Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The income tax provision for interim periods is generally determined using an estimate of the Company’s annual effective tax rate adjusted for discrete items. Each quarter the estimate of the annual effective tax rate is updated, and if the Company’s estimated tax rate changes, a cumulative adjustment is made.

The effective tax rate for the thirteen weeks ended September 30, 2023 and October 1, 2022 was (69.4)% and 50.0%, respectively. The effective tax rates differed from the federal statutory rate primarily due to changes in the valuation allowances, tax credits, withholding taxes, state income taxes, Global Intangible Low Taxed Income (“GILTI”), Foreign Derived Intangible Income (“FDII”), Internal Revenue Code Section 162(m) excess compensation and foreign rate differential.

The effective tax rate for the thirty-nine weeks ended September 30, 2023 and October 1, 2022 was 60.2% and 32.8%, respectively. The effective tax rates differed from the federal statutory rate primarily due to changes in the valuation allowances, tax credits, withholding taxes, state income taxes, GILTI, FDII, Internal Revenue Code Section 162(m) excess compensation and foreign rate differential.

In the normal course of business, the Company is required to make estimated tax payments throughout the year based on the expected tax liability for the full year. This results in a prepaid balance during the first half of the year, as the Company earns most of its profit in the second half of the year. As of September 30, 2023, the Company had a $6.3 million balance in prepaid income taxes, which is classified in prepaid expenses and other current assets in the unaudited interim condensed consolidated balance sheets.