v3.26.3
INCOME TAXES
 9 Months Ended
Sep. 27, 2026
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The Company is subject to federal and state income taxes with respect to the Company's allocable share of any taxable income or loss of UBH, as well as any standalone income or loss that UBI generates. UBH is treated as a partnership for federal income tax purposes, and for most applicable state and local income tax purposes, and generally does not pay income taxes in most jurisdictions. Instead, UBH taxable income or loss is passed through to its members, including UBI. Despite its partnership treatment, UBH is liable for income taxes in those states that do not recognize its pass-through status and for certain of its subsidiaries that are not taxed as pass-through entities. The Company has acquired various domestic entities taxed as
corporations, which are now wholly owned by us or our subsidiaries. Where required or allowed, these subsidiaries also file and pay taxes as a consolidated group for federal and state income tax purposes.
The Company recorded income tax benefit of $0.1 million and expense of $0.3 million for the thirteen and thirty-nine weeks ended September 27, 2026, respectively. Comparably, the Company recorded income tax expense of $13.4 million and $9.6 million for the thirteen and thirty-nine weeks ended September 28, 2025, respectively. The effective tax rates for the thirteen and thirty-nine weeks ended September 27, 2026 were 0.3% and (0.6)%, respectively. Comparably, the effective tax rates for the thirteen and thirty-nine weeks ended September 28, 2025 were (197.1)% and 184.6%, respectively. The Company’s effective tax rates differ from the federal statutory rate of 21% primarily because UBH, which is a partnership, is not taxed at the entity level, and is required to allocate some of its taxable results to the holders of noncontrolling interests ("Noncontrolling Interest Holders"), as well as state taxes and, with respect to the thirteen weeks and thirty-nine weeks ended September 28, 2025, the fair value impact of warrant liabilities. During the thirteen and thirty-nine weeks ended September 27, 2026, the effective tax rates were primarily impacted by return to provision items and statutory state tax rate changes, which resulted in discrete tax (benefit) expense of $(0.3) million and $0.2 million, respectively.
The Company regularly evaluates valuation allowances established for deferred tax assets (“DTAs”) for which future realization is uncertain. The Company assessed the available positive and negative evidence to estimate whether future taxable income would be generated to permit the use of existing DTAs. As of September 27, 2026, a significant piece of objective negative evidence evaluated was the twelve-quarter cumulative loss before taxes. Such objective evidence limits the ability to consider other subjective evidence, such as projections for future growth. The Company determined that there is uncertainty regarding the utilization of certain DTAs such as the investment in UBH, federal operating losses subject to annual limitations due to “change in ownership” provisions, and state net operating losses where the Company does not expect to continue to have nexus. Therefore, a valuation allowance has been recorded against the DTAs for which it is more likely than not they will not be realized.
Additionally, the Company has deferred tax liabilities (“DTLs”) related to its investment in UBH that will not reverse in the ordinary course of business and, absent consummation of a transaction involving UBH, will only reverse when the investment in UBH is sold or liquidated. As discussed in Note 2. Pending Merger, the Company has entered into agreements that contemplate the Purchase and the Redemption, which would reduce the Company’s ownership interest in UBH to 50%. These transactions remain subject to the satisfaction or waiver of closing conditions, including the Company Stockholder Approval, and had not been consummated as of September 27, 2026. Accordingly, as of September 27, 2026, the Company has not considered the indefinite lived DTL as a source of income to offset other DTAs. In weighing positive and negative evidence, both objective and subjective, including its twelve-quarter cumulative loss, the Company has recorded a full valuation allowance against its DTAs related to net operating losses and deductible book/tax differences and recorded a DTL primarily related to the book over tax basis in the investment in UBH. The Company considered that an indefinite lived DTL may be considered as a source of taxable income for an indefinite lived DTA; however, because the DTL will only reverse upon sale or liquidation of UBH, and the Transactions had not closed as of September 27, 2026, the Company determined that it was more appropriate to record a valuation allowance against its DTAs. The tax effects of the Transactions, including any resulting changes to the DTL, the investment in UBH, and the valuation allowance, will be recognized in the period in which the Closing occurs. The amount of DTAs considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as projections for growth.
As of September 27, 2026, tax years 2023 through 2026 remain open and subject to examination by the Internal Revenue Service and the majority of the states where the Company has nexus, and tax years 2021 through 2026 remain open and subject to examination in selected states that have a four-year statute of limitations.
Upon audit, tax authorities may challenge all or part of a tax position. A tax position successfully challenged by a taxing authority could result in an adjustment to our provision for income taxes in the period in which a final determination is made. The Company did not maintain any unrecognized tax benefits as of September 27, 2026 or December 28, 2025.
Tax receivable agreement liability
Pursuant to an election under section 754 of the Code, the Company obtained an increase in its share of the tax basis in the net assets of UBH when it was deemed to purchase units of UBH from a third party then holding common and preferred interests of noncontrolling interests and purchased units of UBH from noncontrolling interests in our business combination in 2020. Following the 2020 business combination, the Noncontrolling Interest Holders have the option to exchange common limited liability company units of UBH ("Common Company Units") along with the forfeiture of a corresponding number of shares of Class V Common Stock for a corresponding number of shares of Class A Common Stock. The Company intends to treat any such exchanges as direct purchases for U.S. federal income tax purposes, which is expected to further increase its share of the tax basis in the net assets of UBH. The increases in tax basis may reduce the amounts the Company would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.
The Company entered into the original tax receivable agreement in connection with our business combination in 2020. The TRA provides for the payment by the Company to Noncontrolling Interest Holders of 85% of the amount of any tax benefits realized as a result of (i) increases in the share of the tax basis in the net assets of UBH resulting from the business combination and any future exchanges by Noncontrolling Interest Holders of shares of Class V Common Stock for shares of Class A Common Stock; (ii) tax basis increases attributable to payments made under the TRA; and (iii) tax amortization deductions attributable to the acquisition of Kennedy Endeavors and the election to treat the transaction as an asset deal for tax purposes. The rights of each party under the TRA other than the Company are assignable, subject to certain restrictions. The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the timing and amount of taxable income generated by the Company each year, as well as the tax rate then applicable, among other factors.
As of September 27, 2026 and December 28, 2025, the Company had a liability of $19.8 million and $24.0 million, respectively, related to its projected obligations under the TRA, which is reflected as current and non-current accrued expenses in the Consolidated Balance Sheets. As discussed in Note 2. Pending Merger, in connection with the Transactions, the TRA will automatically terminate effective as of and concurrently with the Closing, and the Surviving Corporation will pay the Continuing Stockholders the TRA Payment of an aggregate amount of $44.0 million in settlement of the Company’s obligations under the TRA. The TRA Payment is contingent upon the consummation of the Transactions, which remains subject to the satisfaction or waiver of closing conditions. The consolidated financial statements as of and for the thirteen and thirty-nine weeks ended September 27, 2026 do not reflect any adjustments that may result from the TRA Payment or the termination of the TRA, which will be recognized upon the Closing occurring and the execution of a written employment agreement to be negotiated between UBH and Mr. Lindeman promptly following the Closing.