Taxes

6 Months Ended

Jun. 29, 2024

Income Tax Disclosure [Abstract]

Taxes

9.Taxes

Income Taxes

The Company’s effective tax rates for the three and six months ended June 29, 2024 were (213.0%) and (13.9%), respectively, compared to (1,740.0%) and (40.4%) for the three and six months ended July 1, 2023, respectively. 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 the unusually high negative annual effective tax rate. Applying this negative annual effective tax rate to pretax income for the three months ended June 29, 2024 resulted in an income tax benefit and applying this negative annual effective tax rate to the pretax loss for the six months ended June 29, 2024 resulted in an income tax expense. In addition, the effective tax rates were impacted by approximately $2,900 of tax expense recorded for an out-of-period income tax adjustment and $2,181 of tax expense from a valuation allowance established to offset certain non-U.S. deferred tax assets due to the uncertainty of realizing future tax benefits. 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 Company’s effective tax rates for the three and six months ended June 29, 2024.

For the six months ended July 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 a tax benefit related to foreign-derived intangible income.

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.