Taxes

3 Months Ended

Mar. 30, 2024

Income Tax Disclosure [Abstract]

Taxes

9.Taxes

Income Taxes

The Company’s effective tax rate for the three months ended March 30, 2024 was (19.0%) compared to (132.3%) for the three months ended April 1, 2023. The effective tax rate for interim periods is determined using an annual effective tax rate, adjusted for discrete items. The forecasted full-year tax expense, which included an increase in valuation allowance against U.S. deferred tax assets, in relation to the Company’s forecasted full-year pretax loss (albeit minimal), drove an unusually high negative annual effective tax rate. Applying this negative annual effective tax rate to the pretax loss for the three months ended March 30, 2024 resulted in an income tax expense of $55,448, which is mostly reflected in income taxes payable on the Company’s consolidated balance sheet and consolidated statement of cash flows. Given the seasonal nature of the Company's business, this income tax expense is expected to largely reverse in the third and fourth quarters of fiscal 2024, when the Company expects to earn pretax income.

For the three months ended March 30, 2024, the difference between the U.S. federal statutory tax rate and the Company’s consolidated effective tax rate was primarily due to the valuation allowance noted above. In addition, the effective tax rate was impacted by a tax benefit related to foreign-derived intangible income (“FDII”). The adoption of the Organization for Economic Cooperation and Development’s global tax reform initiative, which introduces a global minimum tax of 15% applicable to large multinational corporations, did not have an impact on the first quarter of 2024. For the three months ended April 1, 2023, the difference between the U.S. federal statutory tax rate and the Company’s consolidated effective tax rate was primarily due to the valuation allowance noted above. In addition, the effective tax rate was impacted by tax expense from income earned in foreign jurisdictions, partially offset by tax benefits related to state income tax and FDII.

Non-Income Tax Matters

The Internal Revenue Service (the “IRS”) notified the Company of certain penalties assessed related to the annual disclosure and reporting requirements of the Affordable Care Act. The Company is in the process of appealing this determination and does not believe it has any liability with respect to this matter. Until the appeals process is complete, the IRS will maintain a federal tax lien which is currently limited to certain IRS refunds due to the Company.