U.S. and foreign components of income (loss) before provision for income taxes


	Fiscal Year Ended
	January 2, 2022			January 3, 2021			December 29, 2019
U.S.	$	(108.9	)	$	(215.3	)	$	(179.7	)
Foreign		82.9			(10.0	)		(1.1	)
Total	$	(26.0	)	$	(225.3	)	$	(180.8	)

Provision for (benefit from) income taxes


	Fiscal Year Ended
	January 2, 2022			January 3, 2021			December 29, 2019
Current
U.S.	$	(0.8	)	$	(42.3	)	$	(27.2	)
Foreign		23.1			29.8			10.2
Total Current	$	22.3		$	(12.5	)	$	(17.0	)
Deferred
U.S.	$	(0.5	)	$	0.4		$	0.3
Foreign		6.5			(1.3	)		(7.2	)
Total Deferred	$	6.0		$	(0.9	)	$	(6.9	)
Provision for (benefit from) income taxes	$	28.3		$	(13.4	)	$	(23.9	)

The applicable tax rate for United Kingdom is 19.0%; however, the U.S. statutory rate has been used as management believes it is more meaningful to the Company. A comparison of the provision for taxes on income at the U.S. statutory rate of 21.0% to the effective tax rate is as follows:


	Fiscal Year Ended
	January 2, 2022			January 3, 2021			December 29, 2019
U.S. Statutory rate		21.0	%		21.0	%		21.0	%
U.S. state and local		2.7	%		(0.1	)%		(0.2	)%
Foreign income taxed at rates other than the applicable U.S. rate		91.4	%		10.3	%		17.9	%
Tax credits		10.2	%		0.8	%		1.1	%
Change in valuation allowance		(171.8	)%		(28.3	)%		(33.0	)%
Foreign tax rate change		(45.3	)%		(2.1	)%		(2.9	)%
Change in uncertain tax positions		(1.5	)%		11.7	%		17.3	%
Foreign exchange gain/loss		(0.2	)%		(1.0	)%		(1.5	)%
Indemnification income		(0.7	)%		(3.0	)%		(3.4	)%
Withholding Tax		(5.2	)%		(0.7	)%		(1.5	)%
Nondeductible/nontaxable items		(10.8	)%		(1.2	)%		(1.5	)%
Nondeductible executive compensation		(10.0	)%		—			—
Stock-based compensation		6.5	%		(0.3	)%		(0.8	)%
Other—net		4.7	%		(1.2	)%		0.8	%
Effective tax rate		(109.0	)%		5.9	%		13.3	%

The effective tax rate for the fiscal year ended January 2, 2022 differs from the U.S. federal statutory rate primarily due to (1) a net cost of $44.7 million for the impacts of operating losses in certain subsidiaries not being benefitted due to the establishment of a valuation allowance, (2) a net benefit of $23.8 million related to non-U.S. earnings being taxed at rates that are different than the U.S. statutory rate and (3) a net cost of $11.8 million for the tax expense associated with the remeasurement of deferred tax assets and liabilities due to the enactment of new tax rates, primarily in the United Kingdom. Deferred tax assets are reduced by valuation allowances when,

based on available evidence, it is more likely than not that the tax benefit of loss carryforwards (or other deferred tax assets) will not be realized in the future. In periods when entities subject to a valuation allowance generate pre-tax earnings or losses, the corresponding increase or decrease in the valuation allowance has an overall impact on the effective tax rate.

The effective tax rate for the fiscal year ended January 3, 2021 differs from the U.S. federal statutory rate primarily due to (1) a net cost of $63.8 million for the impacts of operating losses in certain subsidiaries not being benefited due to the establishment of a valuation allowance, (2) a net benefit of $37.3 million related to a decrease in the Company’s pre-Acquisition reserves for uncertain tax positions due to the settlement of certain tax matters, (3) partially offset by a net cost of $5.7 million related to an increase in certain post-Acquisition non-U.S. reserves for uncertain tax positions and (4) a net benefit of $23.1 million for non-U.S. earnings being taxed at rates that are different than the U.S statutory rate.

The effective tax rate for the fiscal year ended December 29, 2019 differs from the U.S. federal statutory rate primarily due to (1) a net cost of $60.0 million for the impacts of operating losses in certain subsidiaries not being benefited due to the establishment of a valuation allowance, (2) a net benefit of $43.0 million for the decrease in the Company’s pre-Acquisition state and non-U.S. reserves for uncertain tax positions due to the settlement of certain tax matters, (3) partially offset by a net cost of $11.2 million for the increase in the Company’s interest expense on prior year reserves for uncertain tax positions and (4) a net benefit of $32.2 million for non-U.S. earnings being taxed at rates that are different than the U.S statutory rate.

Deferred tax balances


	January 2, 2022			January 3, 2021
Deferred tax assets
Tax loss and credit carry forwards	$	571.1		$	535.8
Allowances and reserves		27.8			26.7
Accrued liabilities		5.2			5.1
Operating lease liability		7.9			7.9
Employee related obligations		24.1			20.9
Capitalized transaction costs		7.8			7.1
Other		12.3			19.4
Total deferred tax assets		656.2			622.9
Less: Valuation Allowance		(591.2	)		(554.8	)
Net, Deferred tax assets	$	65.0		$	68.1
Deferred tax liabilities
Goodwill and intangibles	$	(79.3	)	$	(76.8	)
Depreciation		(28.8	)		(31.4	)
Right-of-use asset		(7.8	)		(7.8	)
Unrealized (gain)/loss		(7.8	)		(7.7	)
Other		(3.7	)		(3.7	)
Total deferred tax liabilities		(127.4	)		(127.4	)
Net, Deferred tax liability	$	(62.4	)	$	(59.3	)


	January 2, 2022			January 3, 2021
Non-current deferred tax asset	$	9.7		$	8.0
Non-current deferred tax liability		(72.1	)		(67.3	)
Net, Deferred tax liability	$	(62.4	)	$	(59.3	)

As of January 2, 2022, the Company had a net deferred tax asset for tax losses and credit carryforwards of $571.1 million. This amount consists of $365.6 million of net operating loss carryforwards, $32.8 million of credit carryforwards and $172.7 million of interest deduction limitation carryforwards, net of uncertain tax positions.

As of January 2, 2022, the Company had $887.1 million of U.S. federal net operating loss carryforwards; of which $473.0 million are subject to expiration through 2037 and $414.1 million are not subject to expiration. In addition, the Company has $528.5 million of state net operating loss, which will expire in years 2022 through 2041. As of January 2, 2022, Company had $12.6 million of U.S. general business credit carryforwards which will begin to expire in 2034 and $25.6 million state business credit carryforwards which will begin

to expire in 2029. As of January 2, 2022, the Company had $513.8 million of net operating loss carryforwards in certain non-U.S. jurisdictions, net of uncertain tax positions. Of these, $304.9 million have no expiration and the remaining $208.9 million will expire in years through 2041.

The Company had valuation allowances that primarily related to the realization of recorded tax benefits on tax loss carryforwards from operations in the United States and Luxembourg of $591.2 million as of January 2, 2022 and $554.8 million as of January 3, 2021.

The following table summarizes the activity related to gross unrecognized tax benefits:


	Fiscal Year Ended
	January 2, 2022			January 3, 2021			December 29, 2019
Balance at beginning of fiscal year	$	27.5		$	110.4		$	143.4
Increase related to positions taken on items from prior years		0.1			19.8			—
Decrease related to positions taken on items from prior years		(1.0	)		(22.1	)		(29.9	)
Increase related to positions taken on items in current years		1.5			1.7			0.2
Decrease due to settlements		—			(81.9	)		(3.1	)
Decrease due to expiration of statutes of limitations		(0.2	)		(0.4	)		(0.2	)
Balance at end of fiscal year	$	27.9		$	27.5		$	110.4

As of January 2, 2022, the total amount of unrecognized tax benefits was $27.9 million ($27.5 million as of January 3, 2021), of which $22.9 million would impact the effective tax rate, if recognized ($23.1 million as of January 3, 2021). As of January 2, 2022, the amount of tax indemnification that would impact earnings (loss) before Provision for (benefit from) income taxes if recognized would be $10.5 million ($11.6 million as of January 3, 2021). The net increase in the balance from the beginning of the year relates to an increase in certain pre-Acquisition non-U.S. reserves for uncertain tax positions. The Company estimates that within the next twelve months, its uncertain tax positions, excluding interest will decrease by $3.0 million.

The Company is subject to income tax in approximately 35 jurisdictions outside the U.S. The Company’s most significant operations outside the U.S. are located in China, France, Japan, and the United Kingdom. For these jurisdictions for which the Company has significant operations, the statute of limitations varies by jurisdiction, with 2013 being the oldest tax year still open. The Company is currently under audit in certain jurisdictions for tax years under the responsibility of Johnson & Johnson. Pursuant to the Acquisition Agreement, all tax liabilities related to these tax years will be indemnified by Johnson & Johnson.

The Company includes interest expense and penalties related to unrecognized tax benefits as part of the Provision for (benefit from) income taxes. The Company recognized a benefit related to interest and penalties associated with unrecognized tax benefits of $0.4 million, $35.2 million and $1.5 million for the fiscal years ended January 2, 2022, January 3, 2021, and December 29, 2019, respectively. The Company’s accrual for interest and penalties was $6.4 million and $6.1 million as of January 2, 2022 and January 3, 2021, respectively. The Company classifies liabilities for unrecognized tax benefits and related accrued interest and penalties as either “Accrued Liabilities” or “Other liabilities” depending upon expected payment date. The Company includes the offset for interest and penalties related to unrecognized tax benefits to be reimbursed by Johnson & Johnson pursuant to the indemnification provisions in the Acquisition Agreement in Other operating expense, net.

As of January 2, 2022, the Company had $34.3 million of unrecognized tax benefits, including interest and penalties. Due to the high degree of uncertainty regarding future timing of cash flows associated with these liabilities, the Company is unable to estimate the years in which settlement will occur with the respective taxing authorities. The Acquisition Agreement includes indemnification provisions with respect to tax liabilities, including reserves for unrecognized tax benefits existing at the Day 1 Closing Date. The Acquisition Agreement generally provided that Johnson & Johnson retained all income tax liabilities accrued as of the date of the Acquisition, including reserves for unrecognized tax benefits. As of January 2, 2022, the indemnification receivable from Johnson & Johnson totaled $16.1 million, of which $15.4 million was included in Other assets and $0.7 million was included in Other current assets. As of January 3, 2021, the indemnification receivable from Johnson & Johnson totaled $17.0 million, all of which was included in Other assets.

Income taxes paid during the fiscal years ended January 2, 2022, January 3, 2021, and December 29, 2019 were $22.2 million, $16.8 million and $8.4 million, respectively.

The following table summarizes the changes to the valuation allowance for the fiscal years ended January 2, 2022, January 3, 2021, and December 29, 2019:


	Beginning Balance		Additions (deductions) charged to provision for (benefit from) income taxes		Currency translation/ other			Ending Balance
Deferred tax valuation allowance
Fiscal year ended January 2, 2022	$	554.8		45.4		(9.0	)	$	591.2
Fiscal year ended January 3, 2021	$	484.1		63.0		7.7		$	554.8
Fiscal year ended December 29, 2019	$	419.7		64.7		(0.3	)	$	484.1