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

Note 11 - Income Taxes

v3.25.2
Note 11 - Income Taxes
 12 Months Ended
Mar. 30, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 11 – Income Taxes

 

The Company’s income tax provision for fiscal years 2025 is summarized below (in thousands):

 

   

Fiscal year ended March 30, 2025

  
   

Current

    

Deferred

    

Total

  

Income tax expense (benefit) on current year income:

                        

Federal

   $ 950     $ (3,419 )   $ (2,469 )

State

     145       (812 )     (667 )

Foreign

     15       -       15  

Total income tax expense (benefit) on current year income

     1,110       (4,231 )     (3,121 )

Income tax expense - discrete items:

                        

Reserve for unrecognized tax benefits

     6       -       6  

Adjustment to prior year provision

     24       -       24  

Tax shortfall related to stock-based compensation

     34       -       34  

Income tax expense - discrete items

     64       -       64  

Total income tax expense (benefit)

   $ 1,174     $ (4,231 )   $ (3,057 )

 

The Company’s income tax provision for fiscal years 2024 is summarized below (in thousands):

 

   

Fiscal year ended March 31, 2024

  
   

Current

    

Deferred

    

Total

  

Income tax expense (benefit) on current year income:

                        

Federal

   $ 2,065     $ (883 )   $ 1,182  

State

     346       (209 )     137  

Foreign

     14       -       14  

Total income tax expense (benefit) on current year income

     2,425       (1,092 )     1,333  

Income tax expense (benefit) - discrete items:

                        

Reserve for unrecognized tax benefits

     43       -       43  

Adjustment to prior year provision

     (68 )     -       (68 )

Tax shortfall related to stock-based compensation

     26       -       26  

Income tax expense - discrete items

     1       -       1  

Total income tax expense (benefit)

   $ 2,426     $ (1,092 )   $ 1,334  

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of March 30, 2025 and March 31, 2024 are as follows (in thousands):

 

   

March 30, 2025

    

March 31, 2024

  

Deferred income tax assets:

                

Employee wage and benefit accruals

   $ 260     $ 148  

Accounts receivable and inventory reserves

     673       585  

Operating lease liabilities

     3,241       3,892  

Intangible assets

     3,490       243  

State net operating loss carryforwards

     704       704  

Accrued interest and penalty on unrecognized tax liabilities

     20       18  

Stock-based compensation

     517       469  

Total gross deferred income tax assets

     8,905       6,059  

Less valuation allowance

     (704 )     (704 )

Deferred income tax assets after valuation allowance

     8,201       5,355  
                 

Deferred income tax liabilities:

                

Prepaid expenses

     (488 )     (552 )

Operating lease right of use assets

     (3,033 )     (3,700 )

Intangible assets

     -       (666 )

Property, plant and equipment

     (172 )     (160 )

Total deferred income tax liabilities

     (3,693 )     (5,078 )

Net deferred income tax assets

   $ 4,508     $ 277  

 

In assessing the probability that the Company’s deferred tax assets will be realized, management of the Company has considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of taxable income during the future periods in which the temporary differences giving rise to the deferred tax assets will become deductible. The Company has also considered the scheduled inclusion into taxable income in future periods of the temporary differences giving rise to the Company’s deferred tax liabilities. The valuation allowance as of March 30, 2025 and March 31, 2024 was related to state net operating loss carryforwards that the Company does not expect to be realized. Based upon the Company’s expectations of the generation of sufficient taxable income during future periods, the Company believes that it is more likely than not that the Company will realize its deferred tax assets, net of the valuation allowance and the deferred tax liabilities.

 

The following table sets forth the reconciliation of the beginning and ending amounts of unrecognized tax liabilities for fiscal years ended March 30, 2025 and March 31, 2024 (in thousands):

 

   

2025

    

2024

  

Balance at beginning of period

   $ 394     $ 323  

Additions related to current year positions

     22       43  

Additions related to prior year positions

     81       28  

Revaluations due to change in enacted tax rates

     -       -  

Reductions for tax positions of prior years

     -       -  

Reductions due to lapses of the statute of limitations

     (86 )     -  

Reductions pursuant to judgements and settlements

     -       -  

Balance at end of period

   $ 411     $ 394  

 

During fiscal years 2025 and 2024, the Company recorded discrete income tax charges of $34,000 and $26,000, respectively, to reflect the effect of the tax shortfall arising from the exercise of stock options and the vesting of non-vested stock during the periods.

 

The Company’s provision for income taxes is based upon effective tax rates of 24.6% and 21.4% in the fiscal years ended March 30, 2025 and March 31, 2024, respectively. These effective tax rates are the sum of the top U.S. statutory federal income tax rate and a composite rate for state income taxes, net of federal tax benefit, in the various states in which the Company operates, plus the net effect of various discrete items.

 

The following table reconciles income tax expense on income from continuing operations at the U.S. federal income tax statutory rate to the net income tax provision reported for fiscal years 2025 and 2024 (amounts in thousands):

 

   

Fiscal year ended March 30, 2025

   

Fiscal year ended March 31, 2024

 
   

Amount

    

Percentage

    

Amount

    

Percentage

  

Income (loss) before income tax expense

   $ (12,413 )     100.0 %   $ 6,228       100.0 %
                                 

Tax expense (benefit) at federal statutory rate

   $ (2,607 )     21.0 %   $ 1,308       21.0 %

State income taxes, net of Federal income tax benefit

     (527 )     4.2 %     108       1.7 %

Tax credits

     (14 )     0.1 %     (115 )     -1.8 %

Discrete items

     64       -0.5 %     1       0.0 %

Other - net, including foreign

     27       -0.2 %     32       0.5 %

Income tax expense (benefit)

   $ (3,057 )     24.6 %   $ 1,334       21.4 %

 

State and foreign income taxes consist primarily of amounts paid to the State of California and the People’s Republic of China, respectively.