Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.4
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes
Loss before income taxes are comprised of the following components for the periods indicated:
Year Ended December 31, 2022 Year Ended
December 25, 2021		 Year Ended
December 26, 2020
United States based operations $ (32,817) $ (56,597) $ (30,083)
Non-United States based operations 18,150  6,481  (3,855)
Loss before income taxes $ (14,667) $ (50,116) $ (33,938)
Below are the components of the Company's income tax expense (benefit) for the periods indicated:
Year Ended December 31, 2022 Year Ended
December 25, 2021		 Year Ended
December 26, 2020
Current:
Federal & State $ 1,838  $ 894  $ 629 
Foreign 177  746  (49)
Total current 2,015  1,640  580 
Deferred:
Federal & State (4,648) (13,651) (7,625)
Foreign 4,406  664  (1,356)
Total deferred (242) (12,987) (8,981)
Valuation allowance (4) (437) (1,038)
Income tax expense (benefit) $ 1,769  $ (11,784) $ (9,439)

The Company has U.S. federal net operating loss (“NOL”) carryforwards totaling $79,396 as of December 31, 2022 that are available to offset future taxable income. Of the $79,396 of federal carryforwards, $41,470 was generated before January 1, 2018 and expire from 2032 to 2036. The remaining $37,926 can be carried forward indefinitely but is subject to an 80% taxable income limitation. A portion of the U.S. federal NOLs were acquired with the MinuteKey purchase in 2018. The MinuteKey NOLs are subject to limitation under IRC §382 from current and prior ownership changes. In addition, the Company's Canadian subsidiary maintains an NOL carryforward of $2,507. These carryforwards expire from 2039 to 2040. Management anticipates utilizing all U.S. federal and foreign NOLs prior to their expiration.
The Company has state NOL carryforwards with an aggregate tax benefit of $3,793 which expire from 2022 to 2042. The Company maintains a valuation allowance of $51 for the state NOLs expected to expire prior to utilization.
The Company has $1,055 of general business tax credit carryforwards which expire from 2026 to 2042. A valuation allowance of $210 has been maintained for a portion of these tax credits. The Company has $769 of foreign tax credit carryforwards which expire from 2022 to 2026. A full valuation allowance has been established for these credits given insufficient foreign source income projections.
The table below reflects the significant components of the Company's net deferred tax assets and liabilities at December 31, 2022 and December 25, 2021:
  December 31, 2022 December 25, 2021
  Non-current Non-current
Deferred Tax Asset:
Inventory $ 12,786  $ 17,590 
Bad debt and other sales related reserves 1,868  2,029 
Casualty loss reserve 606  685 
Accrued bonus / deferred compensation 6,458  3,778 
Deferred social security (CARES Act) —  899 
Interest limitation 37,709  30,094 
Lease liabilities 19,843  23,008 
Deferred revenue - shipping terms 354  320 
Transaction costs 1,701  2,218 
Deferred financing fees 867  — 
Federal / foreign net operating loss 16,477  31,217 
State net operating loss 3,793  4,123 
Tax credit carryforwards 2,274  2,400 
All other 1,487  1,233 
Gross deferred tax assets 106,223  119,594 
Valuation allowance for deferred tax assets (1,030) (1,034)
Net deferred tax assets $ 105,193  $ 118,560 
Deferred Tax Liability:
Intangible asset amortization $ 192,989  $ 205,328 
Property and equipment 28,647  27,722 
Lease assets 18,129  21,446 
Derivative security value 5,519  — 
All other items —  505 
Deferred tax liabilities $ 245,284  $ 255,001 
Net deferred tax liability $ 140,091  $ 136,441 

Realization of the net deferred tax assets is dependent on the reversal of deferred tax liabilities. Although realization is not assured, management estimates it is more likely than not that the net deferred tax assets will be realized. The amount of net deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward periods are reduced. The Company maintains a valuation allowance of $51 on U.S. state NOLs due to the Company's inability to utilize the losses prior to expiration.
The Company considers the earnings of certain non-U.S. subsidiaries to be indefinitely invested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings. The Company has not recorded a deferred tax liability related to the U.S. federal and state income taxes and foreign withholding taxes of undistributed earnings of foreign subsidiaries indefinitely invested outside the United States. It is not practicable to estimate the amount of additional tax that would be payable on the undistributed earnings that are considered permanently reinvested. Should management decide to repatriate the foreign earnings, the Company would need to adjust the income tax provision in the period the earnings will no longer be indefinitely invested outside the United States.
Below is a reconciliation of statutory income tax rates to the effective income tax rates for the periods indicated:
Year Ended December 31, 2022 Year Ended December 25, 2021 Year Ended
December 26, 2020
Statutory federal income tax rate 21.0  % 21.0  % 21.0  %
Non-U.S. taxes and the impact of non-U.S. losses for which a current tax benefit is not available (7.1) % (1.3) % 0.6  %
State and local income taxes, net of U.S. federal income tax benefit 2.9  % 2.9  % 5.7  %
Change in valuation allowance —  % 0.9  % 1.6  %
Adjustment for change in tax law 5.4  % —  % —  %
Permanent differences:
Acquisition and related transaction costs (2.7) % (2.2) % —  %
Decrease in fair value of warrant liability —  % 6.2  % —  %
Global Intangible Low-Taxed Income ("GILTI") (24.4) % (0.5) % —  %
Reconciliation of tax provision to return (0.2) % (1.7) % 0.6  %
Non-deductible compensation (6.4) % (1.9) % (1.0) %
Reconciliation of other adjustments (0.6) % 0.1  % (0.7) %
Effective income tax rate (12.1) % 23.5  % 27.8  %
The Company's reserve for unrecognized tax benefits remains unchanged for the year ended December 31, 2022. A balance of $1,101 of unrecognized tax benefit is shown in the financial statements at December 31, 2022 as a reduction of the deferred tax asset for the Company's NOL carryforward.
The following is a summary of the changes for the periods indicated below:
  Year Ended December 31, 2022 Year Ended
December 25, 2021		 Year Ended
December 26, 2020
Unrecognized tax benefits - beginning balance $ 1,101  $ 1,101  $ 1,101 
Gross increases - tax positions in current period —  —  — 
Gross increases - tax positions in prior period —  —  — 
Gross decreases - tax positions in prior period —  —  — 
Unrecognized tax benefits - ending balance $ 1,101  $ 1,101  $ 1,101 
Amount of unrecognized tax benefit that, if recognized would affect the Company's effective tax rate $ 1,101  $ 1,101  $ 1,101 
The Company files a consolidated income tax return in the U.S. and numerous consolidated and separate income tax returns in various states and foreign jurisdictions. The Company is not under any significant audits for the period ended December 31, 2022. In general, our income tax returns for the years from 2008 through the current year remain open to examination by federal and state taxing authorities. In addition, our tax years of 2015 through current year remain open and subject to examination by local tax authorities in certain foreign jurisdictions in which we have operations.