Income Taxes
The components of earnings (loss) before taxes were as follows:
|
| | | | | | | | | |
| Fiscal Years Ended |
| December 25,
2016 | | December 27,
2015 | | December 28,
2014 |
United States | $ | 136,935 |
| | 140,737 |
| | 142,352 |
|
Foreign | (2,931 | ) | | (4,596 | ) | | (6,945 | ) |
Total earnings before taxes | $ | 134,004 |
| | 136,141 |
| | 135,407 |
|
The provision for income taxes consisted of the following:
|
| | | | | | | | | |
| Fiscal Years Ended |
| December 25,
2016 | | December 27,
2015 | | December 28,
2014 |
Current: | | | | | |
Federal | $ | 35,097 |
| | 34,764 |
| | 37,168 |
|
State | 6,693 |
| | 6,782 |
| | 8,036 |
|
Deferred: | | | | | |
Federal | (288 | ) | | 1,192 |
| | 799 |
|
State | (756 | ) | | (1,253 | ) | | (3,294 | ) |
Foreign | (955 | ) | | (220 | ) | | (1,357 | ) |
Total income tax expense | $ | 39,791 |
| | 41,265 |
| | 41,352 |
|
The following is a reconciliation of the expected federal income taxes (benefits) at the statutory rate of 35% to the actual provision for income taxes:
|
| | | | | | | | | |
| Fiscal Years Ended |
| December 25,
2016 | | December 27,
2015 | | December 28,
2014 |
Expected federal income tax expense | $ | 46,901 |
| | 47,650 |
| | 47,392 |
|
State income tax expense, net of federal effect | 3,852 |
| | 3,377 |
| | 4,399 |
|
General business credits | (12,399 | ) | | (11,094 | ) | | (9,418 | ) |
Other, net | 1,437 |
| | 1,332 |
| | (1,021 | ) |
Total income tax expense | $ | 39,791 |
| | 41,265 |
| | 41,352 |
|
Temporary differences comprising the net deferred tax assets and liabilities on the accompanying consolidated balance sheets are as follows:
|
| | | | | | | |
| December 25,
2016 | | December 27,
2015 |
Deferred tax assets: | | | |
Unearned revenue | $ | 4,466 |
| | 4,386 |
|
Accrued compensation and benefits | 5,892 |
| | 5,339 |
|
Deferred lease credits | 17,020 |
| | 15,718 |
|
Stock-based compensation | 252 |
| | 4,030 |
|
Advertising costs | 3,245 |
| | 3,159 |
|
Insurance reserves | 6,874 |
| | 1,349 |
|
Capital lease and deemed landlord financing | 14,532 |
| | 14,659 |
|
Capitalized costs | 1,135 |
| | 1,167 |
|
State credits | 1,679 |
| | 1,848 |
|
Foreign tax credits | 505 |
| | — |
|
Cumulative translation adjustment | 1,751 |
| | 2,003 |
|
Foreign net operating loss/Other | 7,204 |
| | 6,248 |
|
Other | 4,132 |
| | 3,172 |
|
Total | $ | 68,687 |
| | 63,078 |
|
| | | |
Deferred tax liabilities: | | | |
Depreciation | $ | 67,670 |
| | 69,002 |
|
Goodwill and other amortization | 10,044 |
| | 8,098 |
|
Prepaid expenses | 2,925 |
| | 1,398 |
|
Accrued bonus | 1,029 |
| | 2,058 |
|
Contingent consideration | 1,403 |
| | — |
|
Future taxes on foreign earnings | 7,204 |
| | 6,248 |
|
Total | $ | 90,275 |
| | 86,804 |
|
| | | |
Net deferred tax liability | $ | 21,588 |
| | $ | 23,726 |
|
A valuation allowance is established when it is more likely than not that some portion of the deferred tax assets will not be realized. Realization is dependent upon the generation of future taxable income or the reversal of deferred tax liabilities during the periods in which those temporary differences become deductible. We consider the reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. Since we believe sufficient future taxable income will be generated to utilize the benefits of the deferred tax assets, a valuation allowance has not been recognized. Our foreign net operating losses, foreign tax credits, and state tax credits begin expiring in 2030, 2023, and 2022, respectively.
The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits:
|
| | | | | | | |
| Fiscal Years Ended |
| December 25,
2016 | | December 27,
2015 |
Beginning of year | $ | 1,128 |
| | $ | 598 |
|
Additions based on tax positions related to the current year | 493 |
| | 476 |
|
Additions based on tax positions related to prior years | 218 |
| | 108 |
|
Reductions based on settlements with tax authorities | (29 | ) | | (6 | ) |
Reductions based on expiration of statute of limitations | (55 | ) | | (48 | ) |
End of year | $ | 1,755 |
| | $ | 1,128 |
|
We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. During fiscal 2016, 2015, and 2014, interest and penalties of $64, $13, and ($25), respectively, were included in income tax expense. As of December 25, 2016, and December 27, 2015, interest and penalties related to unrecognized tax benefits totaled $155 and $51, respectively. Included in the balance at December 25, 2016 and December 27, 2015, are unrecognized tax benefits of $1,141 and $733, respectively, which if recognized, would affect the annual effective tax rate. The difference between these amounts and the amount reflected in the reconciliation above relates to the deferred U.S. federal income tax benefit on unrecognized tax benefits related to U.S. state income taxes.
The major jurisdictions in which the Company files income tax returns include the U.S. federal jurisdiction, Canada, Netherlands, and all states in the U.S. that have an income tax. With few exceptions, the Company is no longer subject to U.S. federal income tax examinations by tax authorities for years before fiscal 2013, state and local income tax examinations by tax authorities for fiscal years before 2012, and non-U.S. income tax examinations by tax authorities for fiscal years before 2011.
We regularly assess and reevaluate tax uncertainties by considering changes in current tax law, recent court decisions, and changes in the business. We do not anticipate total unrecognized tax benefits will significantly change due to settlement of audits and the expiration of statutes of limitations prior to December 31, 2017.