Income Taxes

9 Months Ended

Sep. 27, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company’s provision for income tax expense (benefits) were approximately $4.2 million and $(0.8) million and its effective income tax rates were 28.1% and (3.5)% for the three-month and nine-month periods ended September 27, 2020, respectively. The Company’s provision for income tax expense (benefits) were approximately $0.1 million and $(1.9) million and its effective income tax rates were (0.4)% and 5.3% for the three-month and nine-month periods ended September 29, 2019 respectively.

The provision for income taxes for the period ended September 27, 2020 differed from the U.S. federal statutory rate computed by applying the U.S. federal statutory rate to income or loss before income taxes primarily due to the benefit of Foreign Derived Intangible Income (“FDII”), increased prior year interest expense deduction under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), nontaxable income and settlement of foreign taxes offset by disallowed compensation deduction under Section 162(m) and disallowed transaction costs. The provision for income taxes for the period ended September 29, 2019 differed from the U.S. federal statutory rate computed by applying the U.S. federal statutory rate to income or loss before income taxes primarily due to a disallowed interest deduction, non-deductible settlement

paid to the U.S. Government, non-deductible goodwill and the effect of foreign operations offset by a benefit from foreign derived intangible income.

On March 27, 2020, President Trump signed into U.S. federal law the CARES Act, which is aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S. economy. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carry-back periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

In particular, under the CARES Act, for taxable years beginning in 2019 and 2020, the base for interest deductibility is increased from 30% to 50% of EBITDA. As of September 27, 2020, the Company estimated that the net tax benefit related to the CARES Act is approximately $2.7 million. The Company is expecting to defer $36.0 million of employer share Social Security tax under the CARES Act that will be paid equally by December 31, 2021 and 2022. The Company has considered the impact of the CARES Act and continues to review its position as additional guidance is issued by the government.