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

Note 12 - Income Taxes

v3.26.1
Note 12 - Income Taxes
 12 Months Ended
Mar. 29, 2026
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 12 – Income Taxes

 

As disclosed in Note 2, the Company adopted ASU No. 2023-09 effective for the fiscal year ended March 29, 2026. The ASU requires disaggregation of information contained in the disclosures related to the reconciliation of the U.S. federal statutory corporate income tax rate to the Company’s effective tax rate, which is summarized below for the fiscal year ended March 29, 2026 (amounts in thousands):

 

   

Fiscal year ended March 29, 2026

 
   

Amount

    

Tax Rate

  

U.S. statutory rate applied to income before income taxes

   $ 554       21.0 %

Differences arising from:

                

State income taxes, net of federal income tax benefit (1)

     161       6.1 %

Foreign tax effects - Peoples Republic of China

     24       0.9 %

Tax credits - foreign tax credits

     (24 )     (0.9% )

Changes in unrecognized tax liabilities

     (88 )     (3.4% )

Nontaxable or nondeductible items (2)

     157       6.0 %

Other - net

     11       0.4 %

Income tax expense / effective tax rate

   $ 795       30.1 %

 

(1) For the fiscal year ended March 29, 2026, the majority of the Company's state income taxes were incurred in California, Georgia, Michigan, Minnesota and Texas.
(2) Primarily the effect of tax shortfalls arising from the expiration and forfeiture of stock options and performance share awards, as well as the vesting of non-vested stock during the year.

 

In accordance with the guidance in effect prior to the adoption of ASU No. 2023-09, the Company’s previously disclosed reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate for the fiscal year ended March 30, 2025 is summarized below (amounts in thousands):

 

   

Amount

    

Tax Rate

  

U.S. statutory rate applied to loss before income taxes

   $ (2,607 )     21.0 %

State income taxes, net of federal income tax

     (527 )     4.2 %

Tax credits

     (14 )     0.1 %

Discrete items

     64       (0.5% )

Other - net, including foreign

     27       (0.2% )

Income tax benefit / effective tax rate

   $ (3,057 )     24.6 %

 

All income of the Company is earned domestically. The Company is required to pay foreign taxes to the Peoples Republic of China based strictly on the expenses incurred at the Company’s foreign representative offices in that country. The Company recognizes these foreign taxes paid as a component of the Company’s income tax provision.

 

The Company’s income tax provision for the fiscal years ended March 29, 2026 and March 30, 2025 is summarized below (in thousands):

 

   

Fiscal year ended March 29, 2026

  
   

Current

    

Deferred

    

Total

  

Income tax expense (benefit) on current year income:

                        

Federal

   $ (201 )   $ 683     $ 482  

State

     36             204  

Foreign

     24       -       24  

Total income tax expense (benefit) on current year income

     (141 )     851       710  

Income tax expense (benefit) - discrete items:

                        

Reserve for unrecognized tax benefits

     (88 )     -       (88 )

Adjustment to prior year provision

     13       -       13  

Tax shortfall related to stock-based compensation

     160       -       160  

Income tax expense - discrete items

     85       -       85  

Total income tax expense (benefit)

   $ (56 )   $ 851     $ 795  

 

   

Fiscal year ended March 30, 2025

  
   

Current

    

Deferred

    

Total

  

Income tax expense (benefit) on current year loss:

                        

Federal

   $ 950     $ (3,419 )   $ (2,469 )

State

     145       (812 )     (667 )

Foreign

     15       -       15  

Total income tax expense (benefit) on current year loss

     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 tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of March 29, 2026 and March 30, 2025 are as follows (in thousands):

 

   

March 29, 2026

    

March 30, 2025

  

Deferred income tax assets:

                

Employee wage and benefit accruals

   $ 293     $ 260  

Accounts receivable and inventory reserves

     594       673  

Operating lease liabilities

     2,408       3,241  

Intangible assets

     2,487       3,490  

Net operating loss carryforwards

     728       704  

Accrued interest and penalty on unrecognized tax liabilities

     24       20  

Stock-based compensation

     442       517  

Total gross deferred income tax assets

     6,976       8,905  

Less valuation allowance

     (704 )     (704 )

Deferred income tax assets after valuation allowance

     6,272       8,201  
                 

Deferred income tax liabilities:

                

Prepaid expenses

     (317 )     (488 )

Operating lease right of use assets

     (2,217 )     (3,033 )

Property, plant and equipment

     (81 )     (172 )

Total deferred income tax liabilities

     (2,615 )     (3,693 )

Net deferred income tax assets

   $ 3,657     $ 4,508  

 

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 29, 2026 and March 30, 2025 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.

 

As disclosed in Note 2, the Company adopted ASU No. 2023-09 effective for the fiscal year ended March 29, 2026. The ASU requires a disaggregation of income tax payments, which is summarized below for the fiscal year ended March 29, 2026 (in thousands):

 

Federal - United States of America

   $ 500  

State

        

California

     100  

Texas

     12  

Michigan

     2  

North Carolina

     1  

Total state income taxes paid

     115  

Foreign - Peoples Republic of China

     20  

Total income taxes paid

   $ 635  

 

The following table sets forth the reconciliation of the beginning and ending amounts of unrecognized tax liabilities during the fiscal years ended March 29, 2026 and March 30, 2025 (in thousands):

 

   

2026

    

2025

  

Balance at beginning of period

   $ 411     $ 394  

Additions related to current year positions

     -       22  

Additions related to prior year positions

     28       81  

Reductions due to lapses of the statute of limitations

     (129 )     (86 )

Balance at end of period

   $ 310     $ 411  

 

During fiscal years 2026 and 2025, the Company recorded discrete income tax charges of $160 thousand and $34 thousand, respectively, to reflect the effect of tax shortfalls arising from the expiration and forfeiture of stock options and performance share awards, as well as the vesting of non-vested stock during the periods.  Income tax overpayments at March 29, 2026 and March 30, 2025 were $504 thousand and $76 thousand, respectively, and were recorded in other accounts receivable in the consolidated balance sheets.