Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

v3.25.4
Income Taxes
 12 Months Ended
Jan. 03, 2026
Income Tax Disclosure [Abstract]  
Income Taxes
15. Income Taxes
We are taxed as a Corporation for U.S. income tax purposes and similar sections of the state income tax laws. Our effective tax rate is based on pre-tax earnings, enacted U.S. statutory tax rates, non-deductible expenses, and certain tax rate differences between U.S. and foreign jurisdictions. The foreign pass-through subsidiaries file income tax returns in the U.K., France, Australia, and Singapore as necessary, and the controlled foreign corporation subsidiaries file income tax returns in Poland and Canada, as necessary. We expect to continue to reinvest foreign earnings outside the U.S. indefinitely. Our provision for income taxes consists of provisions for federal, state, and foreign income taxes.

The provision for income taxes for the years ended January 3, 2026, December 28, 2024 and December 30, 2023 includes amounts related to entities within the Company taxed as corporations in the U.S., U.K., France, Australia, Singapore, Poland, China, and Canada. The income tax effects of significant unusual or infrequently occurring items are recognized entirely within the period in which the event occurs.

During the years ended January 3, 2026, December 28, 2024 and December 30, 2023, we recorded a total income tax provision of approximately $22.6, $29.9 and $47.1, on pre-tax income of approximately $76.4, $100.3 and $182.8, respectively, resulting in an effective tax rate of 29.6%, 29.8% and 25.8%, respectively. The effective tax rates for the years ended January 3, 2026, December 28, 2024 and December 30, 2023, were primarily impacted by state income taxes (net of federal benefits), permanent differences, tax credits, and the statutory rate differential as well as the change in tax rates.

The carrying values of deferred income tax assets and liabilities reflect the application of our income tax accounting policies in accordance with applicable accounting standards, and are based on management’s assumptions and estimates regarding future operating results and levels of taxable income, as well as management’s judgment regarding the interpretation of the provisions of applicable accounting standards. The carrying values of liabilities for income taxes currently payable are based on management’s interpretations of applicable tax laws, and incorporate management’s assumptions, and judgments regarding the use of tax planning strategies in various taxing jurisdictions. The use of different estimates, assumptions and judgments in connection with accounting for income taxes may result in materially different carrying values of income tax assets and liabilities and results of operations.

We evaluate the recoverability of these deferred tax assets by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income inherently rely on estimates. We use our historical experience and our short-term and long-term business forecasts to provide insight. Further, our global business portfolio gives us the opportunity to employ various prudent and feasible tax planning strategies to facilitate the recoverability of future deductions. We believe it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets recorded. To the extent we do not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is established.

We adopted ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures on a prospective basis for the year ended January 3, 2026.

For the years ended January 3, 2026, December 28, 2024 and December 30, 2023, income before taxes consist of the following:
Year Ended
(dollar amounts in millions)
 January 3, 2026 December 28, 2024 December 30, 2023
US operations $ 74.8  $ 105.7  $ 178.7 
Foreign operations 1.6  (5.4) 4.1 
Total $ 76.4  $ 100.3  $ 182.8 

Income tax expense (benefit) attributable to income from operations consists of:

(dollar amounts in millions)
 Current Deferred Total
Year ended January 3, 2026:
U.S. federal $ (2.6) $ 21.5  $ 18.9 
State and local —  1.9  1.9 
Foreign jurisdiction (0.2) 2.0  1.8 
Total $ (2.8) $ 25.4  $ 22.6 

(dollar amounts in millions)
 Current Deferred Total
Year ended December 28, 2024:
U.S. federal $ 22.8  $ (0.5) $ 22.3 
State and local 7.1  1.1  8.2 
Foreign jurisdiction (0.1) (0.5) (0.6)
Total $ 29.8  $ 0.1  $ 29.9 

(dollar amounts in millions)
 Current Deferred Total
Year ended December 30, 2023:
U.S. federal $ 27.8  $ 9.5  $ 37.3 
State and local 7.6  0.5  8.1 
Foreign jurisdiction 2.2  (0.5) 1.7 
Total $ 37.6  $ 9.5  $ 47.1 


In accordance with the updated requirements of ASU 2023-09 for the year ended January 3, 2026, a reconciliation of the U.S. federal statutory income tax rate to the effective tax rate was as follows:
(dollar amounts in millions)
 Amount Percent
U.S. Federal statutory tax rate $ 16.0  21.0  %
Domestic federal reconciling items
Effect of changes in tax laws or rates enacted in the current period 0.7  0.9  %
Effect of cross-border tax laws
Net controlled foreign corporation tested income 0.4  0.5  %
Tax credits
Federal research and development (0.8) (1.0) %
Nontaxable or nondeductible items
Compensation 0.1  0.1  %
Share-based payments 2.3  3.0  %
Other 0.3  0.4  %
Other 0.4  0.5  %
State and local income taxes, net of federal benefit (1)
2.7  3.5  %
Foreign tax effects
United Kingdom
Statutory rate difference between the United Kingdom and United States (0.1) (0.1) %
Other foreign jurisdictions
    Statutory rate difference between other foreign jurisdictions and United States 0.2  0.3  %
       Other 0.3 0.4  %
Change in unrecognized tax benefits 0.1 0.1  %
Total $ 22.6  29.6  %

(1) State and local taxes in California, Florida, New Jersey, Tennessee, and Texas comprise the majority of the state taxes, net of federal benefit category.

As previously disclosed for the years ended December 28, 2024 and December 30, 2023, respectively, a reconciliation of the U.S. federal statutory income tax rate to the effective tax was as follows:

Year Ended
(dollar amounts in millions)
 December 28, 2024 December 30, 2023
Income before taxes $ 100.3  $ 182.8 
Computed “expected” tax expense 21.1  38.4 
Increase (reduction) in income taxes resulting from:
Statutory rate differential (0.2) 0.2 
Permanent difference 0.8  0.4 
State income taxes, net of federal benefit 5.5  7.8 
Change in tax rates 0.4  (1.2)
Out of period adjustments
 3.4  — 
Change in estimate (1.3) (0.2)
Change in valuation allowance —  — 
Tax Credits (1.0) (0.6)
U.S. tax on foreign operations 0.9  0.9 
Other, net 0.3  1.4 
Total $ 29.9  $ 47.1 
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at January 3, 2026 and December 28, 2024 are presented below:


(dollar amounts in millions)
 January 3, 2026 December 28, 2024
Deferred tax assets
Allowance for credit losses $ 2.8  $ 4.4 
Intangibles 13.4  25.6 
Lease obligations
 18.4  14.8 
Research and development
 —  3.9 
Accrued expenses
 1.4  1.7 
Inventories 0.7  1.0 
Stock compensation 1.3  1.6 
Interest expense carryforward —  0.9 
Income tax credits 0.3  — 
Net operating losses (1)
2.1  — 
Other 1.1  1.1 
Total deferred tax assets $ 41.5  $ 55.0 
Deferred tax liabilities
Prepaid expenses $ (0.9) $ — 
Property, plant and equipment
 (8.4) (5.4)
Right-of-use assets (17.0) (13.6)
Capitalized loan costs (1.4) — 
Intangibles (3.7) — 
Other (0.3) (0.8)
Total deferred tax liabilities
 $ (31.7) $ (19.8)
Net deferred tax asset $ 9.8  $ 35.2 

(1) We have approximately $5.0 of net operating losses at the U.S. federal income tax level. The net operating losses do not expire. We also have approximately $8.6 million of net operating losses in the states in which we operate. The net operating losses will begin to expire if unutilized in approximately 16 years. Lastly, we have approximately $4.3 million of net operating losses in our foreign jurisdictions, primarily in the United Kingdom, which do not expire.

We regularly assess the realizability of our deferred tax assets based on all available evidence, both positive and negative. As of January 3, 2026, we concluded it was more likely than not that we will recognize the benefit for all of our deferred tax assets, primarily due to multiple years of profitability in our operations and the availability of taxable temporary differences which serve as a source of income.

We do not have any open income tax audits as of January 3, 2026. Additionally, U.S. federal and state income taxes for tax years 2022, 2023 and 2024 are still open for examination.

In accordance with the update requirements of ASU 2023-09 for the year ended 2025, cash paid for income taxes, net of refunds was as follows:

(dollar amounts in millions)
 Year Ended
January 3, 2026
U.S. Federal $ 3.5 
U.S. state and local
California 0.4 
Florida 0.4 
Texas 0.7 
Other
 1.8 
Foreign
Australia 0.5 
Total cash paid for income taxes (net of refunds) $ 7.3 
As previously disclosed, cash paid for income taxes, net of refunds for the years ended December 28, 2024 and December 30, 2023 were $26.8 and $33.9, respectively.

There were no material unrecognized tax benefits for the years ended January 3, 2026, December 28, 2024 or December 30, 2023.

We recognize accrued interest associated with unrecognized tax benefits as part of Interest expense, and penalties associated with unrecognized tax benefits as part of Other expenses on the Consolidated Statement of Operations and Comprehensive Income.

As of January 3, 2026 and December 28, 2024, we have recorded no material interest or penalties associated with our unrecognized tax benefits.

The difference between income tax expense recorded in our consolidated statements of operations and comprehensive income and income taxes computed by applying the corporate statutory federal income tax rate of 21% for the years ended January 3, 2026, December 28, 2024 and December 30, 2023 is shown above.

In evaluating its ability to realize its net deferred tax assets, we considered all available positive and negative evidence, including its past operating results, forecasted earnings, future taxable income, and prudent and feasible tax planning strategies.

ASC 740 clarifies the accounting for uncertainty in income taxes and prescribes a recognition threshold and measurement attributes for financial statement disclosure of income tax positions taken or expected to be taken on an income tax return.

We are required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which includes federal and certain states. For the years before 2022, we are no longer subject to U.S. federal tax examinations, and for the years before 2021, we are no longer subject to state income tax examinations.