December 25, 2021 were primarily related to stock-based compensation expected by management to be non-deductible under Internal Revenue Code, Section 162(m). The net increase in total valuation allowance was $1.3 million from December 25, 2021 to December 31, 2022, compared to a net increase of $1.3 million from December 26, 2020 to December 25, 2021.