Income Taxes

6 Months Ended

Jun. 25, 2021


5.			Income Taxes

As further discussed in Note 1, the Company concluded that there is substantial doubt about its ability to continue as a going concern within one year from the date of issuance of the unaudited condensed consolidated financial statements. The Company considered this in determining that certain net deferred tax assets were no longer more likely than not realizable. As a result, as of June 25, 2021, all of the Company's net deferred tax assets in applicable tax jurisdictions are fully offset by a valuation allowance.

The Company recognized an income tax benefit of $33.5 million on a loss from continuing operations before income taxes of $139.7 million for the three months ended June 25, 2021, and an income tax expense of $161.3 million on a loss from continuing operations before income taxes of $789.3 million for the three months ended June 26, 2020. This resulted in effective tax rates of 24.0% and negative 20.4% for the three months ended June 25, 2021 and June 26, 2020, respectively. The income tax benefit for the three months ended June 25, 2021 was comprised of $23.6 million of current tax benefit and $9.9 million of deferred tax benefit. The current tax benefit was predominantly related to an increase to prepaid taxes and a decrease to uncertain tax positions. The deferred tax benefit was predominantly related to intangible asset amortization partially offset by utilization of loss carryforwards in non-valuation allowance jurisdictions. The income tax expense for the three months ended June 26, 2020 was comprised of $146.5 million of current tax benefit and $307.8 million of deferred tax expense. The current tax benefit was primarily the result of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act and unrecognized tax benefits. The deferred tax expense was predominately related to the valuation allowance, recorded against the Company's net deferred tax assets, and unrecognized tax benefits, partially offset by a tax benefit related to previously acquired intangibles and the fiscal 2019 reorganization of the Company's intercompany financing and associated legal entity ownership including related adjustments to elections on the fiscal 2019 U.S. tax return primarily as a result of changes to the NOL carryback provisions in the CARES Act.

The Company recognized an income tax benefit of $49.9 million on a loss from continuing operations before income taxes of $300.3 million for the six months ended June 25, 2021, and an income tax expense of $142.4 million on a loss from continuing operations before income taxes of $864.9 million for the six months ended June 26, 2020. This resulted in effective tax rates of 16.6% and negative 16.5% for the six months ended June 25, 2021 and June 26, 2020, respectively. The income tax benefit for the six months ended June 25, 2021 was comprised of $36.6 million of current tax benefit and $13.3 million of deferred tax benefit. The current tax benefit was predominantly related to an increase to prepaid taxes and a decrease to uncertain tax positions. The deferred tax benefit was predominantly related to intangible asset amortization, partially offset by utilization of loss carryforwards in non-valuation allowance jurisdictions. The income tax expense for the six months ended June 26, 2020 was comprised of $168.8 million of current tax benefit and $311.2 million of deferred tax expense. The current tax benefit was primarily the result of the CARES Act and unrecognized tax benefits. The deferred tax expense was predominately related to the valuation allowance recorded against the Company's net deferred tax assets, partially offset by a tax benefit related to previously acquired intangibles and the fiscal 2019 reorganization of the Company's intercompany financing and associated legal entity ownership including related adjustments to elections on the fiscal 2019 U.S. tax return primarily as a result of changes to the NOL carryback provisions in the CARES Act.

The income tax benefit was $33.5 million for the three months ended June 25, 2021, compared with an income tax expense of $161.3 million for the three months ended June 26, 2020. The $194.8 million net increase in the tax benefit included an increase of $202.7 million attributed to a valuation allowance recorded against the Company's net deferred tax assets, an increase of $28.2 million attributed to changes in the timing, amount and jurisdictional mix of income, an increase of $5.0 million attributed to separation costs, reorganization items, net and restructuring charges, net and an increase of $2.9 million attributed to uncertain tax positions, partially offset by a decrease of $37.7 million attributed to the CARES Act, and a decrease of $6.3 million attributed to the fiscal 2019 reorganization of the Company’s intercompany financing and associated legal entity ownership including related adjustments to elections on the fiscal 2019 U.S. tax return primarily as a result of changes to the NOL carryback provisions in the CARES Act.

The income tax benefit was $49.9 million for the six months ended June 25, 2021, compared with an income tax expense of $142.4 million for the six months ended June 26, 2020. The $192.3 million net increase in the tax benefit included an increase of $202.7 million attributed to a valuation allowance recorded against the Company's net deferred tax assets, an increase of $43.6 million attributed to changes in the timing, amount and jurisdictional mix of income, and an increase of $6.1 million attributed to separation costs, reorganization items, net and restructuring charges, net, partially offset by a decrease of $48.7 million attributed to the CARES Act, a decrease of $6.3 million attributed to the fiscal 2019 reorganization of the Company’s intercompany financing and associated legal entity ownership including related adjustments to elections on the fiscal 2019 U.S. tax return primarily as a result of changes to the NOL carryback provisions in the CARES Act and a decrease of $5.1 million attributed to uncertain tax positions.

During the six months ended June 25, 2021 and fiscal 2020, net cash refunds for income taxes were $59.6 million and net cash payments for income taxes were $39.9 million, respectively. Included within the net cash refunds of $59.6 million were refunds of $77.6 million received as a result of provisions in the CARES Act.

The Company's unrecognized tax benefits, excluding interest, totaled $348.7 million and $349.0 million as of June 25, 2021 and December 25, 2020, respectively. The net decrease of $0.3 million primarily resulted from a lapse of statutes of limitations of $7.3 million and settlements of $0.2 million, partially offset by a net increase to prior period tax positions of $7.2 million. If favorably settled, $73.3 million of unrecognized tax benefits as of June 25, 2021 would benefit the effective tax rate. The total amount of accrued interest and penalties related to these obligations was $19.1 million and $16.7 million as of June 25, 2021 and December 25, 2020, respectively.

It is reasonably possible that within the next twelve months the unrecognized tax benefits could decrease by up to $34.1 million and the amount of related interest and penalties could decrease by up to $15.1 million as a result of payments or releases due to the resolution of examinations, appeals and litigation and the expiration of various statutes of limitation.

Certain of the Company’s subsidiaries continue to be subject to examination by taxing authorities. The earliest open years subject to examination for various jurisdictions, including Ireland, Japan, Luxembourg, Switzerland and the United Kingdom are from 2013 to present and the earliest open years for the U.S federal and state jurisdictions are 2013 and 2009, respectively.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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