Income Taxes

9 Months Ended

Sep. 28, 2018

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 8. INCOME TAXES

Our effective tax rates for the three and nine months ended September 28, 2018 were 17.2% and 17.0%, respectively, as compared to 23.1% and 25.2% for the three and nine months ended September 29, 2017, respectively. The decrease for both the three and nine month periods is due primarily to favorable impacts in 2018 resulting from a lower statutory tax rate in the United States and foreign-derived intangible income tax benefits, partially offset by the loss of the United States domestic production activities deduction, all of which are a result of the Tax Cuts and Jobs Act (“TCJA”), and other federal and international tax benefits.

Our effective tax rates for 2018 and 2017 differ from the U.S. federal statutory rate of 21% and 35%, respectively, due primarily to our earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the U.S. federal statutory rate, the impact of credits and deductions provided by law and the effect of adjustments to the provisional estimates recorded in 2017 related to the TCJA as permitted under SEC Staff Accounting Bulletin No. 118 (“SAB 118”). We recorded a net adjustment of $1.2 million to our provisional estimates during the three months ended September 28, 2018, which increased tax expense and increased our effective tax rate by 40 basis points, and was attributable to a $3.2 million increase in tax expense related to the revaluation of certain deferred tax assets and liabilities and a $2.0 million decrease in tax expense related

to transition taxes, specifically from a decrease in foreign remittance taxes. We recorded a net adjustment of $4.9 million to our provisional estimates during the nine months ended September 28, 2018, which decreased tax expense and decreased our effective tax rate by 50 basis points, and was related to a $11.9 million decrease in tax expense related to the revaluation of certain deferred tax assets and liabilities, a $3.9 million decrease in tax expense related to transition taxes, specifically from decrease in foreign remittance taxes and an offsetting $10.9 million increase in tax expense from a reduction of foreign tax credits. We will continue to evaluate the effects of the TCJA on the 2017 provisional estimates through the end of the SAB 118 allowable measurement period. Refer to Note 11 of our 2017 Annual Report on Form 10-K for further details including disclosures pursuant to SAB 118 interpretive guidance, and provisional estimates for all TCJA effects.

On January 1, 2018, we adopted ASU No. 2016-16, Income Taxes (Topic 715): Intra-entity Transfers of Assets Other Than Inventory using the modified retrospective method, and recorded an immaterial adjustment to opening retained earnings as of January 1, 2018.